Our key takeaway: The UNGPs’ focus on human rights due diligence makes it into German law – albeit not all aspects of the UNGPs made it
On 11 June 2021, the German Federal Parliament adopted (with 412 votes in favour, 159 against, and 59 abstentions) the Supply Chain Due Diligence Act (Lieferkettengesetz):
- Large companies covered. The law will enter into force in 2023 and will apply to companies with 3,000 or more employees. Then, from 2024, the law will apply to companies with 1,000 or more employees. This includes foreign companies with a registered office or branch in Germany. (Civil society organisations view this scope as too small: they state it should be large companies with over 250 employees as well as SMEs in sectors with particular human rights risks.)
- The law obliges companies to comply with human rights and certain environmental due diligence obligations. Due diligence includes establishing effective risk management and conducting risk analyses systematically, and it is expected for companies’ own business and direct suppliers. In the case of indirect suppliers, companies are required to conduct a risk analysis on an ad hoc basis, when they gain “substantiated knowledge” of a potential human rights violation. Works councils with economic committees are entitled to information and consultation on issues of due diligence in supply chains. When it comes to human rights, the law references the UN Guiding Principles on Business and Human Rights. When it comes to the environment, due diligence extends to three environmental conventions which relate to organic pollutants, mercury emissions and hazardous wastes. (Civil society organisations view this as insufficient, as compared to including a general clause relating to environmental damages, and specifically referencing biodiversity loss and climate.)
- Fines and investigations: Companies that violate their due diligence obligations can be fined by the competent authority, the Federal Office for Economic Affairs and Export Control (BAFA). Fines are based on the severity of the offense as well as the company’s total turnover. This can also result in exclusion from public procurement contracts. Affected parties can request that BAFA take action and investigate whether a breach has occurred. (Civil society organisations question why the law does not provide for a new cause of action allowing affected parties to more easily sue companies before German courts for damages suffered.)
For further info, see Supply Chain Due Diligence Act (Lieferkettengesetz)
See Initiative Lieferkettengesetz, What the new Supply Chain Act delivers – and what it doesn’t (11 June 2021)
For an overview of further comments on the German law, see the Business & Human Rights Resource Centre, German parliament passes mandatory human rights due diligence law (16 June 2021).