Are you ready to comply with Germany's new act on supply chain due diligence?
The Act came into force on January 1st, 2023, and requires large companies (initially those with 3,000 or more employees, but from 2024 covering companies with 1,000 or more) to identify, prevent and address human rights and environmental abuses in both their own, and their direct suppliers’ operations.
If companies gain “substantiated knowledge” of a potential human rights violation or environmental destruction, the law requires them to take action, and to document the actions they have taken with the Federal Office for Economic Affairs and Export Control. Those that fail to do so risk being fined up to 2% of annual global turnover, and being excluded from winning public contracts in Germany for 3 years.
The requirements of the new law might seem onerous, but the reality is that brands and retailers who are already accessing supplier data and insights on their purchasing practices, and who are partnering with their suppliers to drive improvements, will be ahead of the game in terms of complying with many of the requirements of the Act.
Since the term ‘purchasing practices’ was first introduced nearly 20 years ago, research has demonstrated time and again the numerous social, environmental and financial impacts of such practices on global suppliers. Six consecutive Better BuyingTM ratings cycles have confirmed that human rights are impacted as a result of suppliers being under pressure because of their customers’ poor purchasing practices.
Research published today by Better Buying Institute looks at the available research that documents the connection between purchasing practices and noncompliance, and finds that buyer purchasing practices have the most known impacts on noncompliances related to working time, workers’ contracts, and workers’ compensation. These findings can inform global brands and retailers’ supply chain due diligence effort, guiding them where to look in their own supply chains for possible risks. Better BuyingTM subscribers will be even better prepared to conform to the requirements of the Act by leveraging the detailed research on their own supply chains to identify human rights risks, address existing impacts, and prevent future ones.
Better Buying’s surveys have been designed to enable brands to identify, manage and address risks, in partnership with suppliers. They focus on the specific purchasing practices categories which we know have the greatest impact on the part of suppliers’ ability to operate sustainably, and meet their buyers’ codes of conduct.
Our reports on subscribers’ purchasing practices provide evidence that a company is doing just what the Act requires.
But we also know that when brands and retailers collect supplier data, they use it to improve. The value of our reports go beyond reporting requirements and fuel actual changes in practices that over time will benefit workers. Our repeat subscribers were even able to continue improving their purchasing practices during Covid-19, because they had already begun the work of prioritizing their supplier relationships, and partnering to improve. When required to report under the new law on how they are striving to identify and address human rights abuses, our subscribers will have the data – in the form of year-over-year Better BuyingTM scores and company reports – to demonstrate commitment and progress.
If history is an example, there will be a tendency for brands and retailers to push the requirements of supply chain due diligence onto their suppliers. But they need to take responsibility too. And they must own the responsibility for the impacts of their purchasing practices. By being better buyers, brands and retailers will support human rights within their supply chains and drive better wages and working conditions for workers.