A supply chain law in Germany: Finally!
Today the German Bundestag passed a “Supply Chain Due Diligence Act” (LkSG). The law will come into force in 2023 and will initially cover companies with 3,000 or more employees and then companies with 1,000 or more employees from 2024. From now on, these companies must identify risks for human rights violations and environmental degradation with direct suppliers and, if necessary, also with indirect suppliers and take countermeasures and document them.
The German Supply Chain Due Diligence Act passed today is a political compromise. A number of points are to be welcomed from a civil society perspective, as companies are obliged to contribute to greater human rights and environmental care in the supply chains. The Supply Chain Act initiative, of which XertifiX is also a member,has put together in a detailed analysis the decisive points to be assessed positively and critically. Among other things, the following can be rated positively:
- Introduction of a necessary paradigm shift in Germany: No longer voluntary CSR (Corporate Social Responsibility), but binding human rights and environmental requirements for companies.
- Preventive effect through the law: Companies must change their behavior and prevent damage to people and the environment through preventive measures.
- Strong official control and enforcement of the law: If companies violate their duty of care, they act improperly and can be fined by the competent authority, the Federal Office for Economic and Export Control (BAFA) .
- By law, those affected can demand that BAFA take action: If those affected claim against the Federal Office for Economic and Export Control (BAFA) that their rights are due to non-compliance with due diligence If the company is injured or threatened immediately, BAFA must take action and check whether there has been a violation and work to ensure that the company eliminates it.
- The law introduces litigation: In future, those affected will be able to authorize NGOs and trade unions through the existing legal channels to bring their rights to German courts in their own name.
At the same time, the compromise falls far too short on many points:
- The duties of care apply in full only to the company’s own business area and to direct, but not to indirect, suppliers.
- There is no civil liability rule according to which companies are liable for damage caused by failure to observe their duties of care.
- The law only marginally takes environmental aspects into account.
- The number of companies recorded is too low ( not will be all large companies with over 250 employees as well as small and medium-sized enterprises (SMEs) in sectors with particular human rights risks recorded).
- There are large gaps in the issues of gender equality and indigenous participation rights .
- The BAFA is a federal authority in the business area of the Federal Ministry of Economics (BMWi), which has decisively blocked an ambitious supply chain law in the last few months.
The law should therefore not simply serve as a model for a European supply chain law. Therefore it can be said:
We are still a long way from our goal, but we are finally at the start!
Please refer: Analysis of the supply chain law initiative: what the new law delivers
On the website of the Supply Chain Act initiative: Analysis