Challenges of a supply chain due diligence obligation (Supply Chain Act)

Supply chains play a crucial role in our globalised world. Companies face many challenges, particularly with regard to the verification of data due to the Supply Chain Act.

Review, risks and solutions

In today’s globalised economy, supply chains play a crucial role. However, companies are increasingly confronted with the challenges of supply chain due diligence (Supply Chain Act), especially when it comes to verifying data. The facts surrounding the Supply Chain Act audit shed light on various problems that companies have to overcome.

Transparent data sources as the key to integrity

The sources from which data for Supply Chain Act audits originate are often opaque. This uncertainty harbours the risk that the authenticity of the data cannot be clearly established. Companies are faced with the task of identifying reliable and transparent data sources in order to ensure the integrity of their supply chain.

Adapt questionnaires to the legal requirements

Data is often collected using questionnaires in various formats. These often do not exactly reflect the legal requirements, which makes compliance checks more difficult. There is an urgent need to develop standardised and legally compliant questionnaires to ensure that the data collected complies with legal requirements.

Manual verification of data from the social sector

The data to be collected mainly comes from the social sector, such as human rights or child labour. Manual verification of this sensitive data is often time-consuming and error-prone. Companies need to find solutions to automate the process while ensuring the accuracy and correctness of the information.

Complex interactions between companies and suppliers

Companies that are subject to the Supply Chain Act often have several suppliers to be audited, while one supplier in turn supplies several companies subject to the Supply Chain Act. The challenge is that different questionnaires are sent to the supplier, which increases the risk of inconsistent responses to the same legal requirements. Standardised communication and questionnaire design are crucial to minimise these inconsistencies.

Lack of context-sensitive testing

Companies often record data without carrying out a context-sensitive check. This increases the risk of “greenwashing” and violations of the Supply Chain Act, where companies pretend to act sustainably while in reality their compliance with legal requirements is questionable. A context-sensitive review of data is crucial to ensure that sustainability efforts are not just superficial.

Risks of fraud and greenwashing

One prominent example was provided by a well-known car brand based in the south of the country. Despite a successful Supply Chain Act audit of a supplier, it subsequently emerged through third-party research that the supplier was massively violating human rights. The consequences were serious. The risk of reputational damage is very high in the event of a violation. There is also the threat of legal consequences. Non-compliance with the Supply Chain Act can lead to legal consequences, including fines and trade restrictions, particularly in regions where strict regulations apply.

Possible solution

Overall, companies must proactively develop solutions to meet these challenges. The implementation of automated processes, the standardisation of questionnaires and the use of modern technologies are decisive steps on the way to effective supply chain due diligence. The use of AI-supported data analysis and risk assessment solutions are further preventative measures. This is the only way for companies to ensure that their supply chains comply with legal requirements while promoting sustainable and ethical practices.