Supply Chain Law

Reporting
- Companies must publish annual reports on their websites and submit them to the competent authority
- Companies must also continuously document the fulfillment of their due diligence obligations and keep this documentation for 7 years after its creation (10 I)
Due Diligence
- Obligations partially based on the UNGPs and OECD Guidelines
- Risk management, risk analysis, preventive measures, remedial measures, and grievance procedures

Human Rights
- Focus on labor-related rights (prohibition of forced labor and slavery, prohibition of unequal treatment, etc.) through a human rights perspective
Environment
- Namely the standards in the POP, Minamata and Basel Conventions
- Obligations regulated are mainly those with implications for human health (persistent organic pollutants mercury emissions and transboundary movements of hazardous wastes)
- Narrow approach towards the principle of prevention in international environmental law as general biodiversity loss and climate change impacts are not included
Other Social Matters
Broad ranging

Own Operations
Subsidiaries
Direct Suppliers
Indirect Suppliers
- Ad hoc obligations to identify risks linked to indirect suppliers and prevent and mitigate them if:
  (1) there exists ‘substantiated knowledge’ of potential human rights violations anywhere in the supply chain, meaning actual indications, for example triggered by an NGO complaint; and
  (2) whenever the risk situation in the value chain changes, for instance when the company introduces new products or enters new business fields
Full Value Chain
- Does not cover downstream obligations

Large Companies
- Based in Germany with at least 3,000 employees (from 2024 at least 1,000 employees)
- The scope of the draft law (only covered domestic companies) was extended to include foreign companies with branch offices in Germany. This addresses businesses’ fears of competitive disadvantages
- Domestic companies seconded to foreign countries need to be included when calculating the total number of employees
SMEs
- Applies to companies that have their central administration, headquarters, registered office or a branch office and at least 3,000 employees in Germany until 31 December 2023.
- As of 1 January 2024, the law will apply to companies with at least 1,000 employees in Germany.
All sectors

Monitoring
- The Federal Office of Economics and Export Control (BAFA) has the power to review reports, conduct risk-based inspections at its own initiative or based on claims raised by the affected parties
- BAFA issues orders and takes measures to detect, end, and prevent violations of due diligence obligations (ex: summon people, order to submit a corrective action plan or require specific actions to fulfill with due diligence obligations)
- BAFA can then order the company to comply within a specific time and/or issue fines (up to 2% of annual turnover) for any failure to conduct due diligence. The department in charge will have 65-130 FTE staff
- The authority reports once a year on its monitoring and enforcement activities, and publishes the report on its website, without naming the enterprise concerned
Administrative Sanctions
- The Federal Office of Economics and Export Control (BAFA) is responsible for the enforcement of the act and can impose administrative fines in case of violations
- It shall exclude enterprises that have been fined for a violation to a certain extent from participating in public procurement.
  BAFA’s independence from political influence has been questioned
- No separate obligation for decision-makers to consider the results of risk analysis when taking a decision

Civil Liability
- A violation of due diligence obligations does not establish a stand-alone civil law liability of the company
- The law does not create a new cause of action in civil liability
Facilitating Access to Justice
- Civil law liability already existing in German law remains unaffected
- The law establishes a procedural right for victims and injured parties to authorize German trade unions and NGOs to conduct civil proceedings in Germany on their behalf