No impact of Supply Chain Due Diligence Act (SCDDA) on India: GTRI

Starting 01-01-2023, Germany activated the law to combat forced labour in supply chains, as well as other labour law violations, as an initiative to safeguard human rights. It is called the Supply Chain Due Diligence Act (SCDDA). The law applies to businesses operating in Germany as well as to those in other countries, dealing with Germany. Smaller firms will be covered under the law from January 2024.

However, according to the think tank Georgia Tech Research Institute (GTRI), there won’t be any significant impact of the law on India. GTRI said that India already has appropriate legislation to deal with any kind of violation of labour laws, including child labour and workplace discrimination. The report also acknowledged the minimum wage requirements exercised in the country.

Germany, in a positive move, has shifted the onus for identifying risk and taking actions from government to business firms. The SCDDA includes violation of labour laws, child labour, forced labour, and occupational health and safety, and promotes due diligence in supply chains.

Traceability being an important concept, the SCDDA includes indentifying and taking corrective measures by German companies for their as well as their partners’ operatings, apart from being proactive, when it comes to retaining labour laws and basic human rights.

“This means that companies will need to collect information about their suppliers, their operations, and the risks they face, ” Ajay Srivastava (Co-Founder, GTRI) said, adding the SCDDA imposes civil liability on companies that fail to comply with the law.

It should be noted that all EU (European Union) member countries have some form of regulations on forced labour, which are constantly being updated and strengthened. For instance, France and the Netherlands have adopted the most comprehensive regulations on forced labour. Also, in September 2022, the EU published a new regulatory proposal to ban forced labour products. Once the proposal is adopted, it will prohibit the trade of products made with forced labour in the EU market, regardless of where the products were made.

“The law could increase costs for companies, as they must implement new due diligence processes and extensive compliance measures. However, the law could also positively impact workers, as it could help prevent them from being exploited,” the report said.

Further, it said the SCDDA is a complex legislation, and implementation may face critical challenges.

The reported also highlighted the fallouts of strict implementation of SCDDA. It cited that Congo is Germany’s go to destination for mining cobalt, which is a key component in batteries for electric vehicles manufactured in the country. Considering that human rights issues have a strong presence in Congo, te SCDDA may out Germnay in a sticky situation. Also, they would have to halt the import of industrial goods from China due to concerns regarding the treatment of Uyghurs.

Germany is India’s largest trading partner in Europe and has consistently been among India’s top global partners. The bilateral trade between both countries stood at USD 24.8 billion in 2021-22, and Germany is the ninth largest investor in India, with cumulative FDI inflows of USD 13.8 billion from April 2000 to September 2022.

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