German Supply Chain Act (Lieferkettensorgfaltspflichtengesetz) – New standard for human rights and environmental due diligence for global supply chains
In the context of globalized trade, value and supply chainsextend across the entire world. International corporationsthat do not voluntarily comply with human rights andenvironmental standards along their supply chains(83-87% of German companies) have been criticizedfor several decades for profiting from weak and poorlyenforced national regulations in emerging and developingcountries, especially in the Global South. The call forcompanies to comply with these standards is emphasizedby the fact that the International Labor Organizationestimates that 25 million people worldwide are victimsof forced labor, and that global environmental damageis also steadily increasing, according to the UN. Againstthis backdrop, and as a result of the tragic collapse ofthe Rana Plaza textile factory in Bangladesh in 2013 thatclaimed the lives of over 1,000 people, the necessityfor German lawmakers to adopt a legally binding andstricter liability regime for corporate supply chains wasconfirmed. In June 2021, the German legislature passedthe “Gesetz über die unternehmerischen “Sorgfaltspflichtenzur Vermeidung von Menschenrechtsverletzungen inLieferketten” (Supply Chain Act). The Supply Chain Actimposes significant obligations on companies that sourcetheir products and services through supply chains fromdeveloping and emerging countries and sell them inGermany to comply with human rights and environmentalstandards, and exposes them to potentially seriousliability in the event of violations.
This article highlights the most important aspects of thenew German Supply Chain Act.
