The Supply Chain Due Diligence Act (LKSG) in the Healthcare Sector: Personnel Challenges and Solutions for Successful Implementation

Introduction:

The Supply Chain Due Diligence Act (LKSG) presents healthcare companies with new regulatory challenges. In addition to implementing risk management processes and reporting structures, the law’s implementation also requires personnel adjustments. New responsibilities arise, existing roles expand, and the demand for specialized professionals in the Environmental, Social, and Governance (ESG) field continues to grow.

This white paper examines the Supply Chain Due Diligence Act (LKSG) and discusses which competencies and job profiles will be in demand in the future, how companies can recruit the right professionals, and which recruitment and training measures HR managers should consider.

Why is the LKSG relevant for healthcare companies and their HR managers?

The healthcare sector relies heavily on international supply chains—whether for procuring pharmaceuticals, medical raw materials, or medical technology. The LKSG mandates that companies identify and mitigate human rights and environmental risks within their supply chains. This requires the implementation of new processes and the recruitment of qualified professionals with expertise in compliance, ESG, sustainable supply chain management, and reporting.

For HR managers, this is particularly relevant because:

• Companies need to create new roles or further develop existing teams.
• ESG and compliance specialists are in high demand in the job market.

Headhunting and recruitment strategies must be adapted to meet increasing requirements.

But let’s take it step by step…

Overview and Background of the Law:

The LKSG has been in effect since January 1, 2023. Initially, it applied to companies with more than 3,000 employees, and since 2024, it has also covered companies with more than 1,000 employees. The key requirements of the law include:

• Preventive and corrective measures for violations of human rights or environmental standards.
• Establishing a grievance mechanism for affected parties.
• Annual reporting obligations for impacted stakeholders.

The increasing integration of German companies into global markets presents new opportunities but also carries risks such as a lack of transparency and weak enforcement of internationally recognized human rights within supply chains. The responsibility to respect, protect, and uphold human rights ultimately lies with the state.

The German federal government implemented the UN Guiding Principles through the National Action Plan for Business and Human Rights (NAP) in 2016. This plan establishes the responsibility of German companies to respect human rights and mandates their integration into corporate processes.

A key element for successful implementation is a uniform understanding of human rights due diligence and its comprehensive integration into internal processes. Companies are provided with a clear, proportionate, and reasonable legal framework to fulfill their due diligence obligations. The requirements are aligned with the due diligence standards of the UN Guiding Principles outlined in the National Action Plan.

The Federal Office for Economic Affairs and Export Control (BAFA) is responsible for monitoring compliance and is authorized to enforce necessary measures. The law imposes a duty of effort rather than a duty of success or strict liability. Companies are not required to completely prevent violations but must demonstrate that they have taken all reasonable measures to address risks within their supply chains.

Comparable National Regulations:

France: In February 2017, France introduced the “Loi de Vigilance”, which requires companies headquartered in France with more than 5,000 employees domestically or 10,000 employees worldwide to establish a vigilance plan. This plan is designed to identify risks and prevent serious violations of fundamental rights, health, safety, and environmental standards within supply chains. Companies that fail to comply with this obligation can be held liable and are required to implement corrective measures.

Netherlands: In May 2019, the Netherlands passed the “Wet Zorgplicht Kinderarbeid” (Child Labor Due Diligence Act). This law requires companies that sell goods or services to Dutch end consumers to verify whether child labor exists within their supply chains. If there is a justified suspicion, they must develop an action plan to address the issue. Companies that fail to comply with this obligation may face financial penalties.

Within the EU, several member states are currently discussing legislation on corporate due diligence in supply chains. The Corporate Sustainability Due Diligence Directive (CSDDD) has introduced binding standards that require companies to assess their supply chains for environmental and human rights impacts.

Outside the EU, legal regulations on corporate due diligence also exist. The UK Modern Slavery Act of 2015 requires companies to ensure transparency regarding measures taken to combat modern slavery within their supply chains. Similar laws have been enacted in Australia and California, encouraging companies to disclose their efforts to prevent human rights violations in their supply chains.

Structure of the LKSG and Its Significance for Compliance Measures:

Does the LKSG also apply to service providers?

The LKSG applies not only to the production of goods but also to services. Service providers are subject to the same due diligence obligations within their supply chains as companies that manufacture physical products.

Challenges:

The implementation of the LKSG presents the healthcare sector with several specific challenges, such as:

Data management and transparency:

• Over 60% of companies struggle to obtain accurate and reliable data on their supply chain activities.
• About one-third of reporting companies lack information about the suppliers of their own suppliers.

The sheer volume of data required for reporting is extremely difficult to manage.

Digitalization and process automation:

• 52% of surveyed hospitals and healthcare companies stated that they do not use any software to implement the LKSG.

A purely manual processing of the required information and data is not feasible, even for hospitals with “only” 500 suppliers.

Risk management and change in perspective:

• The LKSG requires a fundamental shift in risk management, moving from a company-centered approach to a human rights and environmental perspective.

Companies must expand their risk analysis to cover the entire business operation and all direct suppliers.

Resources and competencies:

• Hospitals and companies have been heavily investing in IT systems, data management, and legal consulting for supplier contracts, even before the Hospital Future Act (KHZG).

There is a need to raise awareness about the challenges associated with the LKSG.

