Diligence in economic activity gains weight

Supply Chain Act comes into force at the beginning of 2023 in Germany

Sharp sword or lame duck? Such an ambitious project as the Corporate Sustainability Due Diligence Directive (CSDDD, German: Lieferkettensorgfaltspflichtengesetz - LkSG) inevitably brings a mixed bag of opinions from a wide range of stakeholders. Above all, however, is the legislator's effort to strengthen the protection of human rights and habitats. We look at the intentions behind this move.

Limiting oneself in a world of abundance is difficult for many. Even as a profiteer of certain systems, pushing for their elimination is only partly in human nature. In the course of the continuous development of our value system, of the demands we make on ourselves, which also has an influence on everyday economic life, optimistic changes in thinking and acting can be observed.

More and more, there seems to be a consensus that the fight against the nefarious exploitation of labour and the destruction of ecological resources must be intensified - and both aspects can hardly be considered separately in a complex, globalised world. Activists, trade unions, companies, governments, NGOs and organisations such as the EU and the UN are fighting for sustainable solutions and enforceable rights, especially for affected individuals, in many regions of the world, building on decades-old, sometimes centuries-old knowledge and improvements that have already been achieved.

Supply chain management put to the test

One of the results of this constant effort, which has been in force since 1 January 2023, is the Corporate Sustainability Due Diligence Directive (CSDDD) in Germany. It specifies what will no longer be tolerated and, above all, insists that many companies must now deal with this issue on a mandatory basis.

As could be read in a commentary in a leading industry newspaper at the beginning of the year, despite the change in awareness already achieved in the tough battle for markets and costs, (voluntary) self-obligations cannot have such an effect. The not unjustified conclusion is that a more in-depth analysis of their own supply chains forced upon them by the state would result in a more explicit pressure to act.

Important content of the CSDDD (selection):

  • no forced labour and torture
  • no child labour
  • prevention of wage dumping
  • guarantee of freedom of association and freedom to form trade unions
  • no pollution of air, water and soil
  • protection of resources with regard to consumption and waste

Fines already possible

The field of corporate social responsibility to be dealt with in the context of the CSDDD, as briefly touched upon in the introduction to this text, is by its very nature extensive. In order to provide companies with a comprehensible guideline beyond the text of the law, the Federal Ministry of Labour and Social Affairs and the Corporate Social Responsibility Programme initiated by the Federal Government have set out the most important aspects to be observed on a homepage by means of an FAQ.

Especially those penalties mentioned there under the point "What happens if companies do not comply with the law?" in the case of violated obligations should above all arouse the interest of companies already affected (more than 3.000 employees). This includes not least the reporting obligations, which include the careful evaluation and documentation of one's own business activities and which are considered in the reporting for the currently valid version of the CSDDD as a decisive gateway for legal action.

Between Duty and extraordinary Performance

Acting according to the letter of the law, defined here as a duty, is self-evident. The extraordinary performance, on the other hand, should be to do more than just escape the threat of penalties. Some positive examples of increased pay, better working conditions and resource protection show that the message has already got through in many cases.

Establishing effective risk management to avoid human rights violations and environmental damage, or at least to minimize them as best as possible, on the one hand strengthens one's own brand and its perception in a world that has become more mindful. On the other hand, such action should become more and more self-evident for a successful coexistence on our planet. Then it would be possible for future generations to look back on our actions today with more goodwill and respect.

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