Whilst the discussions on sustainable corporate governance and supply chain due diligence continue at EU level and a proposal for a directive has been postponed several times, Germany is sending a strong signal for effective supply chain due diligence.

The Social Democrats, the Greens and the Free Democrats presented their coalition agreement today. The future government parties back up the brand new German Supply Chain Due Diligence Act (Lieferkettensorgfaltspflichtengesetz, read more on the new law here) and underline that it will be implemented unchanged and may even be improved where necessary. Furthermore, they explicitly express support for an effective supply chain regulation at EU level, demanding that it should be based on the UN Guiding Principles of Business and Human Rights and take account of the burden for small and medium-sized enterprises. In addition, they support the proposed ban on the import of products from forced labour and the EU Commission's proposal for a law on deforestation-free supply chains. Finally, they promote a European Action Plan on Business and Human Rights. It is thus to be expected that the new German government will push the issue in Brussels with vigour.

Meanwhile, companies subject to new obligations under the German Supply Chain Due Diligence Act are preparing intensively for January 2023, when the new law becomes applicable. They need to take various legal and operational steps to comply with the far-reaching new requirements and to avoid liability risks. Supply chains and compliance management systems need to be reviewed carefully to check whether additional measures must be taken (hear more here).

In parallel, the Federal Office for Economic Affairs and Export Control (BAFA), which will enforce the new regulations under the Supply Chain Due Diligence Act, seems to be getting serious: BAFA recently announced that it will create two new offices in Eastern Germany with approximately 5,000 employees who will be entrusted to enforce the Supply Chain Due Diligence Act. Furthermore, the BAFA has started a dialogue with the business community on the implementation of the Supply Chain Due Diligence Act.