What is the German Supply Chain Due Diligence Act?

Germany recently passed the Supply Chain Due Diligence Act, which is a multistage Act designed to ensure that the products sold in Germany are not sourced from areas where human rights are violated. Who does that Act apply to? What will organisations that fall under its scope have to do to adapt their operations and ensure compliance?

The Germany Supply Chain Due Diligence, as well as the key trends in procurement will be discussed at ProcureCon 2023. Download the agenda here.

The Act applies to companies with more than 3,000 employees worldwide, and to companies with more than 1,000 employees in Germany. The law requires companies to take responsibility for their supply chain, from the first tier of suppliers to the last. Companies must identify, assess and address the risks of human rights violations that are present in their supply chain, and must take steps to mitigate or prevent those risks.

It also requires companies to map out their supply chain and identify any potential risks of human rights violations associated with their suppliers. They must then assess the severity of those risks and take steps to address them. This could include changing suppliers, or putting into place monitoring and reporting systems. The Act also requires companies to report on their efforts to meet the requirements of the Act.

Organisations will have to publish an annual report, detailing their efforts to identify and address risks in their supply chain. The reports will be made available to the public and will be monitored by the government. The Supply Chain Due Diligence Act is an important step in ensuring that companies are held accountable for their entire supply chains.

If violations occur within an organisation’s own operations, or even by their direct suppliers, they must respond. Equally, organisations must carry out a risk analysis, should there be a violation of environmental or human rights by their indirect suppliers, to mitigate the possible impacts. The demand for increased visibility across the end-to-end supply chain will only be furthered by the new Act.

The Act imposes a new level of responsibility on organisations that fall under its scope to take responsibility and control over their entire supply chain operations, and enforces action should any violations occur. Organisations around the world will need to adapt, and bring their operations in line. A greater understanding of the supply chain must be taken, as pressures will undoubtedly mount to ensure compliance with the German Supply Chain Due Diligence Act.

You can read a full overview of the new Act by Taylor Wessing by clicking here.

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