Supply Chain Law
. The new Due Diligence Act has been in effect in Germany since 2023, expanding the liability of companies along the value and supply chain for compliance with human rights. Is your company able to meet the requirements of the new supply chain law today? In our article we have summarized all the relevant information for you and tried to make it as generally understandable as possible. The most important thing for you will be the concrete implementation measures.
Affected companies will have to demonstrate comprehensive risk management in the future, otherwise they will face not only damage to their image but also fines and sanctions.
In its first phase, the law applies to large companies.
Experience suggests that suppliers and SMEs will have to make a significant contribution to implementation.
As always, we are at your side with advice and support during the implementation.
Objective
The law requires companies to ensure that human rights violations such as child labor do not occur along their supply chain. Stricter standards are applied to direct suppliers than to more distant links in the chain.
Scope
The law will affect large companies that employ at least 3,000 people. From 2024, companies with more than 1,000 employees will also be affected. This will include all large German companies that operate internationally and source products or materials from abroad. This applies, for example, to companies in the automotive or textile industries and companies that use raw materials or chemical products from Africa or Latin America or technology components from Asian suppliers.
Fines
Accordingly, companies that do not carry out a risk analysis, do not set up a complaint procedure or do not effectively remedy identified human rights violations must expect fines of between 100,000 and 800,000 euros. Companies with annual sales of more than 400 million euros can incur a penalty of up to two percent of sales. Companies are also threatened with exclusion from public contracts for up to three years if they have been sentenced to a fine of at least 175,000 euros.
Due diligence obligations
The main component of the new supply chain law should be the definition of human rights due diligence obligations for companies. To date, German law only required companies to report on measures to comply with human rights within the supply chain. According to the new Supply Chain Act, there are now further duties of care. A human rights risk within the meaning of the Supply Chain Act is a situation in which, based on actual circumstances, there is a sufficient probability of a violation of one of the following prohibitions to protect the legal positions contained in Section 2 Paragraph 1 of the Supply Chain Act : integrity of life and health; freedom from slavery and forced labor; protection of children and freedom from child labor; freedom of association and the right to collective bargaining; protection from torture; Prohibition of disregarding the nationally applicable occupational health and safety obligations, in particular due to obviously inadequate safety standards in the provision and maintenance of the workplace, the workplace and the work equipment, the lack of suitable protective measures to avoid effects from chemical, physical or biological substances, the absence of measures to prevent excessive physical and mental fatigue, in particular through unsuitable work organization with regard to working hours and rest breaks, insufficient training and instruction for employees; Prohibition of withholding a fair wage; Compliance with minimum wage regulations; Prohibition of unequal treatment and discrimination of employees, whereby unequal treatment also includes the payment of unequal pay for work of equal value; Prohibition of the unlawful deprivation of land, forests and waters during acquisition, development or other use; Environmental obligations to protect human health.