The last Supplier Community Event was all about the importance and impact of current ESG regulations on suppliers. The term ESG is short for Environmental, Social and Governance. The participants got an overview of existing and upcoming ESG laws and guidelines. Our special focus lay on the German Supply Chain Act (LkSG).
Therefore, we invited Dr. Martin Rothermel as a qualified speaker to convey this interesting but also very complex topic to our Supplier Community.
Dr. Martin Rothermel is a lawyer at Taylor Wessing and a well-known expert on ESG regulations and the German Supply Chain Act in particular. The event was held once in German and twice in English in the morning and afternoon so that as many community members as possible from different time zones were able to attend.
First Dr. Martin Rothermel gave a compact and informative overview of the most important ESG regulations.
The European Sustainability Reporting Directive (CSRD) came into force in 2023. It requires companies that are already required to report under the NFRD to report on certain sustainability topics in accordance with the European Sustainability Reporting Standards (ESRS). By 2025, the CSRD’s scope will be extended to companies that align at least two of the following criteria:
- more than 250 employees
- a balance sheet total over €25 million
- and/or a net sales exceeding €50 million
The Carbon Border Adjustment Mechanism (CBAM) is an EU climate protection measure to prevent carbon leakage. CBAM ensures that the same carbon price is paid for imports as within the EU under the Emissions Trading System (ETS). Importing companies must screen their supply chains for CBAM goods and collect emission data from their suppliers. In the current transition phase, there is only a reporting obligation. From 2026, companies will have to purchase CBAM certificates when importing CBAM goods and pay a price for production-related carbon emissions.
The German Supply Chain Act (LkSG) came into force on January 1st, 2023. From 2024, it applies to German companies with at least 1,000 employees. The LkSG obliges organizations to comply with human rights and environmental due diligence obligations in their own business operations and in the supply chain. This includes establishing a risk management system and conducting regular and ad hoc risk analyses.
The EU is also working on its own directive for due diligence obligations in supply and value chains in the form of the Corporate Sustainability Due Diligence Directive (CSDDD). Some of the obligations and the impact on companies go beyond German law. The directive was just recently adopted by the EU Council and the EU Parliament Legal Affairs Committee. It will be voted on in a final vote in the plenary of the European Parliament in April 2024.
ESG is the number two topic in procurement after cost efficiency (Deloitte 2023, CPO survey)
With our ESG suite, large, small and medium-sized companies can comply with ESG regulations and drive their own sustainability transformation. SupplyOn as a central hub in the supply chain enables holistic and sustainable supply chain management by integrating ESG criteria on its platform.
In summary, it can be concluded that ever more regulations at national and international level are obliging companies to adopt sustainable practices and transparent reporting. The demands are high and the development of ESG regulations is dynamic and complex. Companies are facing major challenges.
ESG is not a separate issue, but an integral part of business practices, especially in purchasing
Therefore, SupplyOn has made ESG a new strategic business area. As an interface between suppliers and customers, SupplyOn aims to integrate ESG to create a holistic and sustainable supply chain management system that benefits all participants.
Sunny Chowdhury, Vice President of the new ESG department at SupplyOn and I, as a sustainability expert, presented SupplyOn’s sustainability solutions that support suppliers and customers in meeting their individual ESG requirements.
As part of the new SupplyOn ESG Suite, companies can use various software solutions to implement requirements from the LkSG, CBAM or the CSRD. The solutions enable the legally compliant implementation of ESG requirements by automating process steps to the maximum, seamless collaboration and data exchange between suppliers and customers and integrated action management. Existing and new customers benefit equally from SupplyOn’s experience in supply chain management and its existing corporate network. Further information on the offerings can also be found on the new SupplyOn ESG website.
Companies should not perceive sustainability as a threat, but as an opportunity and possibility to generate added value
In summary, the event was a complete success, confirming not only the importance of the topic, but also the willingness and interest of the suppliers to contribute towards a sustainable transformation. The collaboration with Taylor Wessing also demonstrates SupplyOn’s new positioning in the area of sustainability not only as a solution provider, but also a knowledge mediator for the creation of holistic and sustainable supply chain management.
