DSAGLIVE 2021: Sustainability in the supply chain

A recent survey of DSAG members revealed that the topic of sustainability is of high or very high importance to 71% of them. Apparently, the responsible use of available resources from an economic, ecological and social perspective has established itself as an important guideline for corporate action and is becoming increasingly important as a success factor. A holistic and sustainable corporate policy includes, among other things, coordinated performance and risk management, environmental and closed-loop management, and the management of inclusion and diversity.

Put your sustainability management on a solid foundation

The coverage of DSAGLIVE 2021 at a glance:

• DSAGLIVE2021: Courage to change (Preview)

• DSAGLIVE 2021: Companies in the digital dilemma

• DSAGLIVE 2021: Employees at the heart of change

• DSAGLIVE 2021: Sustainability in the supply chain

• DSAGLIVE 2021: Targeting customer needs

Companies must fulfill due diligence obligations

In the future, a new law will ensure that even more companies than before will have to deal intensively with the issue of sustainability: the Supply Chain Due Diligence Act (LkSG). It obliges companies to minimize or prevent human rights and environmental rights violations in their supply chains. This means companies bear responsibility not only for their own business operations, but also for suppliers and other business partners. In view of the high relevance of the LkSG, DSAG discussed in detail at DSAGLIVE 2021 the consequences for companies, how they can check their supply chains for sustainability with the help of SAP solutions, and in which areas there is currently still a need for action on the software side.

The Supply Chain Due Diligence Act will come into force on January 1, 2023 for companies with more than 3,000 employees, and from January 1, 2024 it will also be mandatory for companies with more than 1,000 employees. Since the law relates to the entire supply chain, small and medium-sized companies will also be affected at least indirectly by the regulations. Therefore, DSAG advises its members to deal with the regulations and to initiate necessary measures at an early stage. For example, legally compliant reporting within the meaning of the LkSG is technologically quite complex, so that sufficient time should be planned for conception, creation and implementation.

Provisions of the Supply Chain Due Diligence Act

In terms of content, the LkSG formulates clear requirements for corporate due diligence obligations, which basically cover the entire supply chain - from raw materials to the finished sales product - but are graded according to the degree of influence on the originator and the different stages in the supply chain. Measures required by the law include appointing a responsible person, adopting a policy statement, regularly conducting risk analyses, establishing a risk management system, taking preventive and remedial action when legal violations are identified - up to breaking off business relations - establishing a complaints procedure, and extensive documentation and reporting requirements.

Compliance with the law is monitored by the Federal Office of Economics and Export Control (BAFA). In the event of violations, fines and penalty payments of up to 100,000 euros, 500,000 euros or 800,000 euros are due. For companies with annual sales of more than 400 million euros, the penalty can even amount to up to 2% of annual sales.

What needs to be done?

From DSAG's point of view, it is advisable not to wait and see with regard to the Supply Chain Due Diligence Act, but to become active now. It is important to check one's own supply chain for possible risks, prepare a policy statement and establish complaint mechanisms. In addition, it is important to carefully document all measures taken with regard to the LkSG.

The appropriate technologies can meaningfully support companies in sustainable supply chain management and supply chain optimization along the dimensions of people, environment and costs. According to DSAG's assessment, the existing SAP portfolio already offers a solid basis for covering the ecological aspects of sustainability management in particular and for gaining valuable insights into one's own ecological footprint. This includes, for example, the topics of carbon footprint, waste management, material consumption, energy and water consumption, and environmental pollution. There is still some catching up to do with regard to software tools that ensure entrepreneurial reporting in line with the LkSG.

Sustainability as a competitive advantage

Overall, companies would do well to address sustainability not only because it is required by law. On the contrary, credible sustainability management can make all the difference in global competition. For more and more customers, sustainability is a relevant factor that flows into the decision for or against a company. Even the company's own employees increasingly expect their employer to make careful use of available resources. And in the competition for skilled workers, a sustainable corporate strategy makes a significant contribution to the company's attractiveness as an employer.