Complaints Procedures Under the LkSG and CSDDD

Complaints procedures under the LkSG and CSDDD: the short answer

Complaints procedures are a core element of supply chain due diligence. Under § 8 of the Supply Chain Due Diligence Act (Lieferkettensorgfaltspflichtengesetz, LkSG), companies in scope must ensure that an appropriate internal complaints procedure exists through which persons can report human rights and environmental risks and violations caused by the company's own business or its direct suppliers, and, under § 9 LkSG, also by indirect suppliers.

The company must adopt public rules of procedure in text form, appoint impartial, independent and confidential case handlers, acknowledge receipt, discuss the facts with the complainant, protect complainants against retaliation and review the procedure's effectiveness at least annually. Failure to ensure that such a procedure is in place is one of only four offences that remain subject to fines under the government's LkSG amendment bill (Bundestag printed paper 21/2474), with fines of up to EUR 800,000. The Corporate Sustainability Due Diligence Directive (CSDDD), as amended by Omnibus I, will require comparable grievance mechanisms from July 2029.

This article explains the legal requirements, how to design them so that they are actually accessible to stakeholders in the supply chain, how to handle complaints and how to integrate the procedure with whistleblowing channels under the HinSchG.

Legal requirements under § 8 LkSG

The Federal Office for Economic Affairs and Export Control (BAFA) has published a handout (Handreichung) on organising, implementing and evaluating complaints procedures. It is not binding law, but it shows what the authority looks for in practice: whether the target groups actually know the procedure, whether they can use it without barriers and whether complaints lead to documented follow-up.

Designing accessible complaints procedures

The main challenge is accessibility. Workers at suppliers in other countries, local communities affected by mines or plantations and smallholder farmers rarely visit a German company's website. Effective grievance mechanisms therefore use several channels and work through intermediaries:

• online forms and e-mail in relevant local languages, with anonymous options;
• telephone hotlines or messaging services commonly used in the region;
• posters and information at supplier sites, with contractual obligations on suppliers to display them;
• cooperation with trade unions, NGOs and local organisations that can receive complaints;
• participation in industry or multi-stakeholder grievance mechanisms.

Rules of procedure should be written in plain language and explain who can complain, about what, how complaints are handled, timelines, confidentiality and protection against retaliation. They must be publicly accessible, typically on the company's website, and the information should be repeated where the target groups can actually find it.

Handling complaints step by step

1. Receipt and acknowledgment. Confirm receipt to the complainant and record the complaint.
2. Assessment. Check whether it concerns a risk or violation within the scope and how serious and urgent it is.
3. Discussion. Discuss the facts with the complainant, as required by § 8(1) LkSG, and clarify expectations.
4. Investigation. Gather information from the supplier, audits, local partners and documents, protecting the complainant's identity.
5. Remedy. Decide on preventive or remedial measures under §§ 6 and 7 LkSG, which may include corrective action plans with the supplier, and, as a last resort, suspension or termination of the business relationship.
6. Feedback and closure. Inform the complainant of the outcome and document the case.

Some cases are best resolved through dialogue or amicable settlement, which the LkSG expressly allows. Others require escalation and structural changes. Documentation of each step is essential, because BAFA may review individual cases.

Integration with the HinSchG channel

Most companies within the scope of the LkSG must also operate an internal reporting channel under the Whistleblower Protection Act (HinSchG). Combining the two in one system is efficient, but the differences must be respected. The HinSchG channel primarily serves employees and covers breaches of law; the LkSG procedure must be open to external persons and cover human rights and environmental risks, which may not be breaches of German law. Deadlines (seven days and three months under the HinSchG) and confidentiality rules differ in detail. A combined system should therefore classify each report and apply the relevant procedure.

Outlook: complaints procedures under the CSDDD

The CSDDD requires companies in scope to provide a complaints procedure accessible to persons affected by adverse impacts, their representatives, trade unions and civil society organisations active in the relevant areas, as well as a simpler notification mechanism for information about adverse impacts. The Directive's harmonised core includes these provisions. Following Omnibus I, the CSDDD applies from 26 July 2029 to the largest companies, and Germany intends to replace the LkSG with a new statute. Companies should design their current grievance mechanisms so that they can be extended to meet CSDDD requirements, in particular regarding the broader circle of complainants and follow-up information. Until the German implementing statute is adopted, the LkSG remains the applicable standard, and BAFA can continue to check whether a procedure exists and works.

