To this end, it has extensive rights of information and access; it must support the company concerned in enforcing the measures. The country's largest organizations are now obliged to actively perform due diligence to prevent human rights and environmental abuses within their business and supply chains. You can also find more practical information on risk analysis in our Taylor Wessing guide to risk analysis and in the recording of our risk analysis webinar. The module can help unlock valuable insights to support organizations with their materiality and risk assessments with the following: For companies, a robust sustainability approach across their supply chain is now a business imperative. Governments see the implementation of new regulatory requirements as a catalyst for positive change in global supply chains. 2021. From BAFA’s detailed guidance it is clear that the risk analysis required by the Supply Chain Act is much more extensive than a typical compliance due diligence. Enterprises need to adopt a policy statement concerning their human rights and environmental strategy. The German Supply Chain Due Diligence Act will apply to enterprises based in Germany with more than 3,000 employees, or German-registered branches of foreign companies with over 3,000 employees. Deutsche Unternehmen sehen Lieferkettengesetz positiv Date: 25 Jul 2022 . They’re missing out on a secret of change management,…. The Library of Congress has no objection to the international use and reuse of Library U.S. Government works on loc.gov. We also provide a complete range of Supply Chain Assurance Solutions, including customizable audits and digital services to help provide transparency and peace of mind across your organization, supplier network and other parties. %���� DTTL and each of its member firms are legally separate and independent entities. The responsibility of German enterprises to respect human rights in global supply chains is thereby put on a legal footing. Performing robust supply chain risk analysis sits at the heart of these obligations. For company executives, this means that their supply chains now command the same attention as financial performance as pressure mounts for them to be aware of what is occurring upstream—or face very real reputational, investor and financial risk. Note: Please clarify your Rating in the Comment Field. If the company has an average annual turnover of more than EUR 400 million, the fine can be up to 2 percent of the company’s average annual turnover. The law provides for far-reaching powers of intervention by the competent authority to enforce human rights standards. Enacted in June 2021, the German Supply Chain Due Diligence Act (SCDDA), known in German as the Lieferkettensorgfaltspflichtengesetz (LkSG), was written in response to the above-mentioned challenges with the aim of increasing transparency and responsibility within supply chains worldwide. This report must be submitted to the responsible authority. Companies must introduce appropriate risk management or adapt their existing risk management. But moving beyond direct suppliers to mapping your entire supply chain (including indirect suppliers), from raw material extraction to the last mile, will generate a wide array of benefits: We urge companies to go beyond what is expected of them, to be innovators and lead by example, for the benefit not only of the company but also of all stakeholders. The human rights-related provisions include ones related to: various forms of child labor, forced labor, slavery, occupational health and safety obligations, freedom of association, unequal treatment in employment, the withholding of an adequate living wage, negative impacts on the environment affecting persons, unlawful eviction as well as the hiring of security forces for the protection of a company’s project where this leads to certain human rights violations due to a failure by the company to supervise or control the security forces. Note: If an attempt is made to circumvent the due diligence requirements through the intermediary of a direct supplier, indirect suppliers count as direct suppliers. The law will significantly impact many organizations across all business sectors in Germany. A further tightening of the statutory requirements as a result of the upcoming EU CS3D is also on the horizon. Contact us today to access our wide network of expertise. More about Copyright and other Restrictions. The bill was adopted by the Cabinet on Wednesday. Further information in English can be found on this website and the website of the Federal Ministry of Labour and Social Affairs. ), When a person’s “legal interest of paramount importance” protected in one the international agreements listed in the annex to the Supply Chain Due Diligence Act has been violated, that person may authorize a nongovernmental agency or trade union to sue on his or her behalf. The German Supply Chain Due Diligence Act (LkSG) created global implications for organizations addressing human rights and environmental impacts in their global supply chains. We help you put advanced technologies at the heart of your business to enable and drive your journey of digitisation. On July 22, 2021, the Act on Corporate Due Diligence in Supply Chains (Supply Chain Due Diligence Act) was published in the German Federal Law Gazette. Further information on the term can be found in the Frequently Asked Questions (FAQ) on the SCDDA of the authorities BAFA, BMAS and BMWK (there, under points VI.13 and 14.). Preventative or remedial action concerning indirect suppliers is only required if an organization knows of specific human rights or linked environmental legislation violations. For example, the buyer might con-duct its own checks or audits might be carried out by independent third parties. Without due care and attention, things break—regardless of whether that’s a transformer in an electricity grid, an axle bearing on a train or a refrigerator in a restaurant. ), Germany: New Law Obligates Companies to Establish Due Diligence Procedures in Global Supply Chains to Safeguard Human Rights and the Environment. What are its benefits? The process for this regular risk analysis is as follows: 1. abstract risk analysis – e.g. (ii) The company's ability to influence the immediate causer: for example, considering the company's proximity to the risk. Further, the CS3D provides for civil liability of companies for damages caused by their failure to comply with due diligence obligations. After lengthy and in-depth discussions, Germany’s parliament passed its new Supply Chain Due Diligence Act in June, making human rights due diligence mandatory from 2023. v. AT&T Technologies, Inc., et al., 490 U.S. 900 (1989). 