German companies should be encouraged to act diligently when it comes to human rights, not only in their own operations but also with regard to their suppliers around the world. (Photo: © Felix Pergande/123RF.com)
Read aloud:
March 2021
Child protection, human rights, equal pay: these are the goals the new Supply Chain Act aims to advance. While it directly imposes obligations on large companies, smaller businesses also bear responsibility through their business relationships.
On 3 March 2021, the Federal Cabinet approved the Supply Chain Act If the Bundestag and Bundesrat adopt the draft, the law will take from 2023 German companies are obliged to ensure compliance with human rights in their supply chains. This will indirectly also small and medium-sized enterprises a lot will come.
The Supply Chain Act aims to ensure child protection, freedom from slavery and forced labor, freedom of association, equal treatment in employment, fair remuneration and other Strengthening human rightsGerman companies, of course, already have to comply with all of these rights, and the standard here is comparatively high.
For foreign suppliers However, the situation may be different. And this is where the Supply Chain Act comes in: German companies are to be encouraged to take responsibility not only for themselves, but also for their direct Suppliers and even on companies further down the supply chain to act carefully when it comes to human rights.
The law provides for a Duty of care There is no obligation to achieve results. Therefore, if human rights violations occur at any point in the supply chain, even though the German company has diligently fulfilled its obligations, it is not liable.
Operations management
Craft policy
The Chambers of Crafts in Germany - Chamber of Crafts Münster
However, breaches of duty can have severe consequences, including fines of up to two percent of worldwide turnover. Companies that do not comply with these obligations can also be excluded from public contracts. Finally, trade unions or non-governmental organizations can represent the injured parties Lawsuit Some associations are already fearing waves of lawsuits against German companies.
The direct addressees of the law are companies that have their registered office in Germany and at least 3.000 employees If the parent company is located in Germany, employees in foreign group companies are also counted. 1.1.2024 The law already applies to companies with at least 1.000 employees.
However, indirect effects are also smaller companies This is because the law requires large companies to conduct a risk analysis and, if necessary, take preventive measures against their suppliers. The law explicitly states that companies should consider, when selecting their suppliers, whether they can expect that "human rights-related expectations" will be met. Furthermore, large companies should direct suppliers give up on ensuring that they also comply with the required human rights and environmental standards and "along the supply chain address appropriately".
In order to protect themselves accordingly, large companies that are subject to the obligations of the Supply Chain Act will therefore probably also from their smaller suppliers demand that these even preventive measures and, if necessary, specify them directly.
Small and medium-sized companies that supply large corporations should also address the issue before they are forced to do so by the corporations. Initial, already sensible steps can be:
• Check which large companies are among the Clients which will soon be subject to the Supply Chain Act.
• Contracts Check with clients to see whether they already have specifications on social or environmental protection issues and what contractual penalties may be provided for.
• Clarify whether your own company Goods from abroad where the manufacturer may be considered critical with regard to production conditions.
Craft businesses should also follow what is coming from the EU: The EU Commission has submitted a own supply chain law announced that the company aller At the very latest, when sourcing products from abroad, medium-sized companies cannot avoid addressing this issue.
It is also expected that the risk management programs of large companies will be penalties Suppliers will be encouraged to comply with the regulations. Those who cannot or will not comply with the regulations must expect to be replaced by another supplier. Suppliers will therefore also have every incentive to ensure compliance with human rights due diligence with their own suppliers.
Author Oliver Korte is a lawyer specializing in sales and commercial law at the law firm SKW Schwarz
Newsletter
Write a comment