Essential knowledge for entrepreneurs: Supply Chain Due Diligence Act and plastic ban
The European Union has adopted a uniform ban on single-use plastic products, which has applied since July 3, 2021 . From this date, single-use plastic products made from fossil raw materials such as crude oil may no longer be manufactured.
In addition, the German Supply Chain Due Diligence Act (LkSG) was adopted. From 2023, it requires companies to ensure that human rights are respected in their supply chains.
Here is an overview:
A. Single-use plastic ban in the EU
I. General
As of July 3, 2021, the manufacture of single-use plastics is no longer permitted throughout the EU where sustainable alternatives already exist. This is intended to prevent waste and use resources more efficiently. This covers in particular cotton buds, cutlery, plates, drinking straws, stirrers and balloon sticks made of plastic, as well as to-go beverage cups, fast-food packaging and disposable food containers made of expanded polystyrene.
However, the sale of single-use plastic products that have already been produced is to remain possible in order to avoid their destruction without use.
II. Conclusion
The single-use plastic ban will not have significant effects for many companies. On the one hand, the ban was announced as early as 2018 and the entrepreneurs had enough time to prepare for it; on the other hand, the costs associated with more sustainable alternatives can be passed on to consumers, which is particularly likely to be the case in the restaurant industry.
B. German Supply Chain Due Diligence Act
I. Objectives
The German Supply Chain Due Diligence Act aims to prevent violations of fundamental human rights in global supply chains. These include child labor, exploitation, discrimination, and a lack of labor rights. Environmental impacts caused by illegal logging, pesticide emissions, and water and air pollution are also included.
Accordingly, German companies are required to better fulfill their global responsibilities by extending the responsibility of companies to the entire supply chain. If indirect suppliers are involved and human rights are violated, the company is also liable for these violations as soon as it becomes aware of them.
II. Key provisions
Companies must ensure compliance with human rights throughout the entire supply chain. To do this, they must, among other things, establish complaint mechanisms and report on their activities. The supply chain extends to all the inputs that the company uses to manufacture a product or provide a service (starting from the extraction of raw materials to delivery to the end customer).
III. Which companies are covered by the law?
From 2023, companies with more than 3,000 employees will be subject to the law. From 2024, companies with 1,000 employees will also be required to comply with the law.
IV. What do companies need to do specifically?
- In their own business area and with their immediate suppliers
- Policy statement on respect for human rights to be adopted
- Risk analysis: Carry out procedures to identify adverse impacts on human rights
- Risk management to prevent potentially negative impacts on human rights
- Complaints mechanism to be set up
- Transparent public reporting to be provided
- In the event of a violation in its own business area, the company must immediately take remedial measures that necessarily end the violation; in addition, initiate further preventive measures
- If the company cannot end the violation at a direct supplier within a foreseeable period of time, it must draw up a concrete plan for minimization and avoidance
- Regarding indirect suppliers
For indirect suppliers, the due diligence obligations apply only on an event-driven basis. If the company becomes aware of a possible violation at an indirect supplier, it must without delay:
- A Risk analysis to carry out
- A Concept for minimization and avoidance to be implemented
- establish appropriate preventive measures vis-à-vis the party responsible
V. Conclusion
Entrepreneurs are now also held accountable regarding their indirect suppliers. Regular monitoring of the supply chain is recommended. Contact us if you have any questions or need help.
