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.back