30 Dec 2022

On January 1, the new Supply Chain Act comes into force... As a result, companies with more than 3,000 employees will be required to comply with certain obligations for their entire supply chain.

According to the Development Ministry, about 900 German companies will be affected. From 2024, the law will also apply to companies with more than 1,000 employees.

Among other things, the companies concerned must carry out a risk analysis, introduce risk management and a complaints mechanism, and report on these measures publicly. In the event of violations within the business or by direct suppliers, companies must take appropriate action...

The rules will be monitored by a new branch of the Federal Office of Economics and Export Control (BAFA) that will carry out the auditing through mandatory reports submitted by companies and “risk-based inspections.”

If companies violate the new rules, they could face fines of up to €8 million or up to 2 percent of annual global sales. In addition, companies can be excluded from public tenders...

Corresponding legislation at the EU level is still being discussed. It will likely be stricter than the German rules, but still has to be negotiated with the European Parliament before coming into force.

Berlin will then have to adapt its own law.