German Supply Chain Act (Lieferkettensorgfaltspflichtengesetz) – New standard for human rights and environmental due diligence for global supply chains

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In the context of globalized trade, value and supply chains extend across the entire world. International corporations that do not voluntarily comply with human rights and environmental standards along their supply chains (83-87% of German companies) have been criticized for several decades for profiting from weak and poorly enforced national regulations in emerging and developing countries, especially in the Global South. The call for companies to comply with these standards is emphasized by the fact that the International Labor Organization estimates that 25 million people worldwide are victims of forced labor, and that global environmental damage is also steadily increasing, according to the UN. Against this backdrop, and as a result of the tragic collapse of the Rana Plaza textile factory in Bangladesh in 2013 that claimed the lives of over 1,000 people, the necessity for German lawmakers to adopt a legally binding and stricter liability regime for corporate supply chains was confirmed. In June 2021, the German legislature passed the “Gesetz über die unternehmerischen “Sorgfaltspflichten zur Vermeidung von Menschenrechtsverletzungen in Lieferketten” (Supply Chain Act). The Supply Chain Act imposes significant obligations on companies that source their products and services through supply chains from developing and emerging countries and sell them in Germany to comply with human rights and environmental standards, and exposes them to potentially serious liability in the event of violations.

This article highlights the most important aspects of the new German Supply Chain Act.

Read the full article here.