Germany’s SCDDA and the EU-CSDDD in Supply Chain Due Diligence



Supply chains enable products to reach consumers worldwide in the intricate web of global commerce. Despite this interconnectedness, supply chains are responsible for upholding ethical, sustainable, and environmentally friendly practices. In this exploration, we will delve into two significant initiatives aimed at achieving this goal: Germany’s Supply Chain Due Diligence Act (SCDDA) and the EU’s Corporate Sustainability Due Diligence Directive (EU-CSDDD). We will examine how they are interconnected and how they influence the future of supply chain management, unravelling their importance and pivotal roles.

Brief Introduction to SCDDA

Germany’s Supply Chain Due Diligence Act, abbreviated as SCDDA or LkSG in German language, represents a ground-breaking piece of legislation that came into effect January 1st, 2023. Its primary objective is to hold German companies accountable for the ethical and environmental impacts of their global supply chains. The SCDDA mandates that businesses conduct comprehensive due diligence to identify and rectify human rights violations and environmental harm within their operations and those of their suppliers.

Under the SCDDA, companies with more than 3,000 employees in Germany (2023, from 2024 companies with more than 1,000 employees) must establish a robust risk analysis and risk management system, complaints management and implement preventive and remedial measures. This system is crucial for pinpointing and mitigating supply chain risks, including labour conditions, environmental practices, and human rights compliance. Failure to comply with these stringent regulations can result in significant fines, making the SCDDA a potent regulatory catalyst for promoting ethical business practices.

Brief Introduction to EU-CSDDD

It complements Germany’s SCDDA with the EU’s Corporate Sustainability Due Diligence Directive (EU-CSDDD), offering a unified framework for supply chain due diligence across EU member states. This directive ensures the adherence to ethical and sustainable practices, regardless of the geographic expanse of these supply chains.

Overview of the Connection between SCDDA and EU-CSDDD

While SCDDA is specific to Germany, EU-CSDDD casts a broader net, encompassing all EU member states. What makes these initiatives incredibly impactful is their inherent connection. German companies with a significant presence within the EU must adhere to both SCDDA and EU-CSDDD, aligning their practices with the more stringent regulations. This harmonization is essential for creating a level playing field for businesses and upholding ethical standards across the European market.

Goals and Objectives of Both Initiatives

The primary objectives of SCDDA and EU-CSDDD converge on responsible business conduct, the protection of human rights, and the preservation of the environment.

A core mission of both initiatives is to eliminate human rights abuses within supply chains. Companies must undertake comprehensive due diligence to detect and rectify forced labour, child labour, discrimination, and other human rights violations. This commitment safeguards the rights and dignity of workers, ensuring that commerce is built upon principles of fairness and justice.

Sustainability is a cornerstone of SCDDA and EU-CSDDD. Companies must assess and minimize their environmental footprint, encompassing everything from resource extraction to energy consumption, waste management, and emissions. By advocating for sustainable practices, these initiatives actively contribute to the global fight against climate change and preserve our fragile ecosystems.

Transparency is a linchpin of both SCDDA and EU-CSDDD. Companies must disclose critical information concerning their due diligence processes, supply chain risks, and their actions to address them. This transparency empowers stakeholders, including consumers, investors, and advocacy groups, to scrutinize and verify a company’s commitment to ethical practices.

Responsible sourcing is pivotal to supply chain due diligence. SCDDA and EU-CSDDD compel companies to trace the origins of their products and materials, ensuring they are not connected to conflicts, deforestation, or other harmful activities. This commitment to responsible sourcing bolsters efforts to uphold human rights and environmental standards throughout the supply chain.

Harmonization between the SCDDA and the EU-CSDDD is essential because of their symbiotic relationship. A consistent and rigorous supply chain due diligence standard is now mandatory for German companies operating in the EU. This alignment not only levels the playing field but also magnifies the impact of these regulations, fortifying ethical practices across the European market.u

Together, we can drive the transformation of our supply chains, ensuring that they benefit businesses, workers, communities, and the planet we call home. It’s time to take the following steps toward a more responsible and sustainable future.

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