Topic: 2024-Supply Chain Stability
Country: Germany
Delegate Name: Ava Cousineau
Delegate: Ava Cousineau
School: Williamston High School
Country: Germany
Committee: SPECPOL
Topic: Supply Chain Stability
The stability of global supply chains has become a critical concern in recent years, as businesses face a range of challenges that threaten their ability to deliver goods and services efficiently. Historically, supply chains have been designed for cost-effectiveness, often relying on just-in-time inventory models and global sourcing to maximize efficiency. However, events like natural disasters, geopolitical tensions, and trade disruptions have exposed the vulnerabilities of these interconnected systems. These disruptions have led to delays, shortages, and rising costs, prompting companies to reassess their supply chain strategies. Key issues affecting current supply chain stability include over-reliance on single suppliers, a lack of supply chain transparency, labor shortages, and increasing demand volatility. As a result, businesses are investing in greater diversification, digitalization, and risk management practices to build more resilient and agile supply chains capable of withstanding future shocks.
Efforts made by the German government to combat these issues include the implementation of the German Supply Chain Due Diligence Act. The German Supply Chain Due Diligence Act (SCDDA), which came into effect in 2023, mandates that large companies take responsibility for human rights and environmental standards across their global supply chains. The law requires companies with over 3,000 employees (or 1,000 employees starting in 2024) to establish processes for identifying, preventing, and addressing human rights violations and environmental damage within their supply chains, including those of their direct suppliers and, in some cases, indirect ones. This includes ensuring that suppliers adhere to labor rights, fair working conditions, and environmental sustainability. Companies must also regularly monitor compliance, report on their due diligence efforts, and implement corrective actions where necessary. The law’s implementation has had significant effects on businesses, driving them to increase transparency, improve risk management, and revise supplier contracts. It has also created challenges for companies managing complex, global supply networks, as they must now invest in tracking and verifying compliance at various stages of the supply chain. While the Act aims to promote ethical sourcing and corporate responsibility, it has placed a heavy compliance burden on businesses, particularly those dealing with smaller suppliers or operating in regions with weak regulatory frameworks.
The German government has announced plans to modify the German Supply Chain Due Diligence Act, planning to scale back certain aspects of the act. The upcoming changes to the German Supply Chain Act will significantly alter its scope and impact, with fewer companies being subject to its requirements—likely less than a third of the current number. A key adjustment is the introduction of a grace period, which will exempt companies from enforcement of the Act until January 1, 2025. Additionally, the revised rules are expected to ease the burden on smaller, downstream companies by setting clearer guidelines for how larger businesses in scope can request information from small and medium-sized enterprises (SMEs) within their supply chains. While the Corporate Sustainability Due Diligence Directive (CS3D) is anticipated to be a complex challenge for companies, the changes to Germany’s regulations should help alleviate the compliance strain of navigating both the German law and the broader European legislative framework.
https://www.ibm.com/think/topics/scdda
https://www.csr-in-deutschland.de/EN/Business-Human-Rights/Supply-Chain-Act/supply-chain-act.html
https://www.bmz.de/en/issues/supply-chains
https://practicalesg.com/2024/07/germany-seeks-to-scale-back-german-supply-chain-act/#:~:text=The%20German%20government%20has%20announced,Diligence%20Directive%20(CSDDD).%E2%80%9D
