The compromise on the Supply Chain Act was preceded by months of negotiations within the coalition. The agreement now stipulates a duty of care for companies: Companies are to keep an eye on their entire supply chain. If a company becomes aware of a grievance in the supply chain, it will be obliged to take remedial action. This concerns exploitation, child labor and environmental standards in global supply chains (you can find details on the Supply Chain Act here). A "graduated responsibility" is envisaged for the path from the end product back to the raw material. There is to be no civil liability for companies.

VDMA Managing Director Thilo Brodtmann explains the agreement within the government on a so-called Due Diligence Act:

"The worst mistakes of the Due Diligence Act have been eradicated, but the new attempt will also be noticeably more bureaucratic and burdensome for companies. The good thing is that German companies will now only have to answer for their direct suppliers and there will be no civil liability. We have always insisted on this and Economics Minister Peter Altmaier has rightly prevailed here. After all, medium-sized industrial companies in particular have neither the market power nor the personnel and administrative resources to track their supply chains down to the last link. This is all the more true as a single machine can contain tens of thousands of components. The fact that the law initially only applies to companies with more than 3,000 employees is little consolation. This is because the planned reduction to 1000 employees will affect many medium-sized industrial companies.

It must also be ensured that large companies do not pass on their supply chain requirements to small and medium-sized companies in Europe. A review of the supply chain must sensibly start where the risks are particularly high.

The VDMA remains willing to work on an effective and practical implementation of the Due Diligence Act. After all, respect for human rights is a matter of course for our companies. The National Industry Dialogue on the Enforcement of Human Rights should therefore be given the necessary powers in the legislative process. The mechanical and plant engineering industry remains ready for a constructive dialog in this area. In this respect, a German due diligence law must be exemplary for a pan-European regulation. It must not be even more rigid and hostile to industry!"