New ESG Obligations for Enterprises in Supply and Value Chains through Corporate Sustainability Due Diligence Acts in the EU and Germany

In the last years, incompliances in supply chains have revealed several violations of environmental and social rights. Individual cases became rather famous. Environmental sensitivity was raised significantly by the Volkswagen (hereinafter referred to as ‘VW’) emission scandal, the so called ‘Dieselgate’, discovered in 2015. This incompliance reinforced the criticism of companies destroying the climate systematically and the failure of state certification mechanisms. For many years authorities as well as consumers have accepted, supported or simply ignored such practices in the automotive industry. In parallel, human rights violations have become public. In particular, in South East Asia, in countries such as India or Bangladesh manufacturers from Europe have exploited working conditions causing dangers and damages. Different factories exploded, burned down or collapsed. Many workers were injured or died due to missing awareness, information, trainings or security measures. Minimum level working conditions have not been assured. It became obvious that regulations in single jurisdictions are not effective. The practice present in supply chains is questionable. Discussions on ethics have taken place in societies. Protests by younger generations are becoming more virulent. Non-governmental organizations and parts of the media take part in the discovery of incompliances. Missing goodwill of enterprises and misconduct provoked stricter investigations and fines by authorities and now, stricter acts by legislators. Overall, the EU does want to environmentally preserve the climate and to grant, socially, a certain level of protection of human rights. Now, new governance and compliance requirements for supply chains have been stipulated in the EU and its member states. Here, we want to focus on the already adopted German Supply Chain Act and the proposal of the EU Directive on Corporate Sustainability Due Diligence. Governance, risk and compliance management system will take an even more important role in the catalogue of supervisory and management duties and strategies. In combination of analogue and digital ecosystems such management systems have to be integrated increasingly. Narrow thinking will be substituted through more interdisciplinary, preventive and holistic approaches.