German supply Chain Due Diligence Act - How can my company comply?

Christian is a Project Manager at Minespider.
Christian Ecker
The German Supply Chain Due Diligence Act came into force on 1 January 2023. It requires German companies to institute risk-management measures and grievance mechanisms and report on their efforts to avoid risks. Companies outside Germany that supply German firms will need to provide the key data to assure them of risk-free sourcing. Here is what steps your company can take to ensure you and your suppliers comply with the new law.
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On July 16, 2021, Germany passed its Supply Chain Due Diligence Act (Lieferkettensorgfaltspflichtengesetz). It entered into force on the 1st of January 2023, and it mandates due diligence measures for companies based in Germany with at least 3,000 employees. That benchmark will be lowered to 1,000 in 2024.

The law mandates supply chain due diligence, both for immediate suppliers, as well as the wider supply chain. It covers risks stretching from basic human rights violations like child labor, and slavery, to environmental risks like the use of mercury or unlawful disposal of hazardous waste. Companies that who are subject to the law are obliged to institute appropriate risk-management measures and grievance mechanisms and to regularly report on their efforts to avoid the risks covered by the law.

How does this matter to companies outside of Germany?

In 2021, Germany imported €1,204 billion worth of goods. In terms of overall trade volume, Germany is third globally, following the USA and China. If you are among the companies who contributed to that figure - directly or indirectly - odds are that this law will matter to you. In order to comply with the new law, the German companies - your direct or eventual customers - will require their suppliers, and by extension their wider supply chains, to provide the necessary data to assure them of risk-free sourcing. Failure to comply can result in fines of up to 500,000€ and the exclusion of public tenders.

If German companies identify risks in their supply chain, they have to address it jointly with their suppliers. In extreme cases, where violations are not stopped or successfully mitigated, companies have to cut off commercial relations.

What your company can do - to comply and expand business

Essentially, German companies need data to assess and address supply chain risks. Therefore, the safest way for you as a direct or indirect supplier is to proactively provide the information necessary to demonstrate compliance with the Supply Chain Act’s expectations. Adopting a proactive approach to reporting relevant risks will make you stand out from the crowd and underscore your commitment to low-risk, sustainable business conduct.

Now the last thing your compliance department needs is another regulation to analyze and more data requirements - this is where Minespider is happy to help.

We support you to:

  • Identify the data needed for your and your customers compliance,
  • Address any data gaps you may have,
  • Structure information accordingly.

In a matter of weeks we can help you get ready for the regulation. If you want to share your efforts with clients or regulators you can make use of our platform to seamlessly communicate that data via our Product Passports. Get in touch with us to find out more.

Minespider Product Passport

Are you subject to another supply chain regulation? Minespider’s Regulation Readiness Package helps you with a number of frameworks: EU Battery Regulation, Inflation Reduction Act, and many more - feel free to contact one of our experts who can walk you through the requirements and how to streamline your compliance.

About the author
Christian is a Project Manager at Minespider.
Christian Ecker
Christian is a Project Manager at Minespider. He focuses on the implementation of traceability processes and sustainability policies, with an interest in local-level human rights & environmental impacts.

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