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The Supply Chain Due Diligence Act: making implementation a success

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The so-called Supply Chain Due Diligence Act (SCDDA) comes into force on 1 January 2023. It imposes strict requirements with regard to risk assessment and supply chain transparency. But what does this mean for companies and what should you now be doing?

The deadline is fast approaching, so now is the time to get everything ready for successful implementation of the Supply Chain Due Diligence Act Our practical guide helps you satisfy the new requirements.

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The objective of the Supply Chain Due Diligence Act (SCDDA) is both to identify and eliminate risks relating to human rights and environmental issues along corporate added value chains as a way of improving the worldwide human rights situation. The Supply Chain Due Diligence Act introduces a large number of new obligations for those companies that are affected. These for example include a comprehensive risk assessment of all business partners, as well as implementation of an effective risk management system. In addition to this, the legislator stipulates that a complaints procedure must be established. The aim here is to help keep an eye on potential infringements.

 

Even small and medium-sized companies that are not affected by the scope of the SCDDA legislation should already start to familiarise themselves with the stipulated due diligence obligations. After all, as suppliers they are also affected by the new rules, albeit indirectly. This underlines the relevance and importance of the topic for all businesses.

Andrea Kohrt Senior Business Consultant at Dun & Bradstreet

This essentially means that companies will in future have to ensure that human rights and environmental standards are observed across the board and not only in their own business segment. The Supply Chain Due Diligence Act also commits companies to scrutinise the business practices of their suppliers. Any company that violates human rights then either no longer qualifies as a business partner or must introduce corresponding corrective measures. Violations of the new legislation will be met with financial penalties of up to EUR 8 million or 2 percent of the respective company’s annual revenue. Alongside the management, the supervisory bodies are also obligated to take action. Within the scope of their monitoring and advisory functions, they must ensure that the new requirements of the legislation are properly met by the management.

The Supply Chain Due Diligence Act will come into force on 1 January 2023

In Germany, the legislation is already being introduced at the start of 2023. From this moment on, companies with at least 3,000 employees must then take responsibility for ensuring that their business partners observe human rights in their operations. Just one year later, companies with at least 1,000 employees will then also have to comply with this ruling.

It is therefore high time to address this topic. ”Even small and medium-sized companies that are not affected by the scope of the SCDDA legislation should already start to familiarise themselves with the stipulated due diligence obligations. After all, as suppliers they are also affected by the new rules, albeit indirectly. This underlines the relevance and importance of the topic for all businesses,” comments Andrea Kohrt, Senior Business Consultant at Dun & Bradstreet.

An overview of the due diligence obligations

To ensure that companies meet their responsibility in terms of human rights throughout their entire supply chain, the legislator stipulates the following due diligence obligations:

  • Establishing a risk management system
  • Defining internal company responsibilities
  • Conducting a risk assessment
  • Approving a declaration of principles for the corporate human rights strategy
  • Anchoring preventive measures in each business division and for direct suppliers
  • Immediate implementation of corrective measures when legal violations are identified
  • Establishing a complaints procedure in the event of legal violations
  • Reporting and documentation requirement to satisfy the due diligence obligations

Identify supplier risks quickly with D&B Risk Analytics

Das Satisfying the new requirements is no easy task for companies. However, D&B Risk Analytics from Dun & Bradstreet provides important assistance in reliably complying with the new due diligence obligations. The cloud-based approach makes it possible to identify supplier risks both quickly and reliably, while also simplifying reporting processes. The solution uses the Dun & Bradstreet Data Cloud and grants compliance officers and purchasing managers access to the latest information of more than 500 million companies. Alongside ownership and corporate structures, these also include negative media reports – an important aspect when seeking to root out potential human rights violations on the part of a supplier.

In addition to this, D&B ESG Intelligence facilitates real-time assessment of the environmental, social and governance performance (ESG performance) of business partners and compiles this information to create meaningful ESG rankings. ESG data on more than 40 million organisations is currently available in the D&B Cloud.

Get the free practice guide

So what should you do now? Our practical guide helps you satisfy the new requirements of the Supply Chain Due Diligence Act. Download your free-of-charge copy now.

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