The Statement of Principles on the Supply Chain Act puts your corporate values into a documented form and forms the basis for dialog with external stakeholders. With the Supply Chain Act, Germany is striving for more transparency and responsibility in global trade.
The Supply Chain Act obliges companies that procure intermediate goods or finished products abroad to assume responsibility for production processes and working conditions at their suppliers. For this, the law brings 5 overarching legal requirements.
What are these and how can manufacturers fulfill them in practice with legal certainty?
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The Supply Chain Act
The Supply Chain Act, also known as the Due Diligence Act, was passed by the German Bundestag on June 11, 2021.
What is the supply chain law?
In 2023, the Supply Chain Act will come into force for the first time for large companies with at least 3,000 employees and in 2024 for companies with at least 1,000 employees in Germany. The law obliges companies to comply with human rights and environmental due diligence requirements in their supply chains. Among other things, this includes
- the establishment of a risk management system,
- the definition of internal responsibilities,
- regular risk analyses,
- the preparation of a policy statement,
- Prevention measures,
- a complaints procedure and
- documenting and reporting on the measures taken.
The exact documentation and reporting requirements are expected to be determined by the Federal Office of Export Control (BAFA).
Introduction of risk management
Companies are required to have a risk management system for their supply chain to introduce. This identifies, assesses and prioritizes the risks in their supply chains. Manufacturers set up a social responsibility department for this purpose, for example, which regularly carries out risk assessments and due diligence checks. To implement these, the department uses specialized risk management software solutions, for example. These collect automated data on suppliers in order to assess and prioritize risks such as human rights violations or environmental impacts. For this purpose, appropriate software should be available via AI Algorithms Have the ability to analyze large amounts of data to identify potential problem areas.
Creation of an action plan
Based on the results of the risk assessments and due diligence, companies draw up an action plan. This plan contains, for example, measures to prevent or minimize violations of human rights and damage to the environment. To this end, companies conduct audits of suppliers, for example, to ensure that they comply with human rights. They do not have to conduct these audits on site. They use digital solutions such as live video to ensure compliance with the measures set out in the action plan.
Establishment of complaint channels
Companies set up complaint channels for people in supply chains. These channels allow workers to raise concerns anonymously and report violations. For this purpose, they set up, for example, a "Whistleblower platform", on which an AI-supported text analysis monitors incoming complaints and Trends identified. In this way, manufacturers do not have to manually check the complaints received from all over the world, but only take action if actors in the supply chain violate the requirements of the Supply Chain Act.
Introduction of regular reporting
Companies are required to report regularly on their supply chain management. These reports then contain, for example, information on the measures introduced and their effectiveness. In practice, they implement this with specialized Software solutions um. They enable companies to organize, monitor and document their efforts to comply with human rights and environmental standards. For this purpose, a Software data from different parts of the business and supply chain and produces meaningful reports on sustainability efforts.
Compliance with human rights and environmental standards
Companies ensure that partner companies in their supply chains comply with human rights and environmental standards. To do this, for example, they require their suppliers to ensure certain working conditions or order them to refrain from environmentally harmful practices. To ensure this, manufacturers use blockchain technology, among other things. It helps manufacturers track every stage of the supply chain. So if a partner company claims to source wood from sustainable sources, blockchain helps verify that claim by documenting the entire journey of the wood from plantation to final product.
Statement of Principles Supply Chain Act Background
The Statement of Principles under the Supply Chain Act serves as a guide to the fundamental values embedded in your corporate culture and illustrates what your company and employees stand for. Likewise, it shows which common goals are pursued and which principles serve as orientation to achieve these goals.
Creating a policy statement is important for several reasons:
- Public engagement: By making such a declaration, your company signals that it is aware of its responsibilities and actively assumes them, both internally and externally.
- Internal alignment and motivation: The policy statement provides your employees with a clear orientation for their behavior and motivates them to live these values.
- Basis for external communication: It enables constructive dialog with external stakeholders and helps build trust by presenting your company in a transparent and responsible manner.
Statement of Principles Supply Chain Act Sample
Copyable sample supply chain law policy statement. Please add content in brackets as appropriate:
As a result of its international business activities, [company name] GmbH considers itself to be particularly committed to improving global human rights standards along its supply chains. In line with the 2030 Agenda for Sustainable Development, we pursue the goal of making our business relationships socially responsible.
The increasing internationalization of [company name] GmbH in global procurement and sales markets harbors both potential and risks. While the opening up of new markets and production sites generates jobs and prosperity, we must be equally mindful of the dangers associated with intransparency and the occasionally inadequate implementation of internationally accepted human rights standards in supply chains.
Company name] GmbH is committed to respecting, protecting and promoting individual human rights. This obligation exists regardless of the capacity or will of individual states to fulfill their human rights protection obligations. For this reason, [company name] GmbH implements a specialized risk management system that serves to identify potential violations of human rights within the supply chain at an early stage and analyze them accordingly. As a result, necessary measures are taken to ensure compliance with these rights.
Our core principles include paying fair wages, striving for adequate working conditions and preventing child labor. In addition, we consider equality of all genders to be a matter of course and reject any discrimination on the basis of gender, origin, race, language, faith or disability.
Furthermore, [company name] GmbH positions itself resolutely against corruption, forced labor and human trafficking. To realize these principles, we continuously train our employees and implement defined processes to detect potential violations of our ethical standards and derive appropriate operational measures from them. This also includes information from third parties.
The Supply Chain Act stipulates that companies procuring intermediate goods or finished products abroad must take responsibility for the production processes and working conditions of their suppliers. This is done on the basis of five legal requirements. The statement of principles under the Supply Chain Act communicates the company's values and objectives, both internally and externally. It signals public commitment, provides internal alignment and is the basis for dialogue with external stakeholders to build trust. This is critical as the law requires increased accountability for ethical behavior in supply chains.