Burdens and Benefits of a Supply Chain Law for Companies. The "Lieferkettengesetz" and the "European Supply Chain Act" (PDF)

Seminar paper from the year 2022 in the subject Business economics - Business Ethics, Corporate Ethics, grade: 1,0, University of Tubingen (Weltethos Institut), language: English, abstract: This paper deals with the burdens and benefits for companies of an upcoming Due Diligence Act on supply chains. The focus is put on the supply chain law in Germany and in Europe. In the first step, fundamental terms and theories concerning the supply chain law are presented referring to the German and European Due Diligence Act putting both in a relationship by illustrating similarities and differences between them. Subsequently, various kinds of burdens and benefits of the supply chain law are assessed from the viewpoint of companies in general. Finally, both up and downsides of impacts on companies are going to be considered in a direct comparison ending in a conclusion.

Volkswagen factory near internment camps for Uyghurs in Xingjiang, child labour on toxic cobalt and lithium mining plants, exploitative and polluting fast fashion industry. These are only few of the numerous conditions that companies cause in their environment through supply chains. According to the International Labour Organization, in 2020, almost 1 in 10 children worldwide is in child labour, accounting for 160 million children worldwide. Companies have grown their supply chains internationally while gaining high profits and also exploiting developing countries. At the same time, one of the largest and most effective levers to preserve the environment and to avoid human rights violations are supply chains. Therefore, making supply chains more sustainable is one key task companies are confronted with the upcoming mandatory human rights and environmental due diligence regulations.

Although there are several voluntary guidance approaches with the aim of minimizing and avoiding human rights violations and environmental harm such as the United Nations Principles for Business and Human Rights, also referred to as the "Ruggie Principles", current results are disappointing regarding the implementation of this concept. That is why more and more countries are enacting regulations in order to ensure more sustainable supply chains. Following other European countries, the German parliament recently has passed the "Supply Chain Due Diligence Act" or in short, the supply chain law. As highly suggested and expected, the European parliament has drafted a European solution as called European Due Diligence Act. These recent developments imply both, new challenges and opportunities for companies that again have caused a major divergence of views of various stakeholders.