More governments are seeking to regulate activities within supply chains with new laws aiming to prevent and mitigate environmental and social risks within company supply chains. Our Hot Topic takes a look at two such instances in the EU: the German Supply Chain Due Diligence Act (SCDDA), which took effect in January 2023, and the EU’s proposed Corporate Sustainability Due Diligence Directive (CSDDD).
Applicability
- The Supply Chain Due Diligence Act (SCDDA) applies to companies with a certain number of employees in Germany.
- The European Commission’s proposal for a Corporate Sustainability Due Diligence Directive (CSDDD) would apply to companies that meet certain revenue and employee thresholds.
Relevant dates
German Supply Chain Due Diligence Act
- Jan 1, 2023 – SCDDA took effect for companies with > 3,000 employees in Germany
- Jan 1, 2024 – Scope broadened to companies with > 1,000 employees in Germany
EU’s Corporate Sustainability Due Diligence Directive
- Feb 2022 – Proposed CSDDD presented to the European Parliament and Council of the EU for approval
- Aug to Dec 2023 – Expected negotiation period between the Parliament and Council
Key impacts
Despite the SCDDA and proposed CSDDD being non-US directives, US and other non-EU companies are impacted if they meet certain scoping criteria that are discussed in our Hot Topic.
Determining whether you have to comply
- The SCDDA applies to companies (either headquartered or with a domestic branch in Germany) with > 3,000 employees (beginning 2023) and > 1,000 employees (beginning 2024) in Germany.
- The proposed CSDDD will likely cover more companies and would be based on revenue and number of employees. This means that a non-EU company could be in-scope if it generates a certain amount of revenue in the EU, irrespective of whether it has a subsidiary or branch in the EU. The values associated with these thresholds are still under discussion.
Where to look within your supply chain?
- The SCDDA applies to the entire supply chain of in-scope companies, which includes the actions of the company in its own business areas and the actions of direct and indirect suppliers.
- Companies subject to the proposed CSDDD will likely be required to assess a broader range of upstream value chain activities extending beyond direct suppliers.
What risks are considered?
- The SCDDA aims to prevent or mitigate human rights and environment-related risks; and end violations of both human rights and environment-related obligations.
- Companies subject to the proposed CSDDD will likely be required to assess a broader range of environmental impacts including, for example, adverse impacts on biological diversity, unlawful disposal of waste and pollution from ships.
Reporting
- The SCDDA requires and the proposed CSDDD will likely require annual reporting on due diligence measures.
Report contents
- Fast facts, impacts and actions
- Background
- Global implications
- Germany’s Supply Chain Due Diligence Act: scoping, obligations, reporting and noncompliance
- The EU’s proposed Corporate Sustainability Due Diligence Directive: obligations and reporting, timeline, comparison to Germany’s SCDDA, interactions with other EU legislation
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