Supplier management:

• Hospitals and purchasing cooperatives must scrutinize their suppliers and assess their measures to fulfill due diligence obligations.

Evaluating the overall sustainability strategy of business partners is becoming increasingly important. These challenges require healthcare companies to comprehensively adapt their processes and strategies to meet the LKSG requirements, leading to significant personnel implications.

To secure the necessary resources for implementing the LKSG, hospitals can take the following measures:

By implementing these measures, hospitals can effectively comply with the LKSG despite limited resources while keeping administrative efforts within a reasonable scope.

However, this raises questions such as:

Which competencies are now required?

Effective ESG management requires a broad range of competencies to successfully address environmental, social, and governance-related challenges. Hospitals that strategically integrate sustainability into their business models need expertise in the following areas:

Sustainability management & ESG regulations: Knowledge of relevant laws, standards (e.g., CSRD, EU taxonomy, GRI), and reporting requirements is essential to ensure compliance and maintain transparency.

Data analysis & ESG reporting: The ability to collect, interpret, and translate ESG data into meaningful reports is crucial for credible sustainability communication.

Circular economy & climate strategies: Expertise in CO₂ management, energy efficiency, and sustainable resource utilization helps companies reduce emissions and build long-term resilience.

Social impact & diversity management: Companies must actively address social aspects such as human rights, equal opportunities, and employee well-being to remain attractive and act responsibly in the long term.

Corporate governance & ethics: Integrity, transparency, and responsible corporate management are fundamental pillars of a successful ESG approach.

What solutions are available for hospitals to meet personnel requirements?

In recent years, the first degree programs focused on ESG and sustainability have been introduced to train professionals for this emerging field. However, it will take some time before a sufficient number of qualified specialists are available to meet the growing demand in the healthcare sector. The rapid transition to sustainable business models requires specialized expertise, but the education and practical experience of these professionals take time to develop. Until then, hospitals can take initial measures to comply with ESG and LKSG requirements.

One key measure is raising awareness and providing further training for existing employees to better integrate sustainability topics into daily operations. In this context, the Chambers of Industry and Commerce (IHK) offer various training and continuing education programs to specifically educate employees in these areas. Chambers of Crafts also provide relevant training programs, particularly for business owners in the trades. This is especially important when hiring external service providers for clinical areas, as they must also comply with ESG and LKSG requirements.

The Federal Office for Economic Affairs and Export Control (BAFA) can be used to verify whether a company meets the legal requirements of the LKSG. Additionally, software solutions such as Digital Life Sciences offer practical support. These tools scan suppliers in the procurement process and use a traffic light system to indicate whether a supplier complies with LKSG requirements or not. This enables hospitals to make targeted, sustainable, and legally compliant decisions.

Reactions from the industry:

The German Medical Technology Association (BVMed) supports companies with guidelines for implementing the Supply Chain Due Diligence Act (LKSG) in the medical technology sector. Some companies have already successfully integrated ESG strategies into their business models and emphasize that sustainability is a long-term investment that goes beyond mere cost factors.

However, there is also strong criticism. Companies struggle with the high bureaucratic hurdles and the challenges of obtaining reliable information about suppliers in third countries. Critics argue that while the LKSG creates additional administrative workload and jobs, it does not provide direct added value to the value chain and is therefore perceived as a burdensome obligation with little tangible benefit.

Summary:

The Supply Chain Due Diligence Act (LKSG) presents hospitals with significant personnel challenges, as it introduces new requirements for risk management, compliance, and reporting. To meet legal obligations, hospitals must adjust their internal structures, particularly in the HR sector. 

The requirements of the LKSG necessitate the creation of new roles or the expansion of existing positions. There is a growing demand for specialized professionals in ESG-related fields, particularly in compliance, sustainable supply chain management, and data analysis.

HR managers must therefore adapt their recruitment strategies, as ESG and compliance specialists are in high demand in the job market. Recruiting qualified professionals is becoming increasingly challenging due to a shortage of adequately trained candidates. As a result, hospitals must explore alternative approaches, such as upskilling existing employees. The Chambers of Industry and Commerce (IHK) and Chambers of Crafts offer targeted training and continuing education programs to help equip personnel with the necessary competencies.

The integration of the LKSG into existing processes also requires hospitals to establish a dedicated team comprising various departments, such as procurement, quality management, and legal, to coordinate the law’s implementation. This introduces new leadership responsibilities, which in turn demand additional personnel resources. Furthermore, hospitals must invest in IT infrastructure to enable efficient data analysis and reporting. All these adjustments require time and financial resources, further increasing personnel demands.

References:

Bisping, G. (2025): Projektretter, Bad Iburg. https://www.projektretter.jetzt.

Bundesministerium für Arbeit und Soziales (BMAS), Öffentlichkeitsarbeit, Berlin. https://www.bmas.de/DE/Startseite/start.html

Bundesverband Medizintechnologie e.V. (BVMed), Berlin. https://www.bvmed.de/

Grabosch, R. (2021): Das neue Lieferkettensorgfaltspflichtengesetz. Nomos Verlagsgesellschaft, Baden-Baden.

Würz, K; Birker, A. (2022): Das Lieferkettensorgfaltspflichtengesetz. Haufe Group, Freiburg, München, Stuttgart.