German Supply Chain Laws
This FAQ should provide all initial answers.
Why has the law been proposed?
For the global protection of employee rights, including the right to a fair wage and avoidance of child labour.
Which countries’ workers are set to benefit from the German Supply Chain Law?
A number of suppliers in africa and asia that have historically relied upon low paid and child labour, (for instance the west african cocoa industry) will no longer be able to supply products to german companies, without the potential of the German companies incurring fines if their suppliers abuse human rights.
When will the Supply Chain Law come into force for large companies?
For German companies with more than 3,000 employees from 01.01.2023.
When will the Supply Chain Law come into force for small and medium-sized companies?
For German companies with more than 1,000 employees from 01.01.2024.
Will it apply to the Mittelstand (medium-sized companies), that form the backbone of the German economy?
Yes, provided that they pass the employee-threshold test.
Which industries will be affected?
All industries, but those dependent on foreign labour such as the clothing, fashion and food industries will be the most impacted upon.
Will the Supply Chain Law apply to other EU countries?
No, although the European Commission is planning a similar law that will go further in protecting workers’ rights than the German Supply Chain Law, The German law is likely to be introduced sooner.
Will German companies be responsible for ensuring the entire supply chain complies with the Supply Chain Law?
No, it is planned companies will only be responsible for ensuring the first direct suppliers in the supply chain are compliant, not their suppliers’ sub-suppliers.
What obligations for German companies have been proposed?
German companies will be required to undertake due diligence of their supply chain to check if any infringement of human rights is taking place and to take the appropriate action to end any infringement.
What will happen to non-compliant companies?
It is proposed that non-compliant companies will be fined.
How much will potential fines be?
Companies that are in breach may incur six figure fines, with a maximum fine amounting to 2% of annual revenue for companies with revenues in excess of 400 million euros.
Has the Supply Chain Law been passed?
Not yet, it still must be approved by the Bundestag (House of Representatives of the German government), planned for the Autumn of 2021.
What opposition is there against the Supply Chain Law from german companies?
German companies surveyed have complained that the new law will lead them to incur substantial additional cost to ensure compliance, which will further hinder their economic recovery which has already suffered greatly due to the impact of the corona virus.
What criticism is there of the proposed law from civil rights groups and trade unions?
Commentators argue the Supply Chain Law will do little to change the status quo, given only the first tier of suppliers to german companies must be checked as to any infringement, not the companies at the end of the supply chain which may still exploit workers.
Furthermore trade unions have complained that there only being civil penalties proposed and no criminal penalties for offending companies, this will not be a strong enough deterrent for big business to change bad habits.
What impact is the German Supply Chain Law likely to have on companies supply chain practices?
It is likely german companies will diversity their supply chains to ensure they do not purchase from any infringing suppliers.