Embedding Informality in Human Rights Due Diligence

Informal workers at the bottom of supply chains in agriculture, mining, artificial intelligence, and the automobile industry are often overlooked and excluded from legal protections. Consequently, they are subjected to severe labor violations and indecent working conditions (Anwar, M. A., 2025; Lobato, J., 2025; Siddique, M. R., 2023; Parrot et al., 2025). Additionally, the impact of globalization has made it increasingly challenging to hold transnational and multinational corporations accountable for their human rights violations (Kanellis, G., 2025). Germany has emerged as a key player in shaping corporate accountability frameworks for human rights, particularly through its national legislation and influence within the European Union. The adoption of the German Act on Corporate Due Diligence Obligations in Supply Chains (Lieferkettensorgfaltspflichtengesetz – LkSG) in 2021, which has been in effect since 2023, is a significant step forward. This legislation is a precursor to the EU Corporate Sustainability Due Diligence Directive 2024/1760 (CSDDD), marking a significant step forward in codifying human rights due diligence (HRDD) obligations for multinational companies.

While the LkSG and similar frameworks signify progress (as seen in France), the extent to which they protect informal workers, who form the backbone of labor in many global supply chains (GVCs), remains contested. Statistics place informal workers at 90 percent in most developing countries (Plagerson, S., et al. 2022). Primarily,            informal workers usually lack labor protections such as decent work including freedom of association, collective bargaining, employment contracts, and job security because they often fall outside the legal framework. In GSC, they are even more vulnerable as they face double jeopardy, experiencing exacerbated exploitation placed  at the mercy of transnational actors abandoned by both national and international frameworks (Brudney, J. J. 2023; Chen, M. 2020).

This paper examines Germany’s serendiptous contribution to the protection of informal workers in transnational supply chains through a bottom-up legal and governance perspective. It explores several dimensions: the normative scope and legal architecture of the LkSG, Operational Grievance Mechanisms (OGMs) and informal workers, bottom-up and top-down participation, Criticisms, limitations, and recommendations by way of conclusion. Through this analysis, the paper argues that Germany’s framework serves both as a benchmark and as a missed opportunity. It emphasizes the need for an adaptable model that is inclusive to ensure justice for informal workers.

The Normative Scope and Legal Architecture of the LkSG: Implications for Informal Labor across Various Sectors

The  LkSG imposes legally binding human rights and environmental due diligence obligations on companies. Initially applicable to companies with 3,000 or more employees, and expanding to those with 1,000 or more employees from 2024, the LkSG marks a significant legal development in regulating global supply chains (ECCHR 2023). Under Section 3(1) of the Act, companies must exercise due diligence by establishing risk management systems, designating responsible personnel, conducting regular risk analyses, issuing policy statements, taking preventive and remedial measures, and setting up accessible operational grievance mechanisms (OGM). Crucially, the LkSG defines human rights risk in Section 2(2) broadly, referencing several key international instruments, including ILO conventions and the International Bill of Human Rights. Although none of these instruments explicitly mention informal workers, they provide a normative foundation for protecting all workers, regardless of their employment status. This includes protection from discrimination, equal protection before the law (ICESCR), all rooted in decent work tenets including fair income, protection from exploitation and right to redress in the event of violations (ICCPR). When interpreted holistically, these instruments support the inclusion of informal workers as rights-holders within due diligence obligations.

The LkSG has also drawn significantly from the UN Guiding Principles on Business and Human Rights (UNGPs). Principle 12 UNGP affirms that the corporate responsibility to respect human rights refers to internationally recognized standards, which encompass all the instruments mentioned above. Principle 18 calls for human rights impact assessments that consider risks to vulnerable groups, which envisage informal workers. Notably, Principle 29 mandates the establishment of operational-level grievance mechanisms (OGMs) that are accessible to all affected stakeholders, regardless of their employment form. Thus, the UNGPs offer strong normative support for including informal workers within the scope of LkSG grievance mechanisms and risk management systems.

