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Background and development

Offene Bergbau-Feuerstelle.
Source:  iStock / vladimir_n

The Act on Corporate Due Diligence Obligations in Supply Chains gives enterprises clear guidance and legal certainty on how to respect human rights. For the first time, binding rules are laid down regarding the due diligence obligations that enterprises along the supply chain must comply with. At the same time, the Act strengthens the protection of human rights around the world and makes it easier for those affected to enforce their rights.

Sustainable and responsible corporate governance in terms of human rights and environmental policy must become the standard – the new Supply Chain Act is an important milestone on this journey.

The NAP as the foundation for the Supply Chain Act

The foundation for the Supply Chain Act has already been laid in recent years. In 2016, the Federal Government launched the National Action Plan for Business and Human Rights (Nationaler Aktionsplan Wirtschaft und Menschenrechte, NAP) to contribute to more socially just globalisation together with enterprises. The NAP is based on the United Nations Guiding Principles on Business and Human Rights. In addition to the state’s protection obligation as well as judicial and extrajudicial remedies, corporate responsibility lies at the centre of the plan. The Federal Government supports enterprises in fulfilling this responsibility. In cooperation with industry sectors that face particular human rights risks, specific guidelines are currently being developed for use in practice.

However, a survey of businesses conducted by the Federal Government over several years (NAP monitoring) revealed that only about one fifth of all German-based enterprises with more than 500 employees currently sufficiently meet their human rights-related due diligence obligations along their supply chains. This shows that a voluntary commitment does not suffice. In the coalition agreement, the Federal Government agreed to take legislative action at a national level in this case and, at the same time, to work towards binding rules at a European level.

The Federal Government is currently revising and updating the National Action Plan in close collaboration with many social groups. As part of this review, the Act on Corporate Due Diligence Obligations in Supply Chains will be seamlessly integrated into the broad overall strategy on business and human rights. Unlike the Act, the NAP is addressed to all enterprises based in Germany and expects them to comply with the due diligence obligations enshrined in it. One focus of the revised NAP will be to support enterprises in implementing their due diligence obligations. Offers to that effect made by the Federal Government and other relevant actors will be collected and made public.

Please click here for more information on the NAP.

Assessing the effectiveness of the Act

The effect of the Act will be evaluated in 2026. In the light of possible EU legislation, it will then be assessed whether any adjustments are necessary. As part of that process, it will also be examined whether the scope of application should be extended to other enterprises.