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"The true cost of non-compliance is not measured in fines, but in lost trust and missed opportunities."
- World Economic Forum
Think of compliance as your company's "legal and ethical driver's license." It's about ensuring your business follows the rules - not just in-house, but also with all partners and suppliers worldwide. This sounds like a lot of paperwork (which it is), but it has an important background: ensuring fair working conditions, environmental protection, and human rights everywhere.
Compliance thus includes:
Legal Conformity: Following national and international regulations.
Ethics: Aligning business decisions with values like fairness, responsibility, and sustainability.
Responsibility: Actively managing risks and addressing issues.
Why is this so important? According to an International Labour Organization study, an estimated 27.6 million people worldwide work under conditions of modern slavery - a shocking example of why compliance in global supply chains is urgently needed.
The Supply Chain Due Diligence Act (LkSG) has been in force since 2023. This law is an important step toward fair and sustainable supply chains.
But what does this mean specifically?
Since 2023: Companies with more than 3,000 employees.
From 2024: Also companies with more than 1,000 employees.
Plus: Indirectly all suppliers of these companies, as they must also meet the requirements.
To ensure a robust compliance framework, establish a comprehensive risk management system—a kind of "early warning system" to identify potential issues before they escalate. Regularly conduct thorough checks to pinpoint weaknesses within your supply chain. By taking proactive precautions, you can effectively minimize risks before they materialize. If challenges arise, act swiftly to address and resolve them. Remember, thorough documentation is essential—record every step meticulously.
Non-compliance can lead to severe consequences, including fines of up to 2% of global annual turnover, which can be devastating. Beyond financial penalties, reputational damage is a critical risk. A striking example is the backlash faced by a well-known fashion retailer for its failure to uphold due diligence, leading to public criticism and loss of consumer trust.
By prioritizing compliance, you not only protect your company financially but also strengthen its reputation and operational integrity.
The EU is planning even more comprehensive regulation with the Corporate Sustainability Due Diligence Directive (CSDDD). This law goes beyond the German LkSG and could come into force in 2025.
Affects more businesses:
Large EU companies (>500 employees, >150M € turnover).
Risk sector companies (>250 employees, >40M € turnover).
Climate protection plans: Companies must set concrete targets for reducing their CO2 footprint.
Personal liability: Managing directors and board members can be held personally responsible for violations.
Extended due diligence: Even stricter requirements along the entire supply chain.
Don't panic! With a well-thought-out strategy and the right tools, you can handle compliance requirements. Here's a guide:
A robust compliance system starts with structured processes that create transparency across operations. Organizations must establish clear workflows and responsibilities while maintaining detailed documentation of all compliance activities.
Supply chain oversight requires evaluation of both direct suppliers and their sub-contractors. Regular audits and risk assessments across all tiers help identify potential compliance issues before they escalate.
Digital platforms and AI-powered tools enable efficient monitoring and real-time violation detection. These solutions streamline compliance processes and provide instant access to critical documentation.
Employee training forms the foundation of compliance defense. Regular training ensures teams understand current regulations and can identify potential violations. Well-informed employees make better decisions and maintain compliance standards.
Comprehensive documentation tracks all compliance activities, from training records to audit results. Standardized procedures and secure digital storage ensure accurate, accessible record-keeping for regulatory requirements and process improvement.
Compliance is like insurance: Sometimes it's annoying, but when it matters, you're glad to have it. Sure, it all costs money and time - but the alternative (penalties, reputation damage, lost customers) is much more expensive.
"Companies that implement sustainable and ethical standards in their supply chain are better positioned for the future."
- Transparency International
Implementing strong compliance practices delivers multiple strategic advantages. Companies gain legal security, significantly reducing regulatory risks and potential penalties. A solid compliance record strengthens reputation, as today's customers actively seek responsible business partners. This leads to more sustainable supply chains, benefiting both environment and brand value. Most importantly, thorough compliance becomes a competitive differentiator, helping companies secure preferred partnerships and new business opportunities. In today's regulatory landscape, effective compliance isn't just about following rules—it's about building business resilience.
Relatico's platform streamlines supply chain compliance through comprehensive digital solutions. Our integrated system combines supplier management, AI-powered risk assessment, and centralized documentation in one platform. Real-time monitoring and automated analyses ensure complete supply chain visibility while reducing manual effort. With Relatico, companies transform compliance challenges into opportunities for sustainable growth and operational excellence.
Bernd possesses extensive experience in strategic procurement, shaped by his tenure at Eckes-Granini, Symrise and DuPont de Nemours. Currently, he is focused on sustainable sourcing and supply chains, collaborating with the relatico team to develop practical software solutions. Additionally, Bernd runs his own agricultural business and is involved in supply chain projects globally.
