Overview
What the risk analysis under the German Supply Chain Due Diligence Act (LkSG) is, when you have to carry it out and how it works in the Tacto App. Relevant for everyone who is responsible for or carries out the risk analysis in your company. For details on the individual steps, see Abstract risk analysis in the Tacto App and Concrete risk analysis in the Tacto App.
Note: Templates, score formulas, score thresholds and table views of the risk analysis are configured per customer. This article describes Tacto's standard configuration – your configuration may differ.
Aim of the risk analysis
The risk analysis is the basis for appropriate and effective risk management. Companies must observe human rights and environmental due diligence obligations in their supply chains in an appropriate manner. The aim is to prevent or minimise human rights and environmental risks or to end violations.
When to carry out the risk analysis
According to Section 5 (4) LkSG, the risk analysis must be carried out once a year and on an ad hoc basis.
Ad hoc mainly refers to events that significantly change or expand the risk situation in the supply chain – for example new products, projects or business areas – or a substantiated suspicion of a violation.
Adding a new supplier in the core business does not usually trigger an ad hoc risk analysis.
Process in the Tacto App
The risk analysis in the Tacto App has two stages and is carried out individually for each supplier:
Abstract risk analysis: All direct suppliers are assessed based on country and industry.
Concrete risk analysis: Suppliers with a medium or high risk are analysed in more detail.
The weighted risks result in a final supplier score (LkSG score).
Data basis
The risk model of the standard configuration is based on recommendations from the German Federal Office for Economic Affairs and Export Control (BAFA) and the law firm Taylor Wessing. Quantifiable values from the following indices are used for the country and industry scores:
World Justice Index
UN Sector Mappings
ITUC Global Rights Index
AMAP/UNEP: Technical Background Report for the Global Mercury Assessment 2013
ILO ILOSTAT Database
UNSD Environmental Indicators
Sensoneo Global Waste Index
Yale Environmental Performance Index (EPI)
amfori BSCI
CEIP Emissions Database
Abstract risk analysis
Assesses the risk of all direct suppliers based on country and industry.
The country and industry scores are derived from the average values of the relevant indices.
Each supplier is assigned a risk status: High, Medium or Low.
You then assess appropriateness based on your purchasing volume as a share of the supplier's total turnover.
Concrete risk analysis
Applies to suppliers with a medium or high risk from the abstract analysis.
Examines three legal positions: human rights, labour rights and environmental rights.
The scores of the legal positions are initially based on the country and industry scores.
You assess appropriateness for each legal position based on severity, probability of occurrence, type of business activity, contribution to causation and influence.
If the score is still below 80, mitigation factors such as certificates are requested.
If the risk remains elevated, you send the supplier a self-assessment as a Request. The supplier's answers are included in the score of the legal position.
Interpreting the score
The higher the LkSG score, the lower the risk. The maximum score is 100 points.
Mitigation factors such as a code of conduct reduce the assessed risk and improve the score.
In the standard configuration, a score below 80 indicates an elevated risk. For these suppliers, you carry out the concrete risk analysis.
If the score remains below 80 afterwards, you define preventive or remedial measures.
Next steps
Prepare the risk analysis (including providing and transferring data)
Carry out the risk analysis in the Tacto App
Evaluate the results
Define measures