EFS Consulting
03/29/2022

Germany plans new obligations in the supply chain

The German legislator has enacted the Supply Chain Due Diligence Act, which is scheduled to enter into force on 1st of January 2023.   

The new Supply Chain Sourcing Obligations Act in Germany will be applicable across all sectors from 2023 for companies with at least 3,000 employees. From 2024, companies with at least 1,000 workers will also be required to comply with these regulations. This law is intended to contribute to compliance with human rights and environmental standards in other countries.  

The condition for the applicability of the act is that the head office, the main branch, the administrative headquarters or the statutory seat is located in Germany. After the new provisions enter into force, the companies concerned are obliged to comply with human rights as well as environmental standards. To this end, they are required, for example, to conduct regular risk analyses, to issue a policy statement on the company’s human rights strategy and to take preventive or remedial measures. In case of non-compliance with the provisions of the act, companies face fines. However, civil liability is not foreseen.   

Also at the EU level, sector-specific regulations currently apply to suppliers of companies in the conflict minerals and timber trade sectors. There are also plans to issue a directive that would apply across all sectors and provide for civil liability as well.  

The EU Commission has now presented a draft for such a directive, which, however, has faced resistance from the business community. On the one hand, it should also apply to small and medium-sized enterprises and on the other hand, an extension of the scope of application is planned. Not only the companies concerned themselves, but also their subsidiaries and the entire value chain are to be covered.  

Since debate and ultimately amendments are still to be expected in the legislative process, a final decision on the European Supply Chain Act can therefore be expected in 2023 or 2024 at the earliest.  

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