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New German supply chain ESG law will have global impact
A new German ESG (environmental, social and corporate governance) law that came into force on 1 January could have major consequences for businesses in the UK, INVERTO, an international procurement and supply chain management consultancy has said.
TWO PER CENT OF TURNOVER FINES
The new law means German companies will face fines of up to 2% of their global turnover if they do not construct a complete ESG inventory of their supply chains and take steps to prevent human rights abuses or environmental degradation within them. German companies which fail to comply with the new law also risk being excluded from German public contracts for up to three years.
GERMANY GOES THE DISTANCE ON ESG
Thibault Lecat, Managing Director of INVERTO in the UK, said: “Germany is going further and faster on ESG than many other countries. Large German businesses are effectively being forced to take responsibility for ESG risks in their whole supply chain – by 1 January.
“UK businesses will essentially have no choice but to comply with this law if they want to keep their German customers.”
UK BUSINESSES MUST SUPPLY ESG DATA TO GERMAN COMPANIES
Any UK business which supplies a large German company, in any sector, will have to supply large amounts of detailed ESG data to their German customers in order to keep doing business with them. In some cases, UK suppliers are already complying with similar UK regulations, such as those covered by the Modern Slavery Act.
Many UK suppliers are already likely to have received weighty questionnaires from their German customers, asking questions about ESG issues ranging from forced labour to environmental degradation.
Nichola Mallon, Head of Trade & Devolved Policy, Logistics UK, said: “ESG is fast racing up the boardroom agenda of UK plc and this new German law shows how important it is, particularly for logistics businesses with pan-European operations, to take this issue seriously. Logistics UK will be looking further into this issue in order to advise its members with German customers on the best ways to proceed.”
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Published On: 12/01/2023 16:00:09
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