The German Supply Chains Due Diligence Act (LkSG), which entered into force on January 1, 2023, contains a number of very important legal regulations that may affect not only German companies, but also thousands of Turkish enterprises in commercial relations with these companies, and the performance of the Turkish economy.
As it is known, economic relations with Germany are of great importance for Turkey. Germany, the EU’s largest economy, is currently Turkey’s number one trading partner, and the trade volume between the two countries exceeds 41 billion euros. Germany is also one of the European countries that invest the most in Turkey. Germany’s most important companies are investors in Turkey, more than 7,800 German or German-owned Turkish companies operate in Turkey, they employ hundreds of thousands of people.
What does the new law in Germany envisage?
The law indexes the economic relations, investments, trade of German companies to the conditions and criteria for human rights and environmental protection. The German Supply Chains Due Diligence Act (LkSG) outlines the rules and standards that German companies must comply with in areas such as human rights and environmental protection in their supply chains.
For example; not employing child labor, complying with occupational health and safety rules, respecting trade union rights and not confiscating immovable property in violation of the law are some of them. Suppliers will also need to comply with the prohibition of non-discrimination on the grounds of ethnicity, gender, political opinion and sexual orientation. At the same time, German companies have to take care that their suppliers do not cause air pollution. Protection of the
environment in production processes, not causing air pollution, not polluting the soil and water resources and not transporting wastes in a way that harms the environment are also among the provisions in the law.
In the first phase, the law will cover businesses with administrative headquarters in Germany and more than 3,000 employees. From 2024, it will be available to businesses with a thousand or more employees in Germany.
German companies that fail to comply with the provisions of the law will be subject to administrative fines of up to 8 million euros. Businesses with an annual turnover exceeding 400 million euros will have to pay a fine of up to 2 percent of their total turnover. Depending on the severity of the violation, companies may also be exempted from public tenders.
Why will German law affect Turkey?
Under the new obligations introduced by the law, it is foreseen that German companies will be able to refrain from working with Turkish suppliers who cannot certify that they comply with human rights and environmental criteria. With the new law in Germany, German companies are now directly responsible for human rights and environmental protection violations in their supply chains.
This obliges German companies to check whether their suppliers meet these criteria and to work with suppliers who do. Third-country suppliers are therefore forced to position themselves as a business partner that meets these criteria. We believe that this legislation will also bring an incredible amount of compliance pressure for Turkish companies. Because German companies will not be able to work with a supplier that cannot certify that they comply with the criteria in this law, if they see problems in some countries, they may seek other alternatives.
Can be prosecuted in German courts
Under the new law, workers in supplier countries such as Turkey will be able to file lawsuits in German courts through non-governmental organizations and trade unions in Germany.