Germany's Supply Chain Due Diligence Act (SCDDA, or “LSKG” by its initials in German), was enacted on January 1, 2023. It imposes social and environmental standards on companies operating in Germany with over 3000 employees. From 2024, this number will reduce to 1000.

Under the act, businesses must establish Human Rights and environmental risk guidelines as part of their Due Diligence process. These guidelines aim to identify, assess, prevent, and address actual and potential risks within their supply chains.

The first complaint under the SCDDA

The first complaint under the SCDDA has already been filed. Advocating on behalf of Bangladeshi workers, in April 2023, The European Center for Constitutional Human Rights (ECCHR), the National Garment Workers Federation (NGWF), and the African Women's Development and Communication Network (FEMNET) raised concerns that companies such as Ikea, Amazon, and Tom Tailor are not in compliance with the act.

The case has received support from recent research conducted in Bangladesh in 2023 by NGWF, which uncovered safety concerns in factories that supply the mentioned brands.

According to the complainants, the companies have failed to monitor the health and safety conditions at their sites in Bangladesh, thereby endangering their workers along the value chain.

The overseeing authority, the Federal Office of Economics and Export Control (BAFA), can impose fines ranging from EUR 8 million to 2 percent of the average annual turnover for companies with an average turnover of EUR 400 million or more.

BAFA has stated that businesses are expected to answer its requests within three weeks; otherwise, further enforcement measures, such as penalty payments, might be taken.

How can companies better prepare to act under the SCDDA?

The SCDDA primarily targets companies based in Germany. However, it also applies to branches of foreign businesses that employ 3000 or more people in German territory (or 1000 people starting from 2024).

The scope of the SCDDA requires brands to have significant visibility throughout their supply chains. The Due Diligence process is expected to include extracting raw materials for product delivery to the end customer.

The SCDDA outlines specific obligations for the Due Diligence process, including monitoring even indirect suppliers, implementing a risk management system, and appointing a Human Rights officer.

A notable aspect of the SCDDA is the provision enabling German Trade Unions and NGOs to represent "aggrieved parties" in German courts in cases of Human Rights and environmental violations. This feature has been explicitly differentiated from the legal figure of ‘civil liability’; however, it is expected to set the ground for more lawsuits within the German jurisdiction regarding Human Rights violations.

In the first year of enforcement, approximately 600 companies will be subject to the act. By 2024, when the new criteria come into effect, around 2,900 companies are expected to comply.

If you or your company need to stay current with the German Supply Chain Due Diligence Act and other upcoming regulations, Bendi has you covered. Learn more about Human Rights in fashion supply chains.

Photo by Scott Graham