Fairness in the global economy: New supply chain law is important!

Fairness in the global economy: New supply chain law is important!

On June 6, 2025, the Green Minister in Germany took a vehement stand against simplified regulations in the Supply Chain Act. The introduction of this law aims to guarantee the fair treatment of workers in other countries and significantly improve working conditions. This measure is part of a comprehensive approach to strengthening human rights in global trade.

The Supply Chain Due Diligence Act (LkSG), which came into force on January 1, 2023, obliges companies to observe human rights and environmental standards in their supply chains. This law applies to companies based in Germany that operate internationally. From January 2023, companies with more than 3,000 employees will have to fulfill the obligations, while from January 2024, companies with more than 1,000 employees will also fall within the scope of the law.

Challenges for companies

Companies must conduct comprehensive risk analyzes and initiate preventive measures to identify and minimize risks such as forced labor, child labor and environmental degradation. The requirements are based on the United Nations standards of care. The Federal Office of Economics and Export Control monitors the implementation of the law and can impose fines to ensure compliance.

Nevertheless, many companies face significant challenges. Many feel inadequately prepared for regular risk analyzes and are confronted with the complex analysis of their supply chains and the quality of the data. In this context, the German Chamber of Commerce and Industry said that the overload of companies and the risk of a withdrawal from risk countries could jeopardize the diversification of supply chains.

Reactions and effects

Business reactions to the law have been mixed. While 65% of companies report a positive impact on their sustainability strategies, 12% see no benefit in the new regulations. Larger companies in particular could pass on the requirements to smaller suppliers, increasing costs and administrative effort. The administrative costs for complying with due diligence obligations are between 0.01 and 0.6 percent of sales, which can be a burden, particularly for small and medium-sized companies, which are not affected by the law.

The introduction of the Supply Chain Due Diligence Act has received broad support from trade unions and environmental associations, who recognize the law as an important step in the right direction. However, they also believe that the regulations are not far-reaching enough to effectively achieve the desired goals.