You must have read these recent headlines which grabbed the eyeballs of CPOs and the supply chain industry.
It shows that the reliability of international supply chains, a key component of "made in Germany" product competitiveness for the past two decades, has taken another hit. So it is a question, how will the German Supply Chain Due Diligence Act come into play amidst all this chaos and supply chain uncertainties? What are expectations and possible implications?
Keep reading!
German Supply Chain Due Diligence Act - Overview
All companies domiciled in Germany (HO and branch offices) which employ more than 3000 employees in Germany (for 2023) and employ more than 1000 employees in Germany (for 2024) will be considered for GSCDDA (LKSG)
Prohibitions and obligations addressed in the German Supply Chain Due Diligence Act
Human rights related bans and obligations
- Child labor and exploitation of children
- Forced labor and slavery
- Work safety and protection
- Freedom of association (trade unions)
- Discrimination ban
- Adequate wages
- Direct environmental damage or pollution
- Unlawful use of security forces and forced evictions
Environmental bans and obligations
- Production and use of mercury
- Persistent organic pollutants
- Export of hazardous waste
- Environmentally sound handling, collection, storage, and disposal of waste
Does your company need to take action?
Even though the law leaves a lot of room for interpretation, comprehensive compliance management should be in place to avoid risks and penalties of non-compliance.
Organizations should conduct due diligence on all suppliers to identify:
- What risk potential do they entail?
- Which countries do they operate in?
- What about environmental risks that may violate human rights?
- How high is the ratio of manual work in the value chain? How does this work?
- Could it involve child labor?
While around 25 million people worldwide have been subjected to forced labor, 75 million children are toiling under exploitative working conditions.
- Large German corporations must comply with the Act to ensure respect for human rights along their supply chains.
- From 2023, companies will have to check all direct (and indirect) suppliers for compliance with minimum social and environmental standards.
- Under the existing legal framework, violations of listed prohibitions and obligations are subject to punishment.
For a large number of companies, compliance with supply chain due-diligence requirements will only be possible with manual effort in the short term. To prevent purely reactive monitoring and administration from taking center stage, leaving little room for structural improvement of supply chains, effective digitization and automation of supply chain mapping, risk sensing, and data analysis are essential prerequisites.
Advanced Contract Management - Your Best Bet to Comply with the Supply Chain Due Diligence Act. Read More
Action Point
If you are working in the procurement or legal department of your organization, start carrying out required due diligence activities, and risk assessments and keep records to monitor and take precautionary measures to prevent risks and comply with all relevant laws.
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