Summary of Supply Chain Diligence Act 

In June 2021, The Federal Parliament of Germany passes the draft bill on Supply Chain Due Diligence Act. This act is also referred to Supply Chain Act of Germany. The main objective of this act is for the Companies whoever doing business in Germany obliged to find out and assess the Human rights and environmental risk under the Risk management system. 


The Law is initially applied to the companies having their business in Germany and employing more than 3000 employees, effective from January 2023. The same law will apply to the companies employing more than 1000 employees, effective from January 2024. This Act will be a model for the Member States in European Union towards the environment risk and human rights due diligence progresses. Human Rights & Environmental Risks Standards:

Human Rights Risks: Forced and Child Labor, Unsafe Working Conditions, Servitude, Unethical employment, Violating the freedom of association, etc.
Environmental Risks: Disregard Occupational Health and safety, Risk caused by Persistent Organic Pollutant, Hazardous Waste, Mercury

Enforcement Penalties

The Companies who fail to meet these Supply Chain Due Diligence Act inside Germany may result in the penalties offered by the administration. The penalties range from EUR 100,000 to EUR 8 Million depending on the violation. For the companies having an average annual turnover of 400 million euros, the penalty amount will be up to 2% of their total turnover. Step to focus Next:

  • ✔ The companies will be required to report annually on due diligence activities of Human rights risks and Environmental risks.
  • ✔ To achieve that, the companies should carry the risk analysis of their direct and indirect suppliers once in a financial year.
  • ✔ The Companies should take immediate action on their suppliers if they found any violations of human rights and environmental obligations in their business.
  • ✔ The Companies should begin to prepare their risk analysis of human rights and environmental due diligence program. It will be highly recommended that the other companies also start these programs as they will enter into force in the European Union soon.

Note: The German Administration passes the Supply Chain Due Diligence Act in a draft. The modifications belong this act will be expected in the final regulation.
Draft Version: Click Here

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