The draft bill for a supply chain law passed on 11 February 2021 is intended to oblige companies to pay more attention to compliance with minimum social and ecological standards with suppliers abroad. Non-compliance with the due diligence obligations is to be punished with fines and exclusion from the awarding of public contracts.

The current draft provides that the new regulations will apply from 2023 for companies with more than 3,000 employees and from 2024 for companies with more than 1,000 employees. This means that the law would affect about 600-700 companies in Germany from 2023 and about 3,000 from 2024. However, many observers assume that a mechanism will be set in motion by the Supply Chain Act: In the medium term, medium-sized companies would also be affected, as full transparency in the supply chain would then be required and this would also be demanded of suppliers in Germany.

The due diligence required by the Supply Chain Act should initially only apply to direct suppliers, i.e. not to the entire supply chain. In future, the companies concerned should check more closely: Are the working conditions on site adequate? Are fundamental standards for the protection of health and the environment adhered to? Is child labour excluded?
Once a year, the companies concerned are to report on how they ensure compliance with the standards in their own company and with all direct suppliers from abroad. Even if violations become known at the beginning of the supply chain, the company must act, investigate the entire supply chain and disclose it.

Arqum offers you a quick check on the extent to which your company could be affected from 2023/2024 and how you are positioned with regard to the supply chain (complexity of the supply chain, level of information on suppliers, etc.).

Contact at Arqum:
Ellen Leibing