Large companies in crosshairs early under German Supply Chain Act
The German Supply Chain Due Diligence Act entered force Jan. 1 this year, and all eyes are on what the outcome of the first cases will be—and when they might take place.
The legislation, which allows prosecutors to impose fines of up to 2 percent of firms’ global turnover if they fail to identify and prevent human rights and environmental impacts in their supply chains, applies to companies with a registered office or principal place of business in Germany, as well as foreign companies with a branch office there. It currently impacts companies with at least 3,000 employees, but from 2024, it will apply to those with just 1,000 workers.
Although the act does not give rise to any new liability under civil law, it is expected to prompt nongovernmental organizations to more readily file lawsuits for alleged human rights violations in German courts.
The first complaint filed under the legislation was made by a coalition of labor groups led by the European Center for Constitutional and Human Rights (ECCHR) against Amazon, IKEA, and Tom Tailor for their alleged failures to ensure the safety of employees producing goods on their behalf in Bangladesh, rather than a legal case claiming liability for harm.