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## Introduction

Outplacing staff to Germany can seem like a daunting task, especially when considering the intricacies ofSupply Chain Regulations in the country. However, understanding these regulations can significantly simplify the process, ensuring smooth operations while staying in compliance with the law. This article aims to provide a comprehensive guide to navigating supply chain regulations in Germany, particularly for businesses considering employee outplacement.

The German Supply Chain Due Diligence Act (SCDDA) – An Overview

Germany introduced theSupply Chain Due Diligence Act (SCDDA) in 2021, marking a pivotal moment in corporate accountability. The Act shifts the focus from merely environmental impacts to the human aspect of the supply chain, making German organizations legally accountable for respecting human rights within their global supply chains.

The SCDDA applies to enterprises with their central administration, principal place of business, administrative headquarters, statutory seat, or branch office in Germany. It mandates these enterprises to adhere to environmental and human rights standards in their supply chains. The Act presents a comprehensive list of obligations, including the development of a risk management system for compliance and mandatory complaint procedures. Violations may result in significant penalties.

The SCDDA – Who Does It Affect?

The SCDDA will be implemented in two phases:

• Phase 1 (Starting January 2023): The Act will apply to German-based enterprises or German-registered branches of foreign companies with over 3,000 employees. Group companies and personnel posted abroad are included in the employee count.

• Phase 2 (Starting January 2024): The Act will extend to enterprises employing over 1,000 employees, or German-registered branches of foreign companies with more than 1,000 employees.

Although the Act initially targets larger enterprises, it will also indirectly affect Small and Medium-sized Enterprises (SMEs). Larger firms are likely to pass on due diligence obligations imposed by the Act to their suppliers, impacting SMEs in the long run.

Key Dates in the SCDDA Rollout

Understanding the timeline for the SCDDA’s full implementation is crucial for businesses planning to outplace employees to Germany. Here are some of the key dates:

1. June 2021: German parliament passes the SCDDA, requiring large companies to undertake supply chain due diligence activities.
2. February 2022: The European Commission adopts a proposal for a Directive on corporate sustainability due diligence.
3. October 2022: The EU adopts the Corporate Sustainability Reporting Directive (CSRD).
4. January 2023: SCDDA regulations come into force for enterprises with more than 3,000 employees.
5. January 2024: SCDDA regulations come into force for enterprises with more than 1,000 employees.
6. 2024: Companies must report under the CSRD in line with mandatory EU sustainability reporting standards.
7. 2026: The German government will evaluate SCDDA’s effectiveness.

Human Rights and Environmental Risks Under the SCDDA

The SCDDA applies to a wide range of human rights and environmental risks. For instance, it covers child labor, forced labor, disregard of workplace safety, wage discrimination, harmful changes to the soil, and air or water pollution, among others.

The Act also considers several environmental risks, referencing international agreements like the Minamata Convention, Basel Convention, and the Stockholm Convention on Persistent Organic Pollutions (POPs).

Compliance with the SCDDA – What Do Organizations Need to Do?

To ensure compliance with the SCDDA, organizations must monitor and act on violations within their own operations and those of their direct suppliers, regardless of whether the activity was performed in Germany or abroad.

Organizations must also perform a risk analysis immediately if they become aware of a possible violation of environmental standards or human rights by one of their indirect suppliers. The Act mandates action and meaningful remediation, placing a clear onus on organizations over their supply chain performance.

For company executives, this means that they must pay as much attention to their supply chains as they do to financial performance. Failing to do so can result in reputational, investor, and financial risks.

Preparing for the SCDDA Reporting Requirements

The SCDDA requires organizations to undertake several high-level requirements, signaling a shift towards more holistic reporting. These requirements include risk management and risk analysis reporting, policy statements, preventive and remedial measures, complaints procedures, and documentation and reporting obligations.

Consequences of Non-Compliance with the SCDDA

Not complying with the SCDDA can have severe consequences for companies, including monetary penalties of up to EUR 8 million, depending on the nature and magnitude of the violation. Furthermore, companies can be banned from winning public contracts in Germany for up to three years. Trade unions and NGOs can also be granted the authority to conduct litigation for an affected party.

Simplifying Employee Outplacement to Germany with House of Companies

House of Companies offers a unique solution to help businesses navigate the complexities of outplacing staff to German companies. Their self-governance portal allows businesses to outplace staff to German businesses without setting up a local entity, all for a fixed annual fee. This service simplifies the process, allowing businesses to recruit and outplace their staff in Germany efficiently and effectively.

Founded by Dennis Vermeulen in 2007, House of Companies has expanded to multiple European countries and Dubai, setting up over 10,000 entities. The company’s vision of ‘Globalisation as a Service’ involves making legal processes more understandable and actionable, disrupting traditional consultancy practices, and empowering international entrepreneurs.

Conclusion

Understanding and complying with supply chain regulations in Germany is essential for businesses planning to outplace employees to the country. The SCDDA presents a comprehensive set of obligations and requirements that businesses must adhere to. Fortunately, with the right knowledge and support, navigating these regulations can be a straightforward process.

With services like House of Companies, businesses can simplify the process of outplacing staff to Germany, ensuring compliance with the law while focusing on their core operations.

Note: The information in this article was last updated in October 2022. For the latest information and updates, businesses should refer to the Official SCDDA FAQs.