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Germany’s Supply Chain Due Diligence Act Sets Precedent for Global Compliance

Introduction

In January 2023, Germany’s Supply Chain Due Diligence Act came into effect, requiring large companies operating in the country to conduct human rights and environmental due diligence on their business and suppliers. This legislation has significant implications not only in Germany but also globally, as other countries consider introducing similar regulations.

Key Provisions of the Act

According to experts, the German law is a major step forward for mandatory human rights due diligence legislation. Companies with at least 3,000 employees must:

• Establish a process to identify and assess third-party risks, including:
  • Forced labor
  • Environmental impact
  • Discrimination
  • Unsafe working conditions
• Prevent and remedy any adverse impacts
• Publish an annual report outlining their approach

Consequences of Non-Compliance

Failure to comply with the Act could result in significant costs for companies, including:

• Fines of up to 2% of their average yearly global revenue or up to €800,000
• Temporary exclusion from applying for public contracts

Scope and Impact

The Act’s scope will be extended in January 2024 to include companies with at least 1,000 employees in Germany. The law applies not only to German-headquartered companies but also to any company with a large branch in Germany or a German subsidiary of a foreign company that exceeds the employee threshold.

Global Implications

Several countries and bodies have introduced similar regulations, including:

• European Union’s Corporate Sustainability Due Diligence Directive
• Netherlands’ Child Labour Due Diligence Act
• France’s Duty of Vigilance Law

Many others are considering introducing human rights due diligence requirements on companies in the near future.

Becoming Compliant

Experts warn that becoming compliant with human rights and environmental due diligence is not a straightforward task, particularly as supply chains become increasingly complex. Companies need access to reliable data on their suppliers and third parties to meet the challenge of mandatory human rights and environmental due diligence legislation.

Solutions for Compliance

To address this issue, Nexis Solutions offers a range of tools and technologies that can help companies implement an efficient and effective due diligence process. These include:

• News data to identify reputational risk
• PEPs and sanctions data to identify entities that may require enhanced due diligence
• ESG data to assess compliance with growing expectations around human rights and environmental due diligence
• Company data to build a picture of a company’s structure, directors, and beneficial owners

Conclusion

“Germany’s Supply Chain Due Diligence Act sets a precedent for global compliance,” said [Name], Head of Compliance at Nexis Solutions. “We are committed to helping companies navigate this new landscape and implement effective due diligence processes that meet the evolving expectations of regulators and stakeholders.”

For more information on how Nexis Solutions can support your company’s compliance efforts, please contact us at [insert contact information].