Duties of due care in the sup­p­ly chain

Rele­van­ce for medi­cal device manufacturers 

The Act on Due Dili­gence in the Sup­p­ly Chain has been in effect sin­ce 1 Janu­ary 2023. It appli­es to com­pa­nies based in Ger­ma­ny which are requi­red to com­ply with inter­na­tio­nal­ly accept­ed human rights and envi­ron­men­tal stan­dards in their sup­p­ly chains. Medi­cal device manu­fac­tu­r­ers and small and mid-size com­pa­nies are also affec­ted by this Act and are requi­red to crea­te appro­pria­te inter­nal struc­tures in order to com­ply with their duties of due care.

To whom does the Act apply?

The Act on Due Dili­gence in the Sup­p­ly Chain appli­es direct­ly for com­pa­nies which are estab­lished in Ger­ma­ny and which have at least 3,000 employees. As of 2024, the scope of the Act will be exten­ded to include com­pa­nies with at least 1,000 employees. Small and mid-sized com­pa­nies with less than 1,000 employees may be indi­rect­ly affec­ted by the new rules if they act as a sup­pli­er for com­pa­nies which are direct­ly affec­ted by the Act. The Act was not “cus­to­mi­zed” for con­di­ti­ons in spe­ci­fic indus­tries and does not afford pre­fe­ren­ti­al tre­at­ment to any par­ti­cu­lar eco­no­mic sec­tors. Accor­din­gly, medi­cal device manu­fac­tu­r­ers are among tho­se affec­ted by the requi­re­ments defi­ned in the Act, whe­ther direct­ly based on the num­ber of their employees or indi­rect­ly, as sup­pli­ers for com­pa­nies which fall within the scope of the Act.

Which duties ari­se from the Act?

§ 3 of the Act on Due Dili­gence in the Sup­p­ly Chain requi­res com­pa­nies to com­ply with cer­tain duties of due care rela­ting to human rights and the envi­ron­ment within their own sup­p­ly chain.
The key ele­ment in this regard is inte­gra­ting duties of due care throug­hout the com­pa­ny, which is to be accom­plished by imple­men­ting and main­tai­ning the fol­lo­wing measures:

  • set­ting up a risk manage­ment sys­tem (§ 4(1) of the Act);
  • defi­ning inter­nal respon­si­bi­li­ties for the pro­tec­tion of human rights (§ 4(3) of the Act);
  • per­forming rou­ti­ne risk ana­ly­ses (§ 5 of the Act);
  • issuing a decla­ra­ti­on of prin­ci­ples (§ 6(2) of the Act);
  • estab­li­shing pre­ven­ti­ve mea­su­res in the com­pany’s own busi­ness ope­ra­ti­ons (§ 6(1) and (3) of the Act) and vis-à-vis direct sup­pli­ers (§ 6(4) of the Act);
  • taking reme­di­al actions in cases whe­re pro­tec­ted legal posi­ti­ons are vio­la­ted (§ 7(1)-(3) of the Act);
  • Imple­men­ting a com­plaints pro­ce­du­re (§ 8 of the Act) for report­ing human rights violations;
  • docu­men­ta­ti­on (§ 10(1) of the Act);
  • report­ing (§ 10(2) of the Act).

Which fines may be impo­sed if the Act is violated?

§ 24 of the Act con­ta­ins pro­vi­si­ons rela­ting to the impo­si­ti­on of fines for vio­la­ti­on of the duties of due care. Fines against natu­ral per­sons may run as high as EUR 800,000 . Com­pa­nies may face fines amoun­ting to up to 2 per­cent of their avera­ge annu­al revenues.

Which Euro­pean legal deve­lo­p­ments should be kept in mind?

The EU Cor­po­ra­te Sus­taina­bi­li­ty Report­ing Direc­ti­ve (CSRD), which was adopted on 28 Novem­ber 2022, has cer­tain par­al­lels with the Ger­man Act on Due Dili­gence in the Sup­p­ly Chain. The “aspects of sus­taina­bi­li­ty” in accordance with the CSRD go fur­ther than the pro­tec­ted legal posi­ti­ons spe­ci­fied in the Act on Due Dili­gence in the Sup­p­ly Chain, and include e.g. cli­ma­te tar­gets (limi­ting glo­bal warm­ing to 1.5 °C, cli­ma­te neu­tra­li­ty by 2050) and gover­nan­ce fac­tors (lob­by­ing) as well as more exten­si­ve human rights stan­dards (e.g. the UN Con­ven­ti­on on the Rights of Per­sons with Disa­bi­li­ties, the UN Decla­ra­ti­on on the Rights of Indi­ge­nous Peo­p­les; for details, see


Com­ply­ing with the pro­vi­si­ons of the Act on Due Dili­gence in the Sup­p­ly Chain is a key aspect of com­pli­ance manage­ment, for medi­cal device manu­fac­tu­r­ers as well. Vio­la­ting the duties of due care may result in seve­re pen­al­ties. Even com­pa­nies which are not direct­ly affec­ted by the Act may find them­sel­ves con­trac­tual­ly bound to satis­fy the Act’s requi­re­ments if they act as sup­pli­ers for com­pa­nies which do fall within the scope of the Act. Par­ti­cu­lar atten­ti­on should be paid in this regard to the crea­ti­on of con­trac­tu­al dama­ge claims and rights of ter­mi­na­ti­on in the event of fail­ure to com­ply with requi­re­ments rela­ting spe­ci­fi­cal­ly to the sup­p­ly chain.


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