Sustainable Supply Due Diligence Act
Supply Chain Due Diligence Act which was passed by Germany holds organizations legally responsible for respecting human rights in their global supply chain. Given that the European Parliament has recently adopted a proposal for a directive on corporate sustainability due diligence, a unifying supply chain due diligence process is likely just around the corner.
Organizations must monitor and act on violations both within their own operations, as well as those of their direct suppliers regardless of whether the activity was performed in Germany or abroad. Although the Act focuses heavily on the human rights obligations, it does consider that environmental risks and their negative impact on human health within supply chains are deeply intertwined. We support companies which are in the supply chain of German companies to prepare for due diligence obligations and to comply with the Act.
Specific Services
Supply Chain Mapping
The Act practically means that a company is responsible for everything that happens along its entire supply chain. Supply chain mapping is the process of creating a full picture of the companies and organizations within the supply chain at every tier. Mapping is a useful tool to support risk assessment and for prioritizing suppliers and actions within a sustainable sourcing strategy.
Risk Assessment
Companies are required to conduct regular risk assessments to identify potential human rights and environmental risks associated with their suppliers and business partners in order to ensure due diligence obligations. Companies must implement appropriate measures to prevent or mitigate any identified risks which requires more engagement with suppliers.
Supplier Engagement
Our final stage is to provide a road map including solid internal practices and processes to engage internally with the key staff and the suppliers. It is critical to ensure that the commitment for a sustainable supply chain model is supported by senior management. It is also important to communicate the clear objectives, establishing and enforcing codes of conduct, and training employees to raise awareness and promote responsible practices.
Key Benefits of the Service
For companies, a complete supply chain due diligence approach across their supply chain is now a business imperative which also ensures many benefits.
- Preventing human rights abuses
- Integrating optimization strategies both for economic and sustainability perspectives
- Transparency and traceability in the supply chain
- Reduced risk of legal and reputational damage
- Trust among partners and stakeholders
Why should I worry about the impacts of my supplier?
The supply chain connects customers with products and services across the world. But this comes at a cost both from environment and social perspective. Studies show that a typical consumer company’s supply chain accounts for a good amount of its GHGs which means that the supply chain has a broader affect than we assume. Sustainable supply chain practices are not only good for the planet and people who live here, but they also support business growth.
Which organizations fall under the scope of the Supply Chain Due Diligence Act cover?
The German Supply Chain Due Diligence Act has significant implications for businesses operating in Germany. In 2023 the law applies to companies with 3,000 or more employees; in 2024, it will apply to companies with at least 1,000 employees in Germany. Regulated companies will need to invest in developing robust due diligence systems, which may require additional resources and expertise.
Will the Supply Chain Due Diligence Act impact small and medium-sized enterprises (SMEs)?
It is important to acknowledge that the German Supply Chain Due Diligence Act will have a cascading effect. SMEs that may not be in-scope are still expected to be affected in the coming months and years, because larger firms will likely pass on due diligence obligations imposed on them by the Act to their suppliers.
