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Germany’s New Supply Chain Act – Part 2 of 4 – Compliance

The German Supply Chain Due Diligence Act imposes a mandatory obligation on certain companies operating in Germany to establish, implement and update due diligence procedures to assess compliance with specified fundamental human rights and, to a more limited extent, certain environmental standards in supply chains.

The Act will apply to companies with their registered office or principal place of business in Germany, as well as to foreign companies that have a branch office in Germany.  The Act will come into force on 1 January 2023, giving companies a transitional period to review their existing compliance systems, adapt them or establish new systems and train their employees. Non-compliance with the Act may trigger fines, reputational damage as well as public and private enforcement risks.

Read our full briefing which provides an overview on the requirements for in-scope companies as well as the risks triggered by non-compliance with the new rules.

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The German Supply Chain Due Diligence Act will enter into effect on 1 January 2023 and provides for a tighter regulatory environment on supply chain management for companies incorporated in Germany, or hav-ing subsidiaries or branches in Germany, and employing 3,000 or more people (decreased to 1,000 in 2024). These in-scope companies will have to analyse their supply chains to avoid human and environmental rights related risks and infringements. While conducting the underlying risk analysis will be difficult, non-compliance with the new rules may trigger even more severe disadvantages to in-scope companies.

A&O’s series of briefings will provide an overview on key aspects that companies doing business in Germany need to be aware of.

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