The law imposes mandatory human rights and environmental due diligence obligations on companies in Germany as of 1 January 2023.
By Paul A. Davies, Stefan Bartz, and Alexander Wilhelm
On 25 June 2021, the Bundesrat, the legislative chamber of the German Federal States, approved the Supply Chain Due Diligence Act (Lieferkettensorgfaltsgesetz). The law now only needs to be signed by the Federal President (Bundespräsident) and published before entering into force. Two weeks before, the coalition parties reached a last-minute compromise to adopt the law ahead of the end of the legislative period in September.
This blog post will examine the amendments to the prior draft law resulting from that compromise and consider how the Act will impact companies in Germany (for more information on the draft law, please see Latham’s previous blog).
Despite concerns early in 2020 that the pandemic would impact the growth of environmental, social, and governance (ESG) initiatives, the opposite proved to be the case with political and investor momentum aligning and ESG initiatives surging in the climate of “building back better”. This growth will likely accelerate in 2021, particularly as leading economies and financial centres in the US, China, the EU, and the UK make political and legislative commitments focused on ESG and investors double down on their ESG demands.
The year 2020, with all of its tumult and tragedy, has challenged the relationship between companies and supply chains. Companies have faced operational challenges in sourcing goods from suppliers impacted by the COVID-19 pandemic. Moreover, many suppliers have found themselves in financial extremis and facing difficulty meeting their ongoing cash-flow needs. To meet their needs, companies and suppliers have begun to use supply chain financing arrangements with increasing regularity. Such arrangements have, however, raised concerns with the US Securities and Exchange Commission (SEC) and prompted the Financial Accounting Standards Board (FASB) to consider the proper accounting treatment. Finally, while not a new phenomenon, the year 2020 has seen new litigation seeking to hold companies responsible for the conduct of their suppliers.
On 25 August 2020, the Department for Environment, Food and Rural Affairs (Defra) launched 
On June 19, 2020, the Equator Principles Association (EPA) issued 
Since 1891, Swiss citizens have been able to request changes to the Swiss constitution through popular initiatives. Currently, if an initiative is put forward by a group of at least seven citizens, and subsequently wins the support of 100,000 signatories within 18 months, a nationwide referendum is potentially triggered. However, before the referendum takes place, Swiss legislators may propose a compromise position to the initiative. This compromise proposal will become law if the initiative’s sponsors agree to it; otherwise, the original initiative is submitted for a national referendum.
Potential environmental, social, and governance (ESG) issues posed by suppliers in increasingly complex supply chains can increase reputational risks to an organization. Corporate supply chains generally include every company that comes into contact with a particular product or service. In other words, the “supply chain” refers to the series of steps and processes involved in the production and/or distribution of goods and services. This can include direct and indirect suppliers, manufacturers, distributors, and retailers, and may involve companies and individuals all over the world.