We previously wrote about how 2024 is expected to be a big year for supply chain due diligence. One driver behind this trend is the German Supply Chain Act which requires certain companies to comply with due diligence obligations. The German Supply Chain Act is one of the first supply chain due diligence laws to come into force and precedes the EU’s larger Corporate Supply Chain Due Diligence (CS3D). Originally, the law only applied to German companies with over 3000 employees. However, on January 1, 2024, that threshold was lowered to German companies with over 1000 employees. Reporting from Bloomberg indicates that many companies are frustrated, stating that:
“For the now 5,200 affected companies, this additional layer of red tape is hitting hard, especially amid existing economic challenges such as low global demand and the aftermath of the energy crisis.
‘Small- and medium-sized companies are drowning in a flood of reporting obligations,’ said Dirk Jandura, president of the Berlin-based wholesale lobby BGA. ‘These now weigh more heavily on many companies than the high energy prices.’”
This frustration is understandable when considering that supply chain due diligence is something many companies are unfamiliar with. It also requires companies to alter their practices and potentially source from more expensive suppliers. While complaints roll in from German companies, the CS3D is working its way through the legislative process. Lawmakers are hoping that the CS3D will standardize the current patchwork of supply chain due diligence laws in the EU as Germany, and France currently have separate supply chain due diligence standards. The CS3D is expected to expand and supplement the German Supply Chain Act and will impose more stringent supply chain due diligence requirements. Hopefully, lessons learned from the growing pains experienced in Germany can serve as a guide for other EU companies as the CS3D is transposed into national law around the Union.
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