Supply chain_wood factory in Vietnam
Supply chain laws should improve working conditions in foreign suppliers in the long term.

15.2.2021 Germany is now doing its job in matters of binding human rights due diligence for companies. From 2023, large German companies will have to pay more attention to compliance with human rights standards - and not only in their own operations, but also with their suppliers and business partners. The Supply Chain Act is intended in particular to prevent environmentally harmful working and production conditions, as well as forced or child labor at foreign suppliers.

That will affect new supply chain law from 2023 initially 600 large companies based in Germany that employ at least 3.000 people. From 2024 it will also apply to companies with a company size of 1.000 employees or more, with the exception of smaller companies. Companies that do not fulfill their duty of care face fines and the exclusion from public tenders. The original plan to hold companies civilly liable for human rights abuses along their supply chain, however, has been dropped.  

From today's perspective, Austrian companies will be primarily affected by the growing demands of German customers, because the corporate duty of care in this country does not go beyond a voluntary commitment. However, this could change in the foreseeable future if the EU also concludes its negotiations on uniform European human rights standards. The Legal Committee of the EU Parliament presented one on this at the end of January Own-initiative report, which will be voted on in the EU Parliament in March. In June the EU Commission presented the corresponding legislative proposal for a European supply chain law. How strict this will be cannot yet be foreseen. A proactive examination of the topic of human rights and environmental due diligence and the question of how appropriate processes can look to identify and address risks is still not a bad idea.

Photo: Marcel Crozet / ILO

Would you like to find out more about the latest developments in due diligence in the supply chain? The Austrian National Contact Point for the OECD Guidelines will host a webinar on the subject on February 23, 2021. More information here.