Although the LkSG does not explicitly mention informal workers, its human rights obligations apply to whoever is adversely affected by business operations (Section 2(1)). This includes workers in informal arrangements, such as subcontracted, casual, or home-based labor, particularly where businesses source from or are linked to sectors known for high informality (e.g. agriculture, garments, mining). Legal scholars and civil society have interpreted this open-ended definition as implicitly covering informal workers, especially where harm results from corporate negligence or oversight (see ECCHR 2023, Gustafsson, et al). Together, these instruments create both a binding and non-binding normative framework that requires businesses to recognise, avert, and address adverse impacts on informal workers. Germany’s integration of these treaties into the LkSG establishes a legal obligation to implement their principles in supply chain governance, especially in sectors where informality and vulnerability intersect.

OGMs and Informal Workers: Bottom-up and Top-down Participation

Operational grievance mechanisms (OGMs) mandated by Section 8 LkSG are based on the UN Guiding Principles on Business and Human Rights (UNGPs). Principles 29 to 31 emphasize the importance of grievance systems that are non-judicial, legitimate, accessible, and effective for those affected by corporate actions. The LkSG translates these soft-law obligations into binding corporate duties, thus making OGMs legally enforceable tools for remedy. While imperfect, the LkSG grants supervisory powers to BAFA, which can investigate and sanction companies offering enforcement from the top. Notably, they can also be particularly transformative for informal workers in the Global South, including home-based garment workers, agricultural laborers, and artisanal miners, who typically lack contracts or access to the courts.

OGMs provide a viable alternative or additional channel for these groups to raise concerns about labor violations linked to German companies and their supply chains. This aligns directly with the UN Guiding Principles on Business and Human Rights (UNGPs), particularly Principle 29, which calls for companies to institute or effectively operationalize grievance mechanisms at the operational level for individuals and communities who may be adversely impacted by business activity (Gustafsson, et al 2023).

Companies should ensure that these mechanisms are designed to embed the effectiveness criteria of UNGP Principle 31, which are legitimacy, accessibility, predictability, equity, rights compatibility, transparency, and continuous learning, into their structure to ensure inclusivity and access by vulnerable groups. The German Due Diligence law implicitly refers to these principles without explicitly codifying them. Thus, interpretation is left to the discretion of companies and BAFA’s regulatory guidance, which may result in inconsistencies in application. Therefore, it is ideal to refer to the UNGP 31 principles to ensure uniformity. To ensure access to these OGMs for informal workers, who face literacy, language, digital, and socio-economic barriers, OGMs should be culturally sensitive, multilingual, and allow for anonymous reporting. Companies should collaborate with trusted intermediaries, such as informal grassroots trade union associations and cooperatives, to enhance their operations and improve their overall performance.

In addition to remedying specific grievances, OGMs under the LkSG also serve as platforms for meaningful stakeholder dialogue, particularly through mediation. Mediation as an alternative dispute resolution mechanism empowers informal workers to voice concerns, participate in negotiations, and shape corrective actions when implemented equitably. This bottom-up engagement is crucial for resolving disputes and establishing trust and accountability across global supply chains. It also operationalises UNGP Principle 18, which requires that due diligence processes actively engage affected stakeholders or their legitimate representatives in assessing potential adverse human rights impacts.

Furthermore, if properly implemented and adequately resourced, OGMs can also serve a preventive function by identifying recurring patterns of harm and informing upstream business practices. OGMs using stakeholder-inclusive mediation frameworks are crucial for fulfilling the LkSG’s promise of access to remedies, particularly for vulnerable informal workers in Global supply chains (Buhmann, K et al, 2024). For instance, the ECCHR collaborated with the Ecuadorian union of agricultural workers, ASTAC, Oxfam, and Misereor in the case against REWE and Edeka on their violations in banana supply chains in Ecuador. This collaboration elaborated on the interplay of actors and the potential of bottom-up participation and informal worker inclusion (ECCHR). A key highlight of the LkSG is its enforceability. BAFA can investigate violations, demand corrections, and impose fines, enhancing the effectiveness of the UNGP’s voluntary compliance framework.

