In April 2021, Germany’s new law on supply chain due diligence, “Act on the Duty of Care in Supply Chains,” came into effect. This law is an attempt to address human rights issues around global supply chains and create a more sustainable and inclusive economy. The Act requires companies doing business in Germany to investigate their supply chains for risks of human rights violations and take measures to prevent or remedy any such violations. In this blog post, we will provide an overview of what this Act means for businesses operating in Germany.
What Does the Act Require?
The German Supply Chain Due Diligence Act requires companies to conduct risk analyses of their entire supply chains at least once every three years. Companies must also take steps to mitigate any risks identified in these analyses and ensure that their suppliers meet certain minimum standards for labor conditions, environmental protection, health and safety, and other areas. Companies are also required to have a policy or procedure in place that outlines how they will address any potential human rights violations throughout their supply chain.
Who Does the Act Affect?
The Act applies both to domestic and international companies doing business in Germany with annual worldwide sales of over €400 million (approximately $475 million). It covers companies operating in all industries including manufacturing, retail, food production, services, chemicals, technology, healthcare services, transportation services and more. The Act also applies not only to direct suppliers but also those further down the supply chain—including subcontractors who may be located outside of Germany—which means that companies must conduct due diligence even when dealing with suppliers from other countries.
Implications for Businesses Operating in Germany
The German Supply Chain Due Diligence Act has far-reaching implications for businesses operating in Germany—especially multinational corporations whose operations span multiple countries—and it is essential that these companies are aware of their obligations under this new law. Companies must ensure that they have implemented appropriate procedures for identifying potential human rights risks throughout their entire supply chain. They must also work diligently to reduce any such risks by putting measures in place both within their own operations as well as those of their suppliers.
The German Supply Chain Due Diligence Act is an important step towards creating a more sustainable and inclusive economy by addressing human rights issues around global supply chains. The act requires companies doing business in Germany with annual worldwide sales over €400 million (approximately $475 million) to investigate their supply chains for risks of human rights violations and take measures to prevent or remedy any such violations. It is essential that businesses operating in Germany understand their obligations under this new law so that they can ensure compliance with its requirements while protecting both people and profits alike.