29 July 2021

Germany adopts new Supply Chain Law

The German parliament adopted a new law on human rights in supply chains on 11 June, 2021. The law will require companies to regularly and systematically identify and address human rights and environmental risks in their direct supply chains. Companies will also be obliged to comply with environmental due diligence standards, especially with regards to the avoidance of harmful chemicals in global production processes. Companies will have to report annually outlining the steps they have taken to identify and mitigate human rights risks. In case companies fail to carry out their obligations national authorities can initiate administrative action or impose fines.

Whilst the new law is a step into the right direction, it does not address a few critical points. For example, the law only applies to companies with more than 3,000 employees beginning in 2023, and to companies with more than 1,000 employees from 2024. And companies only have to take measures in specific incidents if they have “substantiated knowledge” of potential abuses. The law does not require companies to undertake thorough and systematic due diligence on indirect suppliers further down the supply chain, which is often where the most serious abuses occur. The law also does not create liability for companies that have been implicated in serious human rights abuses, and does not require companies to assess the compliance of their supply chain with important international standards in certain treaties, such as the UN Convention on the Rights of the Child, or in the Paris Agreement on Climate Change. Explore more about the new law here

The European Commission is also working towards legislation that addresses human rights issues in supply chains. Explore more here.