Criticisms and Limitations

Notably, there have been amendments aimed at reducing bureaucracy related to reporting and penalties. These changes have decreased public transparency by weakening deterrence due to the lack of reports required under Section 10 and hefty fines have been quashed. Consequently, external parties have less insight into how companies handle complaint procedures under Section 8. Nevertheless, companies must still provide accessible grievance mechanisms under Section 8, which can be utilized by informal workers. The law has also received criticism, particularly for its application to German corporations, which may lead to inconsistent human rights protection. The enforcement gap is evident in 2023, as BAFA received only 30 complaints about 40 companies. This is disappointing given the scope of the law. Additionally, the limited visible sanctions and lack of follow-up on corrective orders only highlight this issue further. Another challenge is that data on complaints do not reveal the nature of workers whether informal or formal. Sialkot homebased football stitchers in Adidas supply chains illustate the dearth of specifity of complaints and Adidas grievance channels do not divulge details of complainants like employment status. The availability of such information, could facilitate retrospective analysis and trigger more protection for informal workers.

Furthermore, focusing on large companies and their direct suppliers while limiting indirect supplier obligations to cases where there is substantiated knowledge of violations overlooks informal workers at the bottom of global supply chains, such as home-based textile workers and seasonal agricultural laborers and those in subcontracted instances.

Moreover, in its first year, Germany’s LkSG has highlighted both progress and challenges. Grievance mechanisms have improved engagement with trade unions, enhancing working conditions. However, enforcement by BAFA has been termed problematic, often excluding affected workers from complaint processes and lacking clarity on practical remedial actions, which weakens accountability. The LkSG has significant untapped potential, particularly for the Global South, despite its shortcomings. Meaningful initiatives from stakeholders such as trade unions, informal cooperatives, and associations are crucial for leveraging this law as a means for affected informal workers to access remedies. There is an urgent need for training, education, and awareness-raising about rights in general, as well as the specific circumstances of informal workers. While measuring success in human rights can be challenging, it is not impossible. The implicit acknowledgement of informal workers, who have often been overlooked, marks a significant step forward in recognizing them before the law, regardless of their work status (Art. 6 UDHR, Art. 20 EUCHR, Art. 3ACHPR).

Conclusion

Germany’s Due Diligence Law has positioned itself as a leader in corporate human rights due diligence. Although the first years have yielded mixed results, the German due diligence law has laid the groundwork for enhanced corporate accountability. There is still untapped potential in addressing informal workers, who often remain invisible within global supply chains, if the law is well implemented using the UNGP 31 principles. It can promote informal worker’s visibility and representation, as well as access to redress in case of violations, and intervene in violations before they escalate through dialogue. Primarily, there is a need for empowerement as illustrated by the example of Ecuador, coupled with structural pressure for reforms in inclusive greviance mechanisms for realising economic justice and dignity for informal workers in supply chains. There this therefore a need for collaboration envisaging civil societies, labour organisations,trade unions businesses and governments for promoting economic justice and dignity for all workers in these supply chains through the co-development of transparent, culturally inclusive grievance mechanisms.

The LkSG translates the vision of the UNGPs into enforceable obligations, particularly regarding grievance mechanisms. However, to fully realize their potential, informal workers voices and lived experiences should be intergrated in the reform discussions. Moreover, lack of awareness of grievance mechanisms undermine their utility.

Ultimately, informal workers’ intermediaries, such as cooperatives and trade unions like WIEGO, can utilise Labour rights education and awareness of these mechanisms, which play a critical role in this process, equipping them to assert their rights and enhance their participation effectively. Surendiptiously, OGMs under Section 8 LkSG grant informal workers and their representatives opportunities for recourse to their human rights violations.