What does the Supply Chain Act have to do with human rights and how can Deutsche Telekom support companies on sustainability issues?
When it comes to human rights, companies have a special role to play: we drink coffee from Africa. Our cell phones contain rare earths from China. Our T-shirts are produced in Asia. Supply chains are international and highly complex. Extraction of raw materials, transportation, production, storage: it's all part of it. Many of these products are made under poor working conditions, sometimes even with child or forced labor. Environmental damage is accepted. Companies must take measures to ensure that human rights standards are observed along the entire supply chain. This is ensured by the Supply Chain Act, which has been in force in Germany since 2023. Various Deutsche Telekom software solutions support companies in complying with the new requirements.
The law motivates companies to proactively comply with human rights standards:
- Numerous companies have already started to review their supply chains for potential human rights violations and implement measures to meet the legal requirements.
- Some are increasingly seeking dialogue with stakeholders, non-governmental organizations (NGOs) and government agencies to share best practices and clarify uncertainties.
- Many companies are already demonstrating their commitment to human rights standards - examples can be found online.
- However, quite a few companies are finding it difficult to implement the law. And how are the requirements to be interpreted in detail?
The fact is, violations or potentially suspicious cases have far-reaching consequences: Public image is damaged. Measures for clarification and correction are extensive. Violations of the law can result in fines and exclusion from public procurement for up to three years.
One thing is clear: the law is forcing companies to act:
- From January 1, 2024, companies with 1,000 or more employees will be under obligation.
- Reports are due annually, at the latest four months after the end of the financial year. The Federal Office of Economics and Export Control (BAFA), which is responsible for enforcing the law, will for the first time check that all the reports have been submitted and published as required by the deadline of June 1, 2024.
- Further, stricter regulations are "on the horizon", such as the EU Supply Chain Act for companies with 500 employees, which is expected to come into force in 2025.
- In addition, the Corporate Sustainability Reporting Directive (CSRD) will require a binding sustainability report in accordance with the new European reporting standard, the ESG report, from July 2024. This comprises the documentation of three areas: Environment, Social and Governance.
Companies want to fulfill their due diligence obligations and support the observance of human rights. However, the demanding formalities in the companies consume a lot of working time: not only for upcoming reports, but also directly in the event of anomalies in the supply chain. Telekom's Transparency Suite minimizes the effort involved. This scalable modular system, a software solution based on ServiceNow, meets the basic requirements. It offers an automatic and up-to-date risk analysis, evaluates supply chain processes and helps with the planning of corrective measures. It consolidates the data for the legally required report and supports any complaints with legally compliant responses. The solution links internal and external sources of information and uses artificial intelligence. In the future, it will even be possible to prepare questionnaires for suppliers based on published data - helping all partners in the supply chain to save time.
The sustainability report, too, is a challenge for companies. Deutsche Telekom provides support here with its knowledge of the solution provider market. The "Telekom Sustainability Manager" (link in German) is a preconfigured software-as-a-service solution from Telekom. It enables companies to choose from various components according to a modular principle: ESG reporting, climate management and action finder. Other examples include the Salesforce Net Zero Cloud (link in German), the SAP Sustainability Control Tower and ServiceNow's ESF Management & Reporting module. With these solutions, companies can collect and visualize their emissions data and measure and report it against the planned reduction targets.
Conclusion: Sustainability and digitalization are among the key trends in the business world and they go hand in hand with profitability. Good working conditions inherently ensure fewer errors and therefore lower production costs. In transparent supply chains, such cost drivers become immediately visible. Customers are increasingly choosing suppliers based on sustainability criteria. Companies with proven sustainability are ahead in tenders. Banks also reward them with better credit conditions. Sustainability and transparency thus become a competitive advantage.
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