The German “Lieferkettensorgfaltspflichtengesetz” – or for short “Lieferkettengesetz” – came into force on January 1st, 2023.
🌱 What does the act encompass?
Broadly speaking, the act places enterprises under an “obligation to respect human rights by implementing defined due diligence obligations”. This encompasses the broader supply chain, including actions by contractual partners and indirect suppliers. Under the act, enterprises must put into place “a risk management system to identify, prevent or minimise the risks of human rights violations and damage to the environment”. The act also sets out preventive and remedial measures which enterprises must take. Furthermore, the act makes it mandatory for enterprises to file regular reports and to put complaint procedures into place.
🌱 What rights does the act cover?
The human rights covered by the act are based on 11 international human rights conventions. The act sets forth “the prohibition of child labour, slavery and forced labour, the disregard of occupational safety and health obligations, withholding an adequate wage, the disregard of the right to form trade unions or employee representation bodies, the denial of access to food and water as well as the unlawful taking of land and livelihoods”.
🌱 Who does the act apply to?
The act applies to enterprises with “their central administration, principal place of business, administrative headquarters, statutory seat or branch office in Germany”. The act currently only applies to enterprises that have at least 3000 employees in Germany. Yet, as of 2024, the act will also apply to enterprises with at least 1000 employees in Germany.
🌱 How is it enforced?
The German Federal Office for Economic Affairs and Export Control (Bundesamt für Wirtschaft und Ausfuhrkontrolle) will monitor the supply chain management of the enterprises to which the act applies. Under the act, the federal office can “enter business premises, demand information and inspect documents as well as demand that enterprises take concrete action to fulfil their obligations and enforce this by imposing financial penalties”.
🌱 What penalties are imposed?
Administrative fines of up to €8 million – or of up to 2% of the annual global turnover (if the turnover is more than €400 million) – can be imposed on enterprises that fail to comply. Additionally, a non-compliant enterprise may be excluded from being awarded public contracts.
🌱 How are the electronics, technology, and renewable energy sectors affected?
The act applies to electronics, technology, and renewable energy enterprises with at least 3000 employees in Germany (or at least 1000 employees as of 2024). Enterprises that do not meet this threshold but form a part of the broader supply chain of another enterprise that does – for example, by being a contractual partner or an indirect supplier – will also need to take measures.
Read more about the German Supply Chain Due Diligence Act here:
- https://www.csr-in-deutschland.de/EN/Business-Human-Rights/Supply-Chain-Act/supply-chain-act.html
- https://www.bundesregierung.de/breg-en/service/archive/supply-chain-act-1872076