Cascading the procedure to suppliers

Many companies require their direct suppliers to operate their own grievance mechanisms and to inform workers of the company's procedure. Contractual clauses should oblige suppliers to display information at production sites, to refrain from retaliation, to cooperate in investigations and to give access to documents and workers. Such clauses do not shift the company's own obligation, but they make the procedure more visible and help resolve complaints locally. Supplier training and joint corrective action plans support this. Where a supplier's own mechanism is weak, the company should not rely on it alone and should keep its own channels open to that supplier's workers.

Under § 9(1) LkSG, the procedure must also allow reports about indirect suppliers. If the company obtains substantiated knowledge of a possible violation at an indirect supplier, § 9(3) LkSG requires it to carry out a risk analysis, take appropriate preventive measures and draw up and implement a plan to prevent, end or minimise the violation. A complaint is often the trigger for this event-driven due diligence, so the case handling process should include a clear handover to the team responsible for the risk analysis.

Independence of case handlers

Section 8(3) LkSG requires that persons entrusted with the procedure guarantee impartiality, are independent and not bound by instructions, and are obliged to confidentiality. In practice, companies assign the task to compliance or human rights officers with a direct reporting line to management, or to external ombudspersons. Purchasing staff responsible for supplier relationships should not decide on complaints concerning their own suppliers. The rules of procedure should describe how conflicts of interest are handled and how case handlers can escalate cases.

Protection against retaliation

Complainants in supply chains are particularly vulnerable: a worker who complains about a supplier may lose their job or face threats. Companies must ensure effective protection against disadvantage or punishment as a result of a complaint (§ 8(4) LkSG). Measures include strict confidentiality, anonymous communication, contractual prohibitions of retaliation in supplier codes, monitoring of complainants' situation where identity is known and remedies if retaliation occurs. Retaliation by a supplier should itself be treated as a serious breach that may lead to escalation.

Reviewing effectiveness

The annual and event-driven effectiveness review under § 8(5) LkSG should look at the number and type of complaints, the groups using the procedure, response times, outcomes, feedback from complainants and stakeholders, and gaps, such as regions or supplier tiers from which no complaints are received. A low number of complaints is not necessarily a good sign; it may indicate that the procedure is unknown or not trusted. Results should lead to concrete improvements and be documented.

Illustration: a hypothetical German apparel retailer receives, through a local NGO partner, a complaint that workers at a garment factory are forced to work unpaid overtime. The case handler acknowledges receipt, discusses the facts with the NGO, commissions an unannounced audit, agrees a corrective action plan with the supplier including back pay and working time controls, and monitors implementation. The NGO receives feedback, and the case is documented as part of the retailer's due diligence records.

External and industry procedures

Companies may participate in an external complaints procedure instead of operating their own, provided it meets the statutory criteria. Industry initiatives and multi-stakeholder platforms can offer better access in producing countries and greater credibility. Companies remain responsible for ensuring that complaints concerning their supply chains are followed up and that they take appropriate measures. Agreements with external providers should cover data access, confidentiality, response times and reporting.

Data protection must also be considered. Complaints often contain personal data of complainants, supplier staff and accused persons. Companies need a legal basis under the GDPR, appropriate information duties with possible restrictions, secure systems and retention periods. Transfers of data to suppliers or partners outside the EU require safeguards.

Finally, complaints procedures are a source of insight. Analysing complaints across suppliers and regions helps to update risk analyses, prioritise audits and design training for suppliers. Companies that treat complaints as information rather than as threats tend to identify problems earlier and resolve them at lower cost.

How TRW & Co helps with complaints procedures

We advise companies on designing and operating complaints procedures under the LkSG and the CSDDD. We draft rules of procedure, advise on channels, external providers and industry mechanisms, act as or support independent case handlers, investigate complaints and design remedial measures with suppliers. We also integrate complaints procedures with HinSchG channels and represent companies in BAFA proceedings. Our work connects with our supply chain due diligence and whistleblowing practices. See also the LkSG reform and setting up an internal reporting channel. To review your procedure, contact us.