New Developments on the German and EU Supply Chain Laws - quick!

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After being in force for a year, the German Supply Chain Due Diligence Act (LkSG) is showing its effects, while the EU has now officially adopted its own supply chain legislation. Here are the key updates:

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LkSG One Year On:

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BAFA's Positive AssessmentIn a press release on December 21, 2023, the Federal Office for Economic Affairs and Export Control (BAFA) provided a positive review of the LkSG's first year in force. According to BAFA:

• Many obligated companies are successfully implementing the LkSG's requirements, contributing to improving human rights in global supply chains.
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• Companies are paying closer attention to their supply chains, identifying and mitigating human rights and environmental risks.
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• BAFA conducted 486 controls in 2023, focusing on industries like automotive, chemicals, pharmaceuticals, and textiles. No official sanctions were imposed yet.
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• BAFA urged against companies improperly passing on LkSG duties to suppliers through contractual assurances.
  

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Key Points for 2024:

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• BAFA will increasingly monitor companies with over 1,000 employees for LkSG compliance, as they became subject to the law on January 1, 2024.
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• For larger companies (over 3,000 employees), BAFA will put more emphasis on proper risk analysis implementation.
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• BAFA aims to maintain a cooperative approach, allowing companies flexibility while improving supply chain due diligence.
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EU Adopts Corporate Sustainability Due Diligence Directive On May 24, 2024, the EU officially adopted its own supply chain legislation after extensive negotiations. The Key points are:
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• Applies to companies with 1,000+ employees and €450 million+ revenue (higher thresholds for initial transition period).
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• Allows EU-based lawsuits against companies benefiting from humanrights violations like child/forced labor in supply chains.
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• Requires companies to develop climate mitigation plans.
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• Goes further than Germany's LkSG in certain aspects but was scaled back during negotiations.
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Both the LkSG and the new EU directive underscore the increasing importance of proactive supply chain due diligence for companies operating in Europe. Staying updated on these rapidly evolving regulations is crucial for maintaning compliance.

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