Supply chain due diligence legislation in Germany: Monitoring compliance and handling violations
The Federal Office for Economic Affairs and Export Control (BAFA) is the authority responsible for monitoring the implementation of the SCDDA as well as handling violations.
In principle, BAFA’s monitoring and sanctioning activities apply only to enterprises within the scope of the law and do not directly concern suppliers participating in the enterprise’s supply chain. However, in practice, if an enterprise is sanctioned, related suppliers may still be affected indirectly (particularly regarding the likelihood of receiving additional supply contracts from the enterprise).
1. Monitoring compliance
BAFA has the following main enforcement powers under the SCDDA:
• Regarding reports on enterprise due diligence obligations*
- Check whether reports are submitted on time and contain all the required contents;
- If reports are incomplete, BAFA may request the enterprise to revise the report within a reasonable timeframe.
* The reporting obligation was abolished following the September 2025 amendment.
• Regarding human rights/environmental risks or violations
BAFA may act independently in the following activities:
- Monitor compliance of enterprises with due diligence obligations related to human rights/environmental risks or violations;
- Investigate, detect, terminate, and prevent violations of due diligence obligations.
BAFA acts when a complaint is received concerning:
- Statutory rights of the complainant being violated due to the enterprise not fulfilling its due diligence obligations under the SCDDA (excluding reporting obligations); or
- Serious violations of statutory rights caused by the enterprise failing to fulfill due diligence obligations under the SCDDA (excluding reporting obligations).
During the exercise of the above powers, BAFA has the authority to take the necessary measures to detect, terminate, and prevent violations (For example: summoning organizations or individuals; requiring the company to submit a revised action plan; conducting on-site inspections at the company; accessing the company’s documents and records; requesting information or evidence from related companies, organizations, or individuals…).
Annually, BAFA will publish a Report on its supervisory activities for the year.
2. Handling violations
Based on its inspection and supervisory activities, if BAFA identifies violations of the obligations under the SCDDA, it has the authority to apply the forms and levels of penalties prescribed by the SCDDA.
Specifically, in cases where a company subject to the law violates due diligence obligations, BAFA may consider applying the following measures:
- Fines (depending on the violation, fines may reach up to EUR 50,000, EUR 800,000, or 2% of the company’s average annual turnover)
- Exclusion from public procurement (the company may be banned from participating in public tenders in Germany for up to 3 years).
The penalties under the SCDDA are considered very strict and can cause significant harm to the company.
Note: According to the September 2025 amendment, the penalties will only apply to certain violations of obligations under the SCDDA (mainly serious breaches of duties).
Source: Compiled by the TTWTO-VCCI Research Group