Supply Chain Act – Ethics & Compliance
Countries such as Great Britain, with their Modern Slavery Act, already have laws in place relating to ethics & compliance in international supply chains. France and the Netherlands also have their ‘Loi de vigilance’ and ‘Child Labour Due Diligence Law‘. Up to now, Germany has opted for companies to commit voluntarily. But this is due to change in the future. By the Supply Chain Act (also known as ‘Lieferkettengesetz‘), legislators now intend to draw up clear statutory regulations for German companies with international supply chains. Breaches may incur sanctions and damage to the corporate reputation.
With its Supply Chain Compliance System, Compliance Solutions has created a digital, all-embracing supply chain risk management solution that integrates the new legal requirements of the Supply Chain Act.
The German Supply Chain Act is on its Way
The German Bundestag passed the new German Supply Chain Act on June, 11 2021.
The German Supply Chain Act would then
- initially apply to companies with a workforce of over 3,000 from 2023.
- then also apply to companies with a workforce of over 1,000 from 2024.
- be reviewed with a view to its further application after 2024.
Protection for Human Rights
The Supply Chain Act focuses on the far-reaching protection of human rights in the global economy – a range of subjects which can be grouped under the term social compliance. Global supply chains involve the risk of human rights abuses such as child labour, discrimination, exploitation and poor labour laws. Another issue is environmental destruction through illegal logging, pesticide emissions and water/air pollution.
The aim of the Supply Chain Act is to oblige German companies to better discharge their global responsibility. At the same time, it will remove competitive disadvantages for companies that are even now investing voluntarily in sustainable supply chain management.
Corporate Duties of Care
With the Supply Chain Act there are, for the first time, clear requirements in terms of companies duties of care and, as a result, legal certainty. It involves companies analysing human rights risks, taking preventive and supporting measures, setting up complaint options, and having to report on their associated activities.
Essentially, companies’ duties of care extend along the entire supply chain – from raw materials to the final sales product. The requirements are graduated, in particular according to the ability to exert influence on the party that commits the human rights violation and according to the different stages in the supply chain. When violates are clearly indicated, companies must act.
The Federal Office of Economics and Export Control (BAFA) is to be the external body that examines and monitors compliance with the law. Should lapses or violations occur, it can impose fines or exclude companies from public procurement. Those affected by human rights violations can assert their rights before German courts, but also submit their complaints to the Federal Office of Economics and Export Control.
Compliance Solutions’ Supply Chain Compliance System
Compliance Solutions’ Supply Chain Compliance System is an all-embracing supply chain risk management solution that integrates the new Supply Chain Act requirements. It can be used to identify the risks along the supply chains, and detect and evaluate the potential harm at an early stage in order to take suitable action. It ensures social compliance and it prevents damage to the corporate image, fines and sanctions.
The Supply Chain Compliance System creates transparency in international supply chains. The system runs through the steps below, which are implemented in a guided process with defined roles that makes it audit-proof:
- Upfront risk assessment
- Detailed due diligence on suppliers including survey
- Sanctions list check (PEP, blacklists, watch lists, adverse media)
- Automated risk identification and setting of red flags
- Supplier risk assessment
- Ongoing screening and monitoring to immediately identify new risks
- Compliance audits
- BI & reports
As an ISO 27001 certified EU provider, Compliance Solutions naturally complies with all security standards, for example the General Data Protection Regulation (GDPR).
Leading Provider of Digital Legal & Compliance Solutions
Compliance Solutions is one of the first providers to systematically develop an all-embracing compliance platform that maps every aspect of digital compliance in an integrated software system. The result is the MCS Compliance Platform, which is currently the most powerful compliance platform in the marketplace.
In the ethics & compliance area, the MCS Compliance Platform is a supply chain compliance system that is perfectly aligned with the new legal requirements. The system can be used both as a standalone solution and as a group of systems within the MCS Platform landscape.
Alongside the standard solutions, Compliance Solutions also provides enterprise solutions that can be flexibly customised to meet specific needs.
Our legal & compliance experts will be happy to advise you
If you are thinking about implementing a digital solution for the Supply Chain Act, or if you would like to book a product demonstration, please call us on +49 711 217 232 92, write us an email or use our contact form.