mh2-experts warns against underestimating the EU Supply Chain Act

Even though the EU Supply Chain Act is now set to be introduced in a somewhat diluted form, small and medium-sized enterprises should still be on their guard, warns Mathias Hess from mh2-experts. On the one hand, the topic remains firmly on the European agenda, and on the other hand, concerns about excessive new bureaucracy and liability risks have often not led to the abandonment of regulatory requirements in the past.

(Burghausen) “It will also affect smaller companies in the supply chain,” says Mathias Hess, CEO of mh2-experts and expert in IT management as well as the implementation of the Supply Chain Due Diligence Act in small and medium-sized enterprises. Depending on the majorities in the new EU Parliament, even tightening measures could be on the horizon. Either way, the goals associated with the EU Supply Chain Act will remain in political discourse and ultimately be translated into further rules and regulations. The already valid German Supply Chain Due Diligence Act (LkSG) already demands a lot from companies.

“Even if the major burden seems to have initially passed over the companies, they should not switch to relaxation mode,” warns Hess. Rather, simple technical solutions must be sought to systematically organize their supply chains, comply with social and environmental standards, and master the complex documentation requirements.

Effectively, cost-effectively, and simply meet requirements

“The task of companies will now be to meet the requirements as effectively, cost-effectively, and simply as possible, while also ensuring legal security and taking full responsibility. The ideal combination of IT expertise, procurement, project management, and strategic-systemic implementation competence is necessary. Maximum cost efficiency and simplicity in the application of software are just as much in focus as meeting legal and the highest safety standards,” says Mathias Hess.

There must be a maximally effective implementation of the individual requirements – from risk assessment to the establishment of an accessible and multilingual complaints office to complete documentation and annual reporting, including permanent monitoring. “The goal of companies must be to implement a solution that is as simple, cost-effective, and safe as possible, and to automate the processes arising from the LkSG and European regulations as much as possible. Many companies will have to outsource this task. The requirements are too complex, and the departments for IT, law, compliance, or sustainability are too small in most companies, if they exist at all,” says Hess.

Appoint human rights officers

In addition to all the officers and responsible persons that a company already needs today, appointing a human rights officer who can shoulder the responsibility for complex supply chains will also not be an easy task. The solution lies in software and external partners who see themselves as LkSG service centers. The requirements of the LkSG and subsequent regulations can only be successfully implemented in a software-based, automated, and standardized manner. “Only in this way can SMEs manage this at all, and only in this way can the required transparency be ensured and corporate responsibility actually be taken,” Hess is convinced.

“The topic of supply chains is ultimately an IT issue. It is about data and information, their evaluation and documentation, as well as risk assessment,” says Hess. The topic must be solved technically.

Software and service should merge

“Software and service should and will merge. Good tools already include risk management (conducting risk analysis, initiating, tracking, and completing preventive and corrective measures), complaint management (recording, processing, tracking, and closing complaints), as well as reporting (creating BAFA reports and reports for management). Some companies that primarily focus on technical solutions and software will also take on the role of the human rights officer and document their activities in the software,” Hess knows from his practice at mh2-experts.

Photo: © mh2-experts