In global trade, companies harm the environment and exploit people. This happens in the course of global value and supply chains and has been accepted until now, also because of its low controlability due to the distance to e.g. low-wage countries. This is because what is beyond the control of companies cannot be claimed via product liability.
After 10 years of tinkering with the draft directive for the Supply Chain Act in the EU, it was passed in Germany in 2021. There it is then effective from 01.01.2023. For the time being, in stages depending on the size of the company. France, the Netherlands and the UK already have their own laws. Outside Europe, too, for example in the USA or Australia, laws stipulate that companies worldwide must respect human rights.
These are only the best known cases in recent years, the number of unreported cases is likely to be several times higher. There is an urgent need to remedy this situation.
Basically, the EU Supply Chain Act is about creating a practical and SME-friendly framework for internationally active companies. A statutory catalog of criteria must clearly define what companies have to do in concrete terms as part of their due diligence obligations.
In detail: In France and Germany, the law initially applies to companies with a size of more than 3,000 employees and annual sales of more than 300 million euros. Following the introduction of the first stage, the law will be extended to companies in the SME segment with 500 or more employees. German companies face heavy fines of up to 50,000 euros for misconduct. Fines of up to 800,0000 euros or up to two percent of annual sales may also be imposed. In addition, there is the threat of exclusion from public tenders for up to three years. More information can be found on the website of the Federal Ministry of Labor and Social Affairs.
The new supply chain law will certainly lead to increased time and costs for many companies. However, consumer awareness of responsibly produced products is also increasing. In many cases, the negative media coverage alone should be enough reason to more rigorously review their own supply chain in the future. The path to a transparent supply chain is certainly the right one for the future.
Related blog article: 3 sustainable changes to make your logistics operations greener
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