German Corporate Due Diligence Obligations in Supply Chains Act

German Act on Corporate Due Diligence Obligations in Supply Chains (the Act), adopted by the German Parliament  on 11 June 2021, introduces an obligation for companies over a certain scale to comply with human rights standards in relation to their business activities throughout their global supply chains.

Human rights mentioned non exhaustively in the Act:

• Prohibition of Child Labour
• Prohibition of Discrimination
• Clean Environment
• Adequate Wage
• Protection Against Slavery and Forced Labour
• The Right to Form Trade Unions/Workers’ Representative Bodies
• Protection Against Unlawful Land Confiscation
• Occupational Safety and Health

The Act will apply to:

Enterprises that have their central administration, principal place of business, administrative headquarters and statutory seat or branch office in Germany, with 3,000 and more employees from 2023 and 1,000 or more employees from 2024.

Fines:

Administrative fines for non-compliance (only for enterprises) imposed by the Act are up to EUR 8,000,000 or up to 2% of annual turnover. (fines based on turnover only to the enterprises with more than 400 million annual turnover) Enterprises that fail to comply with the Act can be excluded from public contracts for up to 3 years if an administrative fine of a certain minimum amount is imposed (threshold depending on the severity of the violation: EUR 175,000 or EUR 1,500,000, EUR 2,000,000, 0.35% of annual turnover).

Human Rights Due Diligence Obligations in German Act on Corporate Due Diligence in Supply Chains

1. Establishing a Risk Management System
2. Designating Responsible Person(s) Within The Enterprise
3. Performing Regular Risk Analysis
4. Issuing a Policy Statement
5. Laying Down Preventive Measures in its Own Area of Business and Vis-À-Vis Direct Suppliers
6. Taking Remedial Actions
7. Establishing a Complaints Procedure
8. Implementing HRDD Obligations With Regard to Risks at Indirect Suppliers
9. Documenting and Reporting