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Climate Change

A legal briefing on climate change in the context of supply-chain legislation and companies’ due-diligence obligations.

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9. Making the Necessary Amendments and Additions to Contracts

How due-diligence duties affect purchasing and cooperation contracts, supplier rules and contractual recourse clauses.

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8. Documentation and Reporting

Fulfilment of the due diligence obligations must be documented continuously and records kept for at least seven years; an annual report must be published on the company’s website within four months of the financial year-end and is reviewed by the competent authority.

7. Establishment of the Complaint Mechanism

The Act and the EU directive require an accessible complaint procedure through which supply chain risks and violations can be reported, with impartial and confidential handling, protection against retaliation, and the option of joining an external mechanism.

6. Taking Remedial Measures

Where a breach of a human rights-related or environmental obligation exists or is imminent, the company must take remedial measures — up to suspending or, in serious cases, terminating the business relationship — and review their effectiveness regularly.

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5. Taking Preventive Measures

The Act requires preventive measures both in the company’s own business area — from procurement strategy to training and risk-based controls — and towards direct suppliers, whose contractual assurances must be secured, trained, and verified, with regular effectiveness reviews.

4. Preparing a Policy Statement

As part of risk management, company management must issue a policy statement on its human rights strategy: compliance procedures, the priority risks identified in the risk analysis, and the expectations placed on employees and suppliers form its minimum content.

3. Conducting Regular Risk Analyses

Companies in scope must analyse human rights and environmental risks in their own operations and at direct suppliers, prioritise the findings, report them to decision-makers, and repeat the analysis annually or when the risk situation changes.

2. Defining Internal Areas of Responsibility

Defining internal areas of responsibility under the supply chain rules: who monitors risk management, how findings reach decision-makers, and the EU directive’s requirement that non-EU companies appoint a registered representative in a Member State.

1. Establishing a Risk Management System

Under the German Supply Chain Act and the planned EU directive, companies must operate an effective risk management system, anchor it in all relevant business processes, appoint clear responsibility for monitoring it, and consider the interests of those affected along the supply chain.

Specific Obligation Cases Within the Scope of the Due Diligence Obligation (Summary)

A summary of the specific obligations comprising supply chain due diligence under the German Act: risk management, internal responsibility, risk analysis, the policy statement, preventive and remedial measures, the complaints procedure, documentation and reporting, and the Directive's notion of appropriate measures.

Companies Subject to the Due Diligence Obligation

Who falls within the scope of the German Supply Chain Act — the 3,000-worker threshold, reduced to 1,000 in January 2024 — and how the EU directive, now narrower than the Act, reaches non-EU companies and entire chains of activities.