On March 3, 2021, the German government adopted a draft bill which obliges companies to ensure that human rights are observed throughout their entire supply chain. The aim of the “draft legislation on corporate due diligence in supply chains” (“Draft Bill”) (“Sorgfaltspflichtengesetz”) is to require companies to take steps to prevent human rights violations in their supply chains. This builds on the growing momentum for mandatory human rights due diligence (see our previous Blog Post).
Under the Draft Bill:
- companies must ensure that human rights are being respected throughout their entire supply chain;
- companies must establish complaint mechanisms and report on their due diligence activities;
- companies with more than 3,000 employees must meet their due diligence obligations as of January 1, 2023 (and companies with more than 1,000 employees as of 2024);
- violations of the obligations set forth in the Draft Bill will be sanctioned with fines, which can amount to up to 2% of the average annual turnover for large companies with more than 400 million euros annual turnover.