The supply chain law at a glance

Since the summer of 2021, Germany also has its own supply chain law, thereby joining other countries such as France, the United Kingdom and the Netherlands, which have already put comparable regulations in force for several years.

Under the German law, German companies above a certain size (2023: from 3,000 employees, 2024: from 1,000 employees) will in future be obliged to meet their responsibility for respecting human rights also in their direct supply chains.

To this end, the legislator expects them to address the following five core elements of supply chain due diligence in particular:

1. Assume responsibility

By including respect for human rights in the corporate philosophy.

2. Analyse risks

By answering the question: Where do potential or actual human rights violations threaten in the individual business model?

3. Minimise risks

By taking measures to prevent human rights violations or to stop them (if violations have already occurred), as well as monitoring their effectiveness on an ongoing basis.

4. Inform and communicate

Towards all relevant stakeholders.

5. Enable complaints

By establishing a transparent procedure that enables stakeholders to claim their rights.

The requirements of the German Supply Chain Law are internationally connectable and are based on the due diligence standard of the UN Guiding Principles on Human Rights, on which the German National Action Plan for Business and Human Rights of 2016 was likewise based.

Although the law currently only establishes an obligation to make all efforts and provides neither for an obligation to succeed nor for a guarantee of liability for the observance of human rights in the supply chain, German companies are facing major challenges – especially German SMEs, which will be affected at least indirectly across the board due to their high share of value creation in international supply chains as well as their globalized business models.

The supply chain due diligence is gaining additional momentum from the fact that the content of an EU supply chain directive has also been under discussion at European level for some time. Now the formal legislative proposal of the EU Commission is available and, as expected, indicates a significantly wider scope of application and liability for European companies.