Supply chain law creates new standards

New supply chain law sets social and ecological minimum standards

Sustainable Logistics of the future do not stop at minimizing greenhouse emissions, but demand fairness right at the beginning of the supply chain. How are the farmers, workers and manufacturers who do the main work doing on behalf of the large corporations so that the products eventually make it to our homes? 

The Topic Sustainability zählt is one of the key issues in logistics in 2021. With the new Supply Chain Act, German companies will in future be obliged to ensure minimum social and ecological standards along the supply chain.

We at Warehousing1 have broken down exactly what this means for your company in this blog post.

What is the new supply chain law all about?

According to the German Federal Ministry for Economic Cooperation and Development (BMV), transnational and global value chains are responsible for around 80% of world trade and provide a livelihood for more than 450 million people. As a leading industrial nation, Germany has a great responsibility to make its own contribution against exploitative trade. 

Did you know that not only governments, but also companies are obliged to do their part to respect human rights? 

German companies are therefore not only responsible for their local employees, but for all employees in all production countries, as the UN Guiding Principles on Business and Human Rights from 2011 state. However, as the name suggests, the guiding principle of free trade is not yet legally binding as of today. 

Therefore, the BMV, together with the Federal Ministry of Labor and Social Affairs, has developed the key points of a new, more progressive supply chain law that puts fairness before profit. Specifically, the new supply chain law should:

1. include a definition of which obligations German companies can fulfill with regard to respecting human rights along their supply chain.
2. ensure that companies must document their individual efforts in order to be able to demonstrably show that they are doing their part.
3. strengthen workers' rights (especially outside of Germany) and document how claims for compensation can be made in Germany as a result.

Why is a new supply chain law urgently needed?

Anyone who thinks that child and forced labor are passé is sadly mistaken. In the course of globalization, social measures designed to support workers have been pushed further and further into the background. Unfortunately, many large corporations continue to focus on gaining a competitive advantage and making as much profit for themselves as possible. With the help of a new supply chain law, these abuses are to be effectively countered. The Supply Chain Act Initiative sums up the benefits of a new supply chain law for Germany, as can be seen in the graphic below: 

Source: Supply Chain Act Initiative - Briefing June 2020

Will the new supply chain law put German companies at a disadvantage?

According to a BMV survey, three out of four companies in Germany vote in favor of such a supply chain law. However, due to the current situation caused by the Corona crisis, this is to be invoked from companies in the middle class upwards. This is intended to allay the fears of small businesses of suffering financial damage as a result of the law.

Since German companies can already be sued for a lack of commitment to fairness along the supply chain, the new Supply Chain Act for the first time introduces regulations that make it easier for companies to prove that they have fulfilled their obligations. The answer to the question of whether German companies are at a disadvantage can clearly be denied in the sense of a transparent economy. 

Conclusion 

Since the logistics industry, as one of the industries with the highest turnover, is one of the big players in the German economy, it is also instrumental in promoting fair and sustainable conditions along the supply chain. The upcoming Supply Chain Act will set cornerstones for taking action against the exploitation of workers and working conditions that violate human rights. When logistics professionals join forces to advocate for greater fairness and sustainability in supply chain management, change can also happen globally. 

At Warehousing1, we are proud to have partners on our side who are as committed to humanitarian issues as they are to efficiency and innovation. Would you like to learn more about our business model or jump right in with us and put your logistics setup to the test? Then we are very much looking forward to an exchange, please feel free to arrange your get-to-know-you meeting - no strings attached - with one of our account managers today.