New German Supply Chain Due Diligence Act Is Now Effective
Germany’s landmark Act on Corporate Due Diligence Obligations in Supply Chains went into effect January 1, 2023. It will require in-scope companies to monitor human rights and environmental due diligence obligations internally and in their supply chains. The Act will apply to all companies whose head office, main branch or statutory seat is in Germany, if the company has at least 3,000 employees. As of 2024 it will be extended to companies with more than 1,000 employees.
Risk Management is at the Heart of the Act
The Act requires companies to identify, analyze, prioritize and remediate specific types of internal and supply chain risks. The Act creates a duty of effort, but not a duty of success.
Penalties and Civil Liabilities
The Act is enforceable by punitive government action, including hefty fines.
Generally, companies that violate the Act are not civilly liable, but there are exceptions.
Value Chain Sustainability Laws in the New Economic World Order
This Act is the most significant Value Chain Sustainability law enacted to date anywhere in the world. Other, stronger, more comprehensive laws are expected, with even greater global consequences. The biggest of these will be the European Union Corporate Sustainability Due Diligence Directive.
What Companies Need to Do Now
In-scope companies (those that are directly affected by the Act) need to become compliant as soon as possible. Although they will not be in-scope per se, both direct and indirect suppliers will be under pressure to help their in-scope business partners become compliant – and to demonstrate that they will be reliable suppliers.
This article is only a brief synopsis of the new Act. For more detailed information, see German Supply Chain Due Diligence Takes Effect January 1, 2023 at https://mcalan.com/german-supply-chain-due-diligence.Written Jan 03, 2023©Allen Campbell, JD, MBAwww.linkedin.com/in/allencampbelljdmbaEmail: AC@McAlan.comTel. 972-402-5300