German Supply Chain
The “Act on Corporate Due Diligence to Prevent Human Rights Violations in Supply Chains” Supply Chain Due Diligence Act, also known as the German Supply Chain Act, places extensive new requirements on businesses regarding human rights along the supply chain, or due diligence obligations. Companies must put in place stringent compliance controls to fulfil their obligation to safeguard human rights throughout the supply chain.
Came into Force
The German Federal Parliament and Council passed this law, which took effect on January 1, 2023.
The main objective of GSCDDA is “Ensure that organizations take precautionary measures to defend human rights and environmental standards for sustainability and Provide remediation for affected parties with a complaints procedure that is both accessible and effective.”
Who is affected or impacted?
In Jan 2023 – Companies more than 3000 employees, which affects 600 companies and their supply chains.
In Jan 2024 – Companies more than 1000 employees, which affects 3000 companies.
In 2026 and 2027 – Planned implementation on EU level where companies more than 500 and 250 employees were affected.
What is the Act requiring?
Own business operations: – No matter whether the activity is carried out domestically or abroad. This includes activities for the manufacture and exploitation of goods as well as activities for the supply of services.
Supply chain: – This primarily comprises direct suppliers in addition to the company’s own commercial operations. However, if the corporation learns of substantiated information of potential environmental or human rights abuses, it must also conduct a risk analysis and take preventive and remedial steps for indirect suppliers.
Human rights: – The Supply Chain Act defines human rights risks as including child labor, forced labor, slavery, disregard for labor laws and the right to associate, unfairness and failure to pay a living wage, some environmental pollution that affects human rights, land robbery, torture, and other cruel, inhuman, or degrading treatment.
What are the risks that the act applies to?
Human rights risks: – Lack of work safety, Pollution of soil, air and water, Child labor and discrimination, Misuse of private or public security forces, forced labor and slavery and illegal deprivation of land.
Environmental risks: – Minamata Convention on Mercury, Stockholm Convention on Persistent Organic Pollutants (POPs Convention), Basel Convention of the Control of Transboundary Movements of Hazardous Wastes and their Disposal.
What are the measures to be taken to overcome violations?
Risk management and risk analysis, Policy statement, Preventive and remedial measures, Complaints procedure, Documentation, and reporting obligations.
What are the penalties for non-compliance?
- Fines for violations of due diligence and reporting obligations of up to EUR 8 million depending on the nature and gravity of the violation. Companies with an average annual turnover of more than EUR 400 million may be fined up to 2% of their average annual turnover for breaches of the obligation to take remedial action or to implement an appropriate remedial action plan at a direct supplier.
- Exclusion from public tenders for up to three years.
- The Act does not provide for any extension of civil liability.
German Supply Chain act is very much responsible about the human rights during the supply chain, to prevent human and environment.