Companies should prepare for the Supply Chain Act

Das Lieferkettengesetz – eigentlich Lieferketten-Sorgfaltspflichtengesetz (kurz LkSG), soll in Deutschland ab Januar 2023 zunächst für Unternehmen mit mehr als 3000 Mitarbeitern, 2024 ab 1000 Mitarbeitern gelten. © Amnesty International

Not only since the effects of lithium mining in South America on the environment and the people living there, or of mica and cobalt mining in India and Africa, respectively, have come to the public’s attention, has pressure been growing on governments in Western democracies to put a stop to the goings-on or at least to make the product conditions in the supply chains so transparent that consumers have a comprehensible basis for making decisions.

Gold, cobalt or mica – many everyday products cannot do without these minerals. They are found, for example, in electronics, car paints, lipsticks, batteries and rechargeable batteries. But where these minerals come from and under what conditions they are mined is often difficult to understand. In most cases, they come from regions where sales are used to finance violent conflicts, where environmental protection standards are not met, or even where children are used for mining.

According to the aid organization Terre des Hommes, some 22,000 children work in mines in India to extract mica. U.S. and European regulations on the 3TGs (tin, tantalum, tungsten, and gold) have already attempted to minimize mining conditions that are often illegal and questionable. For example, companies must disclose where they source these four so-called conflict minerals.

The Supply Chain Act – actually the Supply Chain Duty of Care Act (LkSG for short) – goes further. This will apply – according to current legislation – in Germany from January 2023 and obligates companies to eliminate risks such as child labor, slavery and environmental pollution in their supply chain. First, companies with more than 3,000 employees must establish a risk management system, conduct risk analyses, issue a policy statement on human rights, establish preventive measures, publish reports on compliance with due diligence obligations, initiate corrective measures, and establish a complaints procedure.

From 2024, these obligations will then apply to all companies with more than 1,000 employees. “But smaller companies are also affected, because they have to provide information as part of the supply chain so that their customers can in turn meet their obligations,” warns Tim Thome, product environmental compliance expert at IMDS Professional. The company from Hesse has already made a name for itself in the field of material reporting since 1999. It is familiar with regulatory requirements for chemicals, end-of-life vehicles, biocides, conflict minerals, and the systems that can be used for reporting.
“Only those who know which minerals are contained in their products and where they come from can firstly provide information about them and secondly eliminate the risks in their supply chain,” says Tim Thome.

Material reporting systems such as the IMDS or the CDX help with this. Here, all data is collected across the entire supply chain and can be queried at any time. The International Material Data System (IMDS), for example, is used worldwide in the automotive industry, and the Compliance Data Exchange System (CDX) can be used across all industries. The CDX has now been extended to include the Responsible Materials Manager, so that EMRT can also be processed automatically in addition to CMRT.

CMRT (short for Conflict Minerals Reporting Template) and EMRT (short for Extended Minerals Reporting Template) are Excel templates provided by the Responsible Minerals Initiative (RMI) to report conflict minerals. The RMI is an association of more than 400 companies worldwide committed to the responsible sourcing of minerals in their supply chains.
“We provide consulting and training to help companies meet their obligations, including under the Supply Chain Act,” explains Heide Teubert, managing director of IMDS Professional. “Our experts know the laws and systems, analyze the company’s individual situation and provide assistance to set up the necessary processes.”

Even companies that will not be (directly) affected by the German law should address the issue. This is because a similar law is currently being drafted at European level, which includes even more far-reaching regulations. Thus, companies with a smaller number of employees will also be affected by this and will even be held liable if they or their suppliers do not fulfill their due diligence obligations.

Environmental Product Compliance

IMDS Professional supports companies in meeting the requirements for material and product conformity sustainably and safely and in complying with all specifications. The core business comprises consulting, service and training on environmentally relevant laws, regulations, guidelines and customer-specific requirements. As a leading service company in the field of Product Environmental Compliance, IMDS sees its mission in profitably optimizing environmental compliance programs. With impartial and focused advice as well as tailored services and training, IMDS helps clients remain competitive in the face of increasing regulatory requirements. Since 1999, small and medium-sized companies as well as corporations from the manufacturing and processing industry worldwide have trusted in the competence of IMDS employees.