New supply chain law: How document management helps with compliance

February 3, 2023

Since the first of January, the new Supply Chain Compliance Act has been in force in Germany. For companies, this primarily means even more documentation. Stephan Feige, Market Director Logistics at d.velop, explains how innovative software solutions can help to get complex compliance requirements under control.

Since 01.01.2023, the new supply chain due diligence law has been in force in Germany for companies with more than 3,000 employees. From the beginning of 2024, it will also become mandatory for companies with more than 1,000 employees. Companies must now observe a comprehensive catalogue of prohibitions, including forced labour, child labour and disregard for health protection. The important innovation here is that companies are not only responsible for their own factories or branches, but for their entire supply chain. The corporate duty of care therefore also extends to the activities of contractual partners and suppliers. The law provides for comprehensive documentation and record-keeping obligations, the violation of which can result in severe penalties. Up to eight million euros or two percent of global annual turnover can be imposed.

These documents are particularly relevant for the reporting obligations arising from the Supply Chain Act:

  • Contract documents
  • Rules of conduct and codes of conduct
  • Annual reports and documentation on compliance with due diligence obligations
  • Policy statements
  • Risk analyses and risk reports
  • Complaints procedures
  • Supplier certifications

In large companies, enormous amounts of data can be generated quickly. Nevertheless, those responsible need fast and central access to all relevant information. Document management systems help them to ensure all of this. These are the four most important advantages:

1. digital supplier files provide an overview

The supply chain structure as well as possible violations of specifications and measures must be documented continuously and completely. Accumulating documents should ensure the transparency of production processes as well as supplier relationships and must be kept for seven years. Without appropriate solutions that lend structure to digital filing, chaos can quickly ensue. To get a grip on the resulting complexity, companies should rely on a document management system that archives the documents relevant to the Supply Chain Act in digital supplier files in a transparent and quickly accessible manner and thus ensures the required storage obligation regardless of location.

2. contract management creates transparency

By switching to the contract management system, supplier contracts can be quickly and practically retrieved, jointly processed and deadlines automatically met. These contract documents play an important role in ensuring transparency in production processes. Digital management of these documents ensures that they can be accessed from anywhere, deadlines are always kept in view, and contracts can be more easily amended and even collaboratively edited as needed.

3. stored risks help with adjustments

The law also requires that potential risks be recorded in supplier contracts to be able to make statements about the probability of adjustments within a supply chain. This can be implemented, for example, by means of lists within the supplier contract, where certain risks, for example for the environment or human rights violations, are recorded and their severity quantified. A modern contract management system is also an enormous help for the administration and adaptation of such complex documents.

4. Identify problems with digital complaint management

Companies must also set up complaints procedures as part of the Supply Chain Act. This is aimed both at those directly affected and at employees in the company who have knowledge of violations. Companies are therefore faced with the challenge of establishing a system to which all those involved along the supply chain have access. To this end, those responsible should first seek an exchange with employees and suppliers to analyse the individual circumstances. Then, all complaints must be recorded and transparently documented for reporting purposes. Measures must also be described as to how violations in the supply chain can be prevented in the future. At the latest here, digital solutions should be used to facilitate the management of the entries.

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