German Policymakers Propose Digital Supply Chain Register to Address Due Diligence Concerns

Key Summary

• Germany is developing a Supply Chain Act to address environmental and social risks in global supply chains
• Policymakers propose a digital supply chain register listing companies with certified due diligence systems
• Companies meeting certain turnover and import thresholds would need to source from registered suppliers
• The register would roll out sector by sector, beginning with textiles and automotive
• IPC is engaging policymakers to ensure upcoming due diligence rules remain workable for electronics manufacturers

As global supply chains have grown increasingly complex, policymakers, industry, and civil society have been looking for ways to use supply chain requirements to reduce the negative environmental and social effects of the products we consume.

In Europe, several European Union Member States have already implemented due diligence legislation requiring companies to avoid problems such as forced labor, corruption, discrimination, occupational health and safety violations, and pollution in their supply chains. The European Commission is also preparing a proposal, which would likely introduce EU-wide binding due diligence requirements for all economic sectors, coupled with liability and enforcement mechanisms. 

Meanwhile, the German government is drafting its own due diligence law, known as the Supply Chain Act, which has been delayed due to concerns over liability mechanisms and the economic impact on businesses. The German Christian Democratic Union (CDU), the leading partner in Germany's coalition government, has presented a sector-by-sector and company-by-company approach. At the center of its proposal is the implementation of a digital supply chain register, which would list companies that supply EU industries and have a certified, robust, due diligence system in place. As part of the due diligence obligation, companies operating within the EU that meet certain turnover and import volume thresholds would have to ensure they source goods and services from companies in the register. The register would be introduced sector-by-sector, likely starting with the textile and automotive industries. Non-EU suppliers would be incentivized to go through the certification process.

Germany's CDU and the CDU delegation in the European People’s Party, the largest political party in the European Parliament, have shared the idea for a digital supply chain register with EU Commissioner Didier Reynders as the commission drafts its proposal, which is expected in the second quarter of this year. The commission believes that EU-wide legislation would be most effective in addressing this complex issue.

IPC is actively engaging with policymakers to ensure that any upcoming due diligence legislation is feasible for the electronics industry and minimizes the administrative burden for our member companies, in particular for small and medium-sized enterprises. We are currently preparing an IPC response to the commission’s request for public input. For further information, see this recent IPC blog, and contact me if you have any questions or concerns.