4 0 obj The law requires regular documentation and reporting, and violations are subject to major fines. It has already been seen that problems may arise, in particular, in areas where the company must cooperate with suppliers and other third parties in order to fulfil its due diligence obligations. The due diligence obligations along the supply chain extend to the company’s own business area and direct suppliers as well as – in less strict form – indirect suppliers. Moreover, if an administrative fine is imposed above a certain minimum level, enterprises may be excluded from the award of public contracts. a convenience, and may not be complete or accurate. With effect as of 1 January 2023, companies operating in Germany and employing a certain number of employees will encounter a completely new set of rulesobliging them to review their supply chains and to enact a supply chain related compliance management system - the These works are also available for worldwide use and reuse under CC0 1.0 Universal. On 23 February 2022, the European Commission proposed a new Directive on Corporate Sustainability Due Diligence (the “CS3D”),  which in certain parts significantly exceeds the requirements of the Supply Chain Act. The only exception is if a company obtains knowledge of human rights or environmental violations by their indirect suppliers – then a risk analysis must be conducted. The Act, which comes into force from January 2023, will have broad consequences for German-registered firms within the scope and smaller organizations that sell into the German market. https://www.loc.gov/item/global-legal-monitor/2021-08-17/germany-new-law-obligates-companies-to-establish-due-diligence-procedures-in-global-supply-chains-to-safeguard-human-rights-and-the-environment/. This covers any activity for the production and exploitation of products and for the provision of services, regardless of whether it is carried out at a location in Germany or abroad. 2021. – 1 of 3 Insights. The Supply Chain Act imposes on companies due diligence obligations which must be complied with, with the aim of preventing or ending certain human rights or environmental violations. Due to global supply chains and client requirements, international suppliers are directly and indirectly affected. Weitere Informationen zum Datenschutz erhalten Sie über den folgenden Link: Datenschutz. When a person’s “legal interest of paramount importance” protected in one the international agreements listed in the annex to the Supply Chain Due Diligence Act has been violated, that person may authorize a nongovernmental agency or trade union to sue on his or her behalf. Web Page. The statutory requirements which apply to remedial action are significantly stricter than those applicable to preventive measures – for example, in the case of an identified violation by a direct supplier the company may be obliged to jointly develop and implement, at high cost, a plan to end the violation. Some industries that will be impacted include: The law is based on the UN Guiding Principles on Business and Human Rights established in 2011. This is the first complaint based on this act, which has been in force since the beginning of the year and applies to companies with more than 3,000 employees in Germany, including German subsidiaries of foreign firms. To do so, all global direct suppliers must be mapped. Document the company’s due diligence procedures, risks identified, and measures taken, and then publish a yearly report on its website, which must be free of charge and publicly available. The Act on Corporate Due Diligence Obligations in Supply Chains ( Gesetz über die unternehmerischen Sorgfaltspflichten in Lieferketten) came into force on 1 January 2023. Jaclyn Jaeger unpacks what you need to know to comply with the LkSG. Implement preventive measures in the company’s own business area, which includes the activities of subsidiaries, if the parent company exerts “decisive influence,” and vis-à-vis its direct suppliers. (. Web Page. Procurement and supply chain professionals may then require practical guidelines on what to do next. Gesley, Jenny. The new German "Act on Corporate Due Diligence to Prevent Human Rights Violations in Supply Chains" (Supply Chain Due Diligence Act - German: Lieferkettensorgfalts­pflichtengesetz, short: "LkSG"), more commonly known as the German Supply Chain Act, imposes extensive new obligations on companies with regard to human rights along the supply chain,. And collaboration with direct and indirect suppliers is essential for ensuring that appropriate due diligence measures are taken and documented throughout the supply chain. In legal terms, the law primarily means that companies need to adapt and update their compliance, purchasing and contract drafting processes. What is the German Supply Chain Due Diligence Act? Rather than applying short-term solutions, we recommend thinking long-term, together with Deloitte Switzerland, to build a better future, now. Most noteworthy is that the categories and reporting requirements symbolize a shift towards an approach of more holistic reporting that goes beyond traditional environmental metrics and indicators and includes other factors, particularly employee working conditions. It obligates companies with 3,000 or more employees in Germany to take “appropriate measures” to respect human rights and the environment within their supply chains “with the goal to prevent or minimize risks related to human rights or the environment or end the violation of duties related to human rights or the environment.” (Supply Chain Due Diligence Act art. It is permitted, for example, to enter business premises, demand information and inspect documents. In addition to the implementation of the due diligence obligations, these obligations must be regularly monitored and further developed, because risks can change constantly. Frequently Asked Questions (FAQ) on the SCDDA of the authorities BAFA, BMAS and BMWK, recording of our complaints procedure webinar, Overview of the German Supply Chain Due Diligence Act, Guide to the German Supply Chain Due Diligence Act, Overview of the new draft bill of the Supply Chain Act. The scope will broaden to enterprises based in Germany employing over 1,000 employees, or German-registered branches of foreign companies with greater than 1,000 employees. Such protected legal interests of paramount importance include life and limb.