12. June 2021

The new supply chain law is coming. Are you prepared for it?

The new supply chain law is coming. Are you prepared for it?

The German government is close to an agreement on the new Supply Chain Act. The law is expected to be passed in Germany by January 2021 at the latest and also at EU level in spring 2021.

The law creates a legal framework for corporate due diligence along the entire supply chain. Companies are thus to assume responsibility for human rights violations and environmental risks of their suppliers and, if necessary, also be liable for them. This means new obligations for companies and their purchasing departments.

Key points of the new supply chain law

The German Federal Ministry of Labor and Social Affairs (BMAS) and the German Federal Ministry for Economic Cooperation and Development (BMZ) have presented a key points paper for the new Supply Chain Act and the strengthening of corporate due diligence obligations to prevent human rights violations in global value chains.

The envisaged obligations go far beyond the core elements of the National Action Plan and relevant international standards, such as the UN Guiding Principles on Business and Human Rights. This is unique because it is the first time German law has been applied to international supply chains. Thus, there is a move away from the principle of applicability of the "law at the place where the damage occurs" to the "law at the place of action".

Is your company affected by the Supply Chain Act?

In principle, only large companies with more than 500 employees are directly affected by the new Supply Chain Act. This corresponds to approximately 7,200 companies in Germany (partnerships and corporations).

However, companies with fewer than 500 employees will also be indirectly affected, because supply chain monitoring takes place not only internationally but also nationally. In this respect, small companies may also be obliged to provide information and disclosures to their large trading partners.

For affected companies, this means committing themselves to the UN Guiding Principles on Business and Human Rights and Environmental Risks and also demanding these from all stakeholders (especially business partners).

All measures taken by the companies concerned must then additionally be published transparently in annual reports.

Meet the requirements of the Supply Chain Act with Sco2res®.

Even though the effects of the Supply Chain Act are far-reaching, there is no reason to panic.

A study by the EU Commission has shown that the cost for large companies is only 0.009 percent of turnover on average.

At its core, the Supply Chain Act requires systematic risk management and an electronic reporting obligation for companies to a federal authority that checks the information for plausibility on a random basis or in cases of suspicion. Existing reporting obligations, for example under the CSR Directive, are to be taken into account.

With Sco2res® you can fulfill your documentation, monitoring and reporting obligations automatically and in compliance with the law.

Arrange a meeting today and get to know Sco2res®.

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