What does the Supply Chain Act stand for? Many German companies have a lot of catching up to do in terms of consistent proof of compliance with human rights in their international procurement networks. A study by the international human rights organization Business & Human Rights Resource Centre and the Zurich University of Applied Sciences (ZHAW School of Management and Law) comes to this conclusion.

Statutory transparency in the supply chain is only a matter of time now

For years now, a law has been under discussion on the consistent observance of human rights at every station of global supply chain. The aim is for companies to be legally obliged to comply with human rights and environmental standards within their international supply chains. In addition, there are efforts to hold them liable for damages that could have been avoided with reasonable care.

It is not yet clear whether and in what form such a supply chain law will be enacted in Germany. However, the Federal Government has addressed the issue in the coalition agreement and will discuss its implementation in 2020.

A look abroad also shows that in many countries (including the USA, France, Great Britain and the Netherlands) there are already laws on compliance with transparent supply chains and thus against child labor, modern slavery and respect for human rights. It is therefore not unlikely that a legal framework will also be created in Germany.

Supply chain law – legal requirements as an opportunity

Industry and employers‘ associations fear – depending on the legal requirements – considerable losses in competitiveness, exorbitant expenditure and thus enormous costs.

From our point of view, this topic offers a great opportunity for companies that already act responsibly today and are methodically well positioned in procurement and the supply chain. A legal obligation would significantly reduce their alleged competitive disadvantage vis-à-vis unfair competitors. All market participants would then be legally obliged to comply with human rights and environmental standards not only at home, but also in an international context and in their purchasing behavior, and to maintain corresponding documentation.

In times of intensive discussions about and growing awareness of social responsibility, companies that have already proven their commitment to human rights and the environment in their purchasing behavior can also derive economic benefits from this. This can make it easier for them to attract investors or to recruit qualified employees. Such a commitment also ensures greater trust on the part of consumers.

Top procurement has the necessary methodology on board – in various toolboxes

For the top buyers in Germany, the topic is not really new. Today, they already have to deal with existing requirements resulting from international compliance standards and regulations, such as international anti-corruption laws, anti-money laundering guidelines, anti-terrorism laws or provisions on conflict minerals or the reliability and correctness of published financial data. This means that there is already an existing toolbox – or several different toolboxes within the framework of supplier management.

Prevention through integrated, qualified supplier management

The aim is to consolidate these toolboxes and to systematically and above all purposefully convert them into qualified supplier management routines (guidelines, competencies, survey methods, due diligence procedures, contracts, correction mechanisms, etc.).

In order to avoid the feared additional effort and high process costs, there are a number of service providers and solution providers who are able to reduce the management effort with smart solutions and to document the process in a revision-proof and transparent manner.

Are your toolboxes sorted?

As ADCONIA we advise our customers with the experience from more than 200 projects from more than 20 years – in questions around the supply chain and the digitalization of processes. Our goal is always to increase the earnings contribution of procurement through cost reduction, process automation or qualification of the procurement team. Costs and expenses can be drastically reduced by early implementation of upcoming changes through a supply chain law. At the same time, the competitive advantage increases compared to those who will only deal with this topic „due to legal pressure“.

We would also be pleased to advise you on the development, implementation and digitalization of the management process for the transparency of your supply chains.

 

Tim Rohweder

Partner, ADCONIA GmbH