Which companies are affected? From January 2023, large German companies with more than 3,000 employees will initially be affected by the Supply Chain Act. The scope expands to companies with more than 1,000 employees from 2024.

The requirements also apply to companies with more than 250 employees and sales of more than €40 million if they generate more than half of their sales in a "risk sector." In addition, the law has been extended to foreign companies that have a branch office in Germany and employ a corresponding number of people there.

According to estimates by the EU Commission, a total of 13,000 companies in the EU are affected.
What are the obligations under the Supply Chain Act? The Supply Chain Act is intended to help establish a process that supports corporate due diligence in respecting human rights throughout the supply chain phase

  • Risk management system with risk analysis

  • Policy statement on respect for human rights

  • Establishment of a complaints procedure

  • Documentation of compliance with due diligence + an annual transparent reporting system

  • Introduction of preventive measures

  • Taking corrective action

Companies must be able to demonstrate that they have implemented the due diligence requirements described in the law that are feasible and appropriate in light of their individual context
What are the consequences of non-compliance? Above all, the damage to a company's reputation is a consequence that should not be disregarded and which threatens non-compliance. In addition, there are the following fines for violations of the due diligence obligations:

  • Periodic penalty payments up to 50,000 euros

  • Fines of up to 800,000 euros or 2% of annual turnover for companies with more than 400 million euros in turnover

  • Exclusion from public tenders for up to three years

"In the future, companies will be judged not only by how solidly and successfully they operate, but by how sustainably they do so."
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