cips germany webinar supply chain act –fromsolutiontoexecution
TRANSCRIPT
CIPS Germany WebinarSupply Chain Act – From solution to execution
1 The Supply Chain Act (“Lieferkettengesetz”) in a nutshell
2 Solution landscape & Case study
3 Discussion
Kai WeberConstantia Flexibles
Host
Angela QuCPO Lufthansa
Speaker
Thomas UdesenCPO Bayer
Speaker
Harald NitschingerCEO Prewave
Speaker
1 The Supply Chain Act (“Lieferkettengesetz”) in a nutshell
Answering the 5 key questions around the Supply Chain Act1. What’s the status quo ?2. Why now ?3. Who’s affected ?4. What’s required ?5. What are the penalties and how is it enforced ?
CIPS Germany WebinarSupply Chain Act – From solution to execution
Part 1
The Supply Chain Act („Lieferkettengesetz“) in a nutshell
1. What‘s the status quo ?
The status quo
Initiative DraftedBill
EnactedLaw
The state of supply chain legislation around the world
Limited scope
Broadscope
2017“Loi de vigilance”
2017“Conflict Minerals Regulation”
2021“Lieferkettengesetz”
2022 (?)“Corporate Due
Diligence Directive”
2015Modern Slavery Act
2019Child Labour Due Diligence
2021“Transparency law”
2021“Konzernverantwortungs-
Initiative”
2022“Initiative
Lieferkettengesetz”
2010“Conflict minerals provision” Dodd Frank
Part 1
The Supply Chain Act („Lieferkettengesetz“) in a nutshell
2. Why now ?
Supply Chains have never been more complex and intransparent
Trend 1. Globalisation
Industrial companies today often source from:
10.000+Suppliers
100+Countries
100+Commodities
Consumers are increasingly consciousabout sustainability risks in supply chains.
Trend 2. Consumer consciousness
75 %of Germans support a supply chain law
Infratest dimap survey 09/2020
Social Media Penetration in 2018
64% Eastern Asia
55% Southeast Asia
63% South America
59% Central America
55% Middle East
Trend 3. Smartphone revolution
Social Media usage rates are above 50% everywhere in the world
Social Media Penetration in 2018
64% Eastern Asia
55% Southeast Asia
63% South America
59% Central America
55% Middle East
Trend 3. Smartphone revolution
Social Media usage rates are above 50% everywhere in the world
Worker’s rights
Labor unrest Accidents
Pollution
Citizen protests
Toxication
Previously hidden incidents are now globally accessible
Part 1
The Supply Chain Act („Lieferkettengesetz“) in a nutshell
3. Who‘s affected ?
Who’s affected by the law ?
Applies to companiesHQ in France,
> 5.000 employees(= 100 - 150 companies)
“Loi de vigilance”
In effect from01.03.2017
ScopeHuman rights, environment
Health & Safety
ReachTier-1 full,No Tier-2+
Applies to companiesHQ or active in the EU
> 250 employees(= 20.000+ companies)
“Corporate Due Diligence Directive”
In effect fromtbd
ScopeHuman rights, environment
Health & Safety, Governance risks
Applies to companiesHQ in Germany,
2023 > 3.000 employees (= 600) 2024 > 1.000 employees (= 3.000)
“Lieferkettengesetz”
In effect from01.01.2023
ScopeHuman rights, environment
Health & Safety
ReachTier-1 full,
Tier-2+ reduced
ReachFull Value Chain
(Tier-1, Tier-2+ & Customers)
Part 1
The Supply Chain Act („Lieferkettengesetz“) in a nutshell
4. What‘s required?
What does the law require ?1. Human rights due diligence on the following issues:
Occupational Health and Safety Bodily integrity and health
Modern slaveryFreedom from torture, slavery and forced labour
Labor rights and standardsCollective bargaining rights, Fair working conditions (safety at work, breaks)
!
Child laborProtection of children and freedom from child labour
Environmental protectionEnvironmentally related obligations to protect human health
What does the law require ?
Implement transparent public reporting
Establish a grievance mechanism
Risk management (mitigation measures) to prevent negative impacts on human rights
Implement procedures for identifying disadvantageous impacts on human rights
Draft and adopt a policy statement on respecting human rights and assign organizational responsibility
Policy Statement & Org. Responsibilities
GrievanceMechanism
Documentation &Public Reporting
Mandatory Risk & Case management= Measures to prevent and mitigate risks
Mandatory risk analysis= Measures to identify risks
1
2
3
New and complexrequirements
4
Existing orlow complexityrequirements
2. Implementation of the following measures
Reported Grievances
5
What does the law require?
3. Due diligence obligations for the entire supply chain (Tier-1 to Tier-N)
High requirements
Low requirements
a. Tier-N requirements are appropriate and tiered b. Tier-N risk analysis
Only on case-by-case basis
for known:
1. Tier-N grievances
2. Tier-N incidents
Part 1
The Supply Chain Act („Lieferkettengesetz“) in a nutshell
5. What are the penalties ?6. How is the law enforced ?
What are the penalties ?A. Exclusion from public procurement processes for up to three years
B. Fines on the order of
2% ofAnnual
revenues
No mitigation measuresfor known violations
No grievance mechanism,No follow-ups on grievance reports
No risk analysis
Up to 8 Mio. EUR(per case)
Up to 5 Mio. EUR
How is the law enforced ?
A.Grievance Report
Who?Victims of human rights violations
Where?a. German courts,
b. Federal Office for Economic Affairs and Export Control (BAFA)
B. Monitoring
Who?The Federal Office for Economic
Affairs and Export Control (BAFA)
What?Checks company reports and
investigates any grievances
Enforcement – Relevant Case StudiesLaw
NGO
Case
Targets
Cobalt DRC Case 2019
GDPR Conflict minerals Loi de vigilance
International Rights Advocates v. Apple, Microsoft, Dell, Tesla
Germany
Amazon leather
1. NGOs and interest groups will bring prominent “hot topic” cases2. Well-known B2C companies (“brands”) will be the main targets
Proactive risk management and communication will be key
Penalty EUR 50 Mio.
Part 2
Solution Landscape & Case Study Volkswagen Group
What does the law require ?
Policy Statement & Org. Responsibilities
GrievanceMechanism
Documentation &Public Reporting
Mandatory Risk & Case management= Measures to prevent and mitigate risks
Mandatory risk analysis= Measures to identify risks
1
2
3
New and complexrequirements
4
5
Existing orlow complexityrequirements
Resource-intensive
RequireTechnology-support
and automation
“Supply Chain Due Diligence” – Solution Landscape
Mandatory Risk & Case management
Mandatory risk analysis4 5
1What is
my supply chain?
2What is happening in my supply chain?
3How to manage and mitigate issues in my
supply chain?
Assessments
Monitoring
On-site Audits
Case Management
Code of Conducts
Periodical & static
Real-time & proactive
Traceability
Mapping
Engagement
Together for more transparencyHow Audi, Porsche and Volkswagen use Prewave
Artificial Intelligence to minimise sustainability risks
5000+ Direct
Suppliers
1000+ Indirect
Suppliers
17Critical Raw
Materials
Case Study Volkswagen Group
MONITORINGSUPPLY CHAIN
MAPPING
Tier-1
Tier-2
Tier-3
Focus on17 critical raw
materialsAI-based analysis in
50+ languages
ESG-risk incidents are detected
and prioritized in real-time
INCIDENTANALYSIS & PRIORIZATION
