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Germany implements Due Diligence Act
On the 16th of July 2021 as part of EU environmental, social and governance (ESG) regulations, Germany implemented the Due Diligence Act, also known as the ‘Supply Chain Act’.
The Regulation comes into force on the 1st of January 2023 and is intended to prevent the violation of international human rights and environmental law breaches.
The law applies to companies and branch offices with over 3,000 employees from 2023 and with over 1,000 employees from the year 2024.
Among the requirements that the companies must meet include:
- the adoption of the policy of corporate human rights strategy;
- the performance of risk analyses;
- anchoring of preventive measures; and
- the establishment of complaints procedure, documentation, and reporting requirements.
Should the Federal Office of Economics and Export Control identify an absence of enforcement or non-fulfillment of the prerequisites, there is a risk of receiving a penalty of up to EUR 50,000 in administrative proceedings. For human rights violations or a failure to set up complaints procedures or preventative measures, there is a penalty of up to €8million with a possibility of exclusion from government procurement for up to 3 years.
