Update Compliance 25/2022

Kick-off for the Supply Chain Due Diligence Act

The topic of human rights has been on everyone’s mind not just since the FIFA World Cup.

On January 1, 2023, the Supply Chain Due Diligence Act will enter into force. Companies that employ a workforce exceeding 3,000 individuals within Germany are thereby obligated to ensure the meticulous fulfillment of their human rights due diligence responsibilities in a manner that is legally sound. For entities exceeding a workforce of 1,000 employees, the aforementioned obligations will enter into force as of January 1, 2024. Any infractions may lead to monetary penalties and disqualification from engaging in public procurement agreements. The indirect ramifications of the Supply Chain Due Diligence Act will even extend to entities that do not fall within the purview of said legislation.

It is imperative to address the legal obligations in a timely manner.  In our webinar on December 01 / December 08, 2022, we will present the key points of the new law. To attend, register here.

The primary objective of the Supply Chain Due Diligence Act is to address and mitigate instances of human rights violations and the negligent disregard of environmental standards within supply chains. It is strongly recommended that companies operating in Germany incorporate the deliberate integration of measures aimed at mitigating human rights and environmental risks into their procurement strategies and purchasing practices. The competent regulatory authority, the Federal Office for Economic Affairs and Export Control (“BAFA“), has recently released comprehensive Guidances that aim to provide valuable support to companies in their endeavors to effectively comply with the law. The key aspects of the Supply Chain Due Diligence Act encompass the following subjects:

Risk Management

Pursuant to the provisions set forth in the Supply Chain Due Diligence Act, it is incumbent upon companies to establish a duly appropriate and effective supply chain risk management system, which is to be seamlessly integrated into all pertinent business processes. This provision serves to facilitate the identification and mitigation of pertinent risks, as well as the prevention, cessation, or mitigation of violations, or at the very least, the reduction of their severity. We offer expert guidance pertaining to the practical execution of the Supply Chain Due Diligence Act during our forthcoming webinar.

Risk analysis

The core of risk management is risk analysis. In light of the intricate nature of the risk analysis, it is imperative to allocate due attention to this matter in anticipation of the forthcoming legislation. The Guidance issued by BAFA pertaining to the performance of a risk analysis in conformity with the stipulations of the Supply Chain Due Diligence Act explains the statutory obligations imposed by the Act and furnishes pragmatic support. We present the key items in our webinar on the Supply Chain Due Diligence Act.

Complaints procedure

One crucial aspect pertains to the establishment of a suitable mechanism for lodging complaints, wherein both internal and external individuals may bring to the attention of the company any concerns pertaining to human rights or environmental hazards. In furtherance of their objectives, corporations may elect to employ an internal corporate procedure or engage in an external procedure. We will inform you about the legal requirements and present technical solutions for implementation in practice in our webinar on the Supply Chain Due Diligence Act.

Practice notes

The countdown for the Supply Chain Due Diligence Act is on. The Guidances published by BAFA on risk analysis, the complaints procedure and reporting serve as helpful explanations for implementing the requisite legal obligations. The requirement for obligated companies to obtain contractual assurances from their business partners that they will comply with the due diligence requirements will lead to an indirect effect of the Supply Chain Due Diligence Act on medium-sized companies as well. Even companies that are not yet directly affected by the Supply Chain Due Diligence Act as of January 01, 2023 should therefore be aware of the key points of the Act. We will inform you on December 01 / December 08, 2022 from 12 noon to 1 p.m in our webinar on the Supply Chain Due Diligence Act. You may register here.

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