As of January 1, 2023, the Supply Chain Act will apply in Germany - to which Swiss companies does the law apply?
For companies that have their headquarters or a branch office in Germany, there are increased corporate due diligence obligations in supply chains. We have looked into the law and show you whether and what steps you need to take to comply with the due diligence obligations.
To whom does the law apply?
On the one hand, the law applies to companies that have their headquarters in Germany and employ at least 3,000 employees. Headquarters is understood to mean the head office, main branch office, administrative headquarters or the registered office as determined, for example, by the shareholders' agreement. In addition, the Supply Chain Act also applies to branch offices that employ at least 3,000 employees. As of January 1, 2024, there will be a further tightening: the Supply Chain Act will then already apply from 1,000 employees. Many Swiss companies that have a branch office in Germany will therefore also be affected by the Supply Chain Act in Germany. Incidentally, the legal form of the company is irrelevant.
What are the obligations?
Companies are required to comply with human rights and environmental due diligence obligations set out in the law in order to end the violation of these obligations in the supply chain.
The legislator obliges the companies:
to establish a risk management system;
designate an in-house responsibility for monitoring risk management (e.g., a human rights officer, as stated in Section 4 (3) of the Act);
Conduct regular risk analyses to identify human rights and environmental risks in the business area;
to issue a policy statement on the human rights strategy by the company's management;
Anchor prevention measures in its own business unit and vis-à-vis direct suppliers, e.g. to implement the policy statement, train employees and carry out control measures;
Take remedial action when human rights or environmental obligations have been violated or a violation is imminent;
to set up an internal company complaints procedure to draw attention to breaches of obligations, with the procedure to be entrusted to an independent person bound to secrecy;
to prepare documentation and an annual report on the fulfillment of due diligence obligations and to make the report publicly available free of charge on the company's website for at least seven years no later than four months after the end of the fiscal year.
Control and enforcement is the responsibility of the Federal Office of Economics and Export Control. Violations of the law can be punished not only by exclusion from award procedures, but also by a fine.
Where to find the text of the law and support for its implementation?
The text of the law is published in the Federal Law Gazette and can be downloaded free of charge in PDF format.
The Federal Ministry of Labor, which is in charge, provides information on the law and implementation aids on the Internet(link).
Wicki Partners AG specializes in advising companies and the implementation of regulatory or legal requirements. We check for you whether you fall within the scope of the law at all. Furthermore, we support you in the implementation and formulation of declarations, documentation, procedural regulations as well as in the training of employees. We also assist you in setting up the independent complaints procedure within your company. Our German lawyer Sven Kohlmeier is experienced with the implementation of German laws.
What does our expert Sven Kohlmeier say about the law?
A fundamental value of every company should be to prevent human rights violating and exploitative production and supply of its products in the globalized world. It is therefore understandable that the Supply Chain Act obliges companies based in Germany to fulfill their responsibility in the supply chain with regard to respect for internationally recognized human rights. Although the German government justifies the goal of the law with the observance and protection of human rights, the explanatory memorandum to the law already contains the obligation to comply with environmentally related obligations. The law defines both human rights-related violations and environment-related risks very precisely. And the obligations of the companies are also specified very precisely and in detail.
We recommend that companies comply with the reporting requirements. Not only with a view to avoiding fines. The damage to a company's reputation must also be taken into account if deficiencies in the implementation of the law become public knowledge or if there are even human rights violations in the company's supply chain.
If necessary, it may also be a good idea to restructure or reorganize supply chains.
New reporting requirements also for Swiss companies
For Swiss companies, to which the Supply Chain Act does not apply due to the fact that they are not based in Germany or do not meet the employee thresholds, due diligence and reporting obligations in the areas of conflict minerals and child labor must be fulfilled for the first time for the 2023 financial year. Our article "Due diligenceand reporting obligations for companies - practical guide "in a nutshell"" provides information on this.
If you have any questions, please do not hesitate to contact our corporate expert Balthasar Wicki and our lawyer Sven Kohlmeier, who is admitted to the bar in Germany.