The German Act on Corporate Due Diligence in Supply Chains

In 2021, the German government adopted a draft legislation on “corporate due diligence in supply chains” (now called the Lieferkettensorgfaltspflichtengesetz) which requires companies that fall under the scope of this law to take steps to prevent human rights violations throughout the supply chains. It built on the growing momentum across Europe driven namely by consumers, non-governmental organisations, the media, and investors towards improving corporate human rights and environmental performance.

The law came into its first stage of effect in 2023 and obliges German companies to set up a due diligence process covering not only the companies’ operations but also their direct suppliers. The latter might lead to an increase and tightening-up of requirements mirrored by additional policies, requests and/or the incorporation of contractual clauses to be accepted by Indian business partners and suppliers.

In this Publication, the Indo-German Chamber of Commerce provides an overview of the important elements proposed in the draft law and its possible impact on companies and suppliers in India and Germany.