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Supply chain act: resilient for the future

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On January 1, 2023, the Supply Chain Act for compliance with human rights and environmental protection will be launched in Germany. Not all companies are prepared for this. Digitalization is helping them. Those who are quick have an edge. Yvonne Jamal from the JARO Institut für Nachhaltigkeit und Digitalisierung explains why more commitment is needed and what companies can do.

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The Supply Chain Act requires companies to detect, prevent, end or reduce negative consequences of their operations on human rights, for example child labor or exploitation of workers, as well as ecological damage.

From January 1, 2023, larger companies must document compliance with human rights and environmental protection in their supply chains. This will initially apply to companies with 3,000 or more employees, and one year later also to companies with more than 1,000 employees. There is also a proposal for a supply chain law at the European level, presented by the European Commission in February 2022. Companies in Europe with as few as 250 employees are to be affected. The law considers the entire value chain, that is all established direct and indirect business relationships. In addition, the Paris climate targets will be given greater weight. For companies, the legislation means legal certainty and a fair competition. Consumers and investors will receive more transparency. 

Protecting the  o n e  planet - but how?

Many companies see the Supply Chain Act as a challenge. It requires a holistic view: When it comes to human decency and environmental protection, the entire life cycle of products must be considered: Production, storage, delivery and the aspects of circular economy. For the consolidated report on the status of their supply chain, companies need cross-departmental data, from purchasing to controlling to legal. That makes it difficult. The greatest lever for compliance with due diligence obligations lies in procurement, says Yvonne Jamal. The founder and CEO of the JARO Insitut für Nachhaltigkeit und Digitalisierung (institute for sustainability and digitalization) is an expert in sustainable procurement and sees the Supply Chain Act as a good initiative: "If you consider that Germany is the third largest importer in the world, procurement can make a massive contribution to sustainable development with its demand and its purchasing decisions, and can also consciously develop suppliers. Our prosperity must not go hand in hand with the violation of human rights and environmental damage. The goal must be to ensure a decent life for all and thus also secure our own future viability."

Sustainability and cost-effectiveness go hand in hand

Good working conditions automatically lead to lower production costs and fewer errors. In transparent supply chains, such cost drivers become immediately visible. "If you take action beyond the legal requirements and exploit the opportunities of new regenerative business models within the planetary boundaries, the given natural resources such as air, water, soil and the like, then you have massive advantages." Yvonne Jamal is convinced of this. "That doesn't just mean classic image gains and that you open up new customer groups or reduce your risk costs. In concrete terms it means that you can decouple yourself from the need for raw materials and secure your skilled workforce for the future."

Sustainability becomes a competitive factor

According to the expert, those who are quick implementing the law have major advantages: "The current political and economic situation clearly shows that resilient supply chains bring competitive advantages. This resilience is enabled by sustainable business practices, by taking a holistic view and by working collaboratively with stakeholders." Now is the time to act: "Currently, companies are looking for sustainable suppliers to boost their own sustainability performance. Those who have established sustainable procurement clearly stand out from their competition. In this way, small and medium-sized companies in particular, which may not currently be directly affected, can offer their business customers absolute added value."  

In the interview, Yvonne Jamal explains what companies can do in concrete terms.

220429-LKSG

Yvonne Jamal, Founder and CEO JARO Institut, …
… has a bachelor degree in Business Administration with a specialization in tourism and more than 15 years of experience in the tourism industry. In the past few years she was in a leading position in indirect purchasing at Zalando SE. Since then she has been volunteering as a regional board member at the Federal Association for Materials Management, Purchasing and Logistics (BME) in the area of sustainable procurement. More…

Woman in warehouse.

More human rights in supply chains

T-Systems now offers companies a solution that enables them to meet the obligations of the Act on Corporate Due Diligence in Supply Chains.

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