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BAFA issues new FAQ for German Supply Chain Act

The Federal Office for Economic Affairs and Export Control (BAFA) is assessing and facilitating companies’ compliance with its obligations.

The guidelines clarify the legal obligations for companies to appropriately consider human rights and environmental due diligence in their global supply chains.

The Supply Chain Act, which came into force on 1 January 2023, applies to all companies with their seat, head office or main branch in Germany. It is the first German act aiming to combat human rights violations and environmental damage along global supply chains. Based on this law, companies are required to act upon their corporate responsibility and manage their supply chains in a socially and environmentally responsible manner by adhering to a number of due diligence obligations.

The due diligence obligations include establishing a risk management system, adopting a policy statement on human rights strategy, implementing preventive measures, promptly taking remedial action in case of legal violations, introducing a complaint mechanism, and fulfilling documentation and reporting requirements. The obligations vary depending on the company’s influence over its own business operations, direct contractual partners, or indirect suppliers.

The BAFA (Federal Office of Economic Affairs and Export Control) supports companies’ efforts in implementing their due diligence obligations by developing and publishing guidelines and FAQs. The latest adaptation to the FAQs addresses among other questions whether third-party companies without direct contractual relations are still deemed as direct suppliers, and, thus, falling under the scope of the Act. Furthermore, it clarifies that NPOs are also subject to the law, and how to implement the obligations in group parent companies and their subsidiaries.

The law came into effect on January 1, 2023, for companies with at least 3,000 employees and is set to apply to companies with at least 1,000 employees starting from January 1, 2024. More information about the law can be found HERE.

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