18 June 2021
On 11 June 2021, the German parliament passed the Act on Corporate Due Diligence in Supply Chains – in short: Supply Chain Act. It will enter into force on 1 January 2023 and establishes extensive due diligence and reporting obligations regarding human, worker's and environmental rights in the supply chain for companies based or operating in Germany.
In globalised trade, value and supply chains take place in the entire world. The procurement markets for intermediate goods or finished products at all stages of production are often located in developing and emerging countries. In these states, standards for social, fair and sustainable economic activities are often less pronounced than in developed industrial nations.
Environmental, Social and Corporate Governance (‘ESG’) criteria such as labour protection, the fight against exploitation and child labour, or compliance with environmental standards increasingly are in the focus of public attention. After long political discussions, the German parliament on 11 June 2021 passed the Act on Corporate Due Diligence in Supply Chains (the "Supply Chain Act").
Particularly the scope of due diligence obligations and their extension to foreign companies operating in Germany as well as the issue of civil law liability in case of non-compliance were subject to controversial discussion.