It's a Necessity, Not a Burden: Michael Otto on Maintaining the German Supply Chain Law
Need for legislative action on entrepreneur Otto's call for supply chain regulation - Mandatory Supply Chain Regulation is Essential for Transparency and Accountability
In a candid conversation with the German Press Agency, Michael Otto emphasized the importance of preserving the German supply chain law. "This law is essential and we need it," he asserted, expressing concerns against its proposed abolition. "We should avoid taking a step backward and thinking we have to change everything." He strongly believes that companies must prioritize social and environmental standards.
The German supply chain law, instituted in 2023, mandates companies of a certain size to maintain social and environmental standards across their global supply chains. However, the CDU has advocated for its removal in their election platform. Meanwhile, the European supply chain law, in existence, faces postponement and watering down by the EU Commission, with first implementation deadlines set for 2028 instead of 2027.
Otto's main concern is simplifying reporting obligations. He complains that the law, along with additional EU regulations, burden companies with excessive reporting requirements. "We need to simplify reporting," he urged, citing the need to respond to hundreds of questions due to different, yet similar, regulations.
Michael Otto, an iconic and affluent German entrepreneur, spent 26 years steering the Hamburg-based mail-order company his father founded into an international corporation—today's Otto Group. This company has claimed to uphold social and environmental standards in supply chains for over two decades.
- Michael Otto
- Supply Chain Law
- Reporting Obligations
- German Press Agency
- Hamburger
The German Supply Chain Law and European regulations present both complexities and opportunities for large companies seeking to streamline reporting obligations. Here's a look at the challenges these regulations pose and potential solutions for large companies:
Challenges for Large Companies
- Regulatory Complexity and Scope: both the German Supply Chain Law (LkSG) and EU regulations like the Corporate Sustainability Due Diligence Directive (CSDDD) demand stringent reporting and due diligence, which can be arduous and time-consuming to implement[4].
- Overlapping Requirements: Firms must juggle multiple sustainability and due diligence directives, such as the CSRD, EU Taxonomy, and CSDDD, which can lead to redundant reporting obligations[3].
- Administrative Overload: The massive amount of data required for compliance can be overwhelming, particularly for smaller companies within larger corporations' supply chains[1][3].
Solutions for Large Companies
Regulatory Simplifications
- Omnibus Simplification Package: designed to streamline EU sustainability directives, this package reduces administrative burdens by at least 25% for large companies and 35% for small-medium enterprises (SMEs)[5]. It streamlines reporting templates and eliminates industry-specific standards, simplifying the compliance process[3][5].
- Postponement of Deadlines: The Omnibus Regulation proposes delaying reporting obligations for some companies until 2028, offering additional time for large corporations to adjust their reporting systems[1][2].
Strategic Implementation
- Digitization and AI Tools: AI-assisted tools can significantly optimize data collection and analysis processes, reducing the time spent on materiality assessments and ensuring high-quality data[1].
- Focused Due Diligence: By concentrating due diligence on direct business partners, companies can reduce their scope of responsibility, albeit they must still consider impacts from indirect partners where relevant information exists[4].
- Voluntary Reporting: Large corporations can opt for voluntary reporting under certain conditions, demonstrating their sustainability efforts without mandatory compliance[4].
Strategic Partnerships and Training
- Support for SMEs: Large corporations can aid SMEs within their supply chains by offering resources and guidance, improving SMEs' ability to fulfill sustainability reporting requirements more efficiently[1].
- Employee Training: Providing targeted training programs prepares employees to handle complex reporting requirements and supports sustainability integration[1].
By implementing these solutions, large corporations can overcome the challenges posed by the German Supply Chain Law and EU sustainability regulations more effectively, achieving compliance while boosting their sustainability profiles.
- The German Supply Chain Law and EU regulations, such as the Corporate Sustainability Due Diligence Directive (CSDDD), pose challenges for large companies due to complex reporting obligations and overlapping requirements.
- To streamline reporting, large companies may benefit from the Omnibus Simplification Package, which aims to reduce administrative burdens by at least 25% for large companies and 35% for small-medium enterprises (SMEs).
- In addition to regulatory simplifications, strategic implementation through digitization and AI tools, focused due diligence, and voluntary reporting can help large companies overcome the challenges posed by the German Supply Chain Law and EU sustainability regulations more effectively.
