German Supply Chain Act
The clock is ticking ...
January 01, 2023 is the date - that's when the first stage of the Supply Chain Act - actually correctly called the Supply Chain Sourcing Obligations Act (LkSG) - comes into force. With the first stage, it will become mandatory for all companies with more than 3,000 employees.One year later, the second stage came into force - this means that the Supply Chain Act applies to all companies with more than 1,000 employees.
However, since the EU is also working on a European supply chain law, which is planned for 2024, small and medium-sized enterprises (SMEs) will also be affected in the future.
The EU Supply Chain Act stipulates that small and medium-sized enterprises (SMEs) in high-risk sectors and listed SMEs operating in the domestic market must also inspect their primary products. What constitutes a high-risk SME is to be defined by the EU Commission.
Objective of the German Supply Chain Act?
The Supply Chain Due Diligence Act - also known as the Due Diligence Act - aims to improve the international human rights situation by setting requirements for responsible supply chain management for certain companies. Companies are given a clear, proportionate and reasonable legal framework for fulfilling human rights due diligence obligations. The law has defined terms for this purpose. The requirements are internationally compatible and are based on the due diligence standard of the UN Guiding Principles, on which the German National Action Plan is based. (Source: Federal Ministry of Labor and Social Affairs)High penalties threaten!
Violations are expensive!
A violation of the LkSG is an administrative offense and can be punished with a fine.
The amount of the fine is based on the amount of the Data Protection Regulation - so it can be very expensive. If you violate the LkSG, you may be subject to substantial fines - from annual sales of more than 400 million euros, this can cost up to two percent of global sales. The sales of all companies are combined if they operate as a single economic unit.
If a fine of at least 175,000 euros is imposed on the company, it can be excluded from participating in public tenders..
Man has three ways to act wisely: by reflection is the noblest, by imitation the simplest, by experience the bitterest. - Konfuzuis
Already Konfuzuis had it with this quotation on the point brought - unfortunately is the third way, which some enterprises do not survive.
One should be well prepared for an inspection
Assistance from standards
Many of the requirements can be covered very well by implementing management systems based on ISO standards. The implementation of the requirements should not be underestimated in terms of time - companies should start this immediately and launch corresponding projects. A project usually takes at least 12 months.
We are specialists in this field and have developed a solution model based on ISO standards - with it you can prove your due diligence obligations. It includes a process model, the necessary organizational structure, guidelines and documents, the necessary training, document organization, automatic supplier questionnaires, support for risk analysis and software for complaint management. We also offer solution models for the human rights officer.
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Quelle des Video: https://www.youtube.com/watch?v=YOIyZNq_w5c
Status of the Supply Chain Act
The draft bill for the Supplier Chain Sorgfaltspfichtengesetz was published on 28.02.2021. The government draft was already passed on 03.03.2021 and the law was published on 22.07.2021.
On 01.01.2023, the Supply Chain Act will come into force and must be implemented by companies on this date. There is no transition period.
Disadvantage for the German economy?
At first glance, it seems as if the Supply Chain Act would result in disadvantages for German companies, since it is a German law. This is not correct!
The Due Diligence Act (Supply Chain Act) is to be adapted to the future European regulation. This is to avoid competitive disadvantages for German companies.
Important developments
Currently, the Supply Chain Act is a German law and is only effective in Germany.It is obligatory for German companies and foreign companies that place products on the market in Germany. However, the European Union (EU) has the issue under consideration as well. In March 2021, MEPs adopted by a large majority a legislative proposal for a law on accountability and due diligence for companies. This means that the topic has reached the European level and will also lead to regulation there.
The European Parliament's proposal provides for very extensive due diligence obligations and goes far beyond the obligations currently set for companies in Germany.
Interactions
Businesses will not only be affected by the Supply Chain Due Diligence Act, but also by a number of other laws that need to be observed.
All of this can be summarized under the term "compliance" - which in German means "adherence, conformity, legal compliance, adherence to rules or "acting in accordance with the applicable regulations".
Important developments to note are:
EU Whistleblower Directive (EU Directive 2019/1937 of 23.10.2019).
The EU Whistleblower Directive entered into force on 19.12.2020 protects a whistleblower. Until 17.12.2021, the directive should actually be implemented in national law, so that a systematic protection of whistleblowers in Germany can be guaranteed. The current status is that it is expected to be implemented in Q. IV 22.
A longer deadline of Dec. 17, 2023 applies only with regard to the obligation to set up internal whistleblower systems for legal entities with 50 to 249 employees.
Whistleblower Protection Act
Companies will likely have to implement the Whistleblower Protection Act from Q.4 22 for all companies with 250 or more employees. The complaint procedure required by the Supply Chain Act under Section 8 LkSG is "de facto" a whistleblower system.
Association Sanctions Act
If many companies also think that the law is for associations, they are mistaken. Associations are defined as companies as legal entities.
The German government passed the draft Association Sanctions Act almost unchanged and introduced it to the Bundestag in October 2020. However, due to disagreements within the governing coalition, the Bundestag did not discuss the bill any further.
It can be assumed that the German government will take this up again. On an ongoing basis, the Organization for Economic Cooperation and Development (OECD) has expressly called on Germany to finally introduce appropriate reforms to "corporate criminal law". Thus, the demand for a compliance management system for companies is only postponed - but not canceled.