How does the Supply Chain Due Diligence Act affect SMEs?

The Due Diligence in Supply Chains Act does not create obligations for SMEs. Obliged companies often turn towards their suppliers in order to fulfil their own obligations for example in the form of a "Code of Coduct". Obliged companies might ask their suppliers for information and ask for completing extensive questionnaires. To do this, you need a good understanding of your own supply chain.

Our Due Diligence Compass tool helps you understand your industry's risks and develop strategies to make your supply chain as robust as possible. Our second tool, the Standards Compass, gives you an overview of various sustainability certifications, seals and initiatives that support your due diligence processes.

We're glad you're here! Watch this video for an overview of the Due Diligence Compass. Get started and click on "Watch the video".

„Determining the direction“

Align your company strategically

 Core element 1 of the NAP / Supply Chain Due Diligence Act

In the National Action Plan on Business and Human Rights (NAP), the German government formulates its expectations for companies to respect corporate due diligence along the value chain. This is defined in five core elements (in German only):

  1. a human rights policy statement
  2. procedures for the identification of actual or potential adverse impact on human rights
  3. measures to ward off potentially adverse impacts and review of the effectiveness of these measures
  4. reporting
  5. a grievance mechanism
Starting point
Starting point: What are the requirements?
  • Start by studying environmental and human rights protection along your company's value chain
  • Compare the requirements with your own company principles
  • Check which approaches your company has already established
  • Convince the management level of the strategic relevance
  • Create the conditions to revise the strategy

Get an overview

reading time approx. 4 min

Start pragmatically and get an overview of the current state of your supply chain management. Information will usually already be available on this.

Basic understanding: What to pay attention to?

Jump to implementation

The following guiding questions should help your company get started with a due diligence process. Click on one of the operational functions to highlight the related questions:


  • Which raw materials, products or services have the highest purchasing volumes and/or are strategically especially relevant for your company?
  • In which countries are your direct and/or indirect suppliers located?
  • In which countries are your products sold, distributed and/or your services provided?
  • What are your company’s criteria for choosing suppliers and customers?
  • How have suppliers been obliged to comply with your company requirements so far (e.g. code of conduct, purchasing conditions, etc.)?
  • Have there been labour and human rights violations or environmental damage in your company, at a supplier, through the use of your products or the provision of your services? Which people or environmental factors were affected?
  • What measures do you take to prevent and reduce environmental and human rights risks and to remedy incidents that have already occurred?
  • Are internal processes already in place in order to address sustainability risks?
  • Do customers, investors or other actors have specific sustainability requirements for your company?
  • Do you already have complaint channels in your company or at association level that can be used by those affected by human rights violations?
Explanation: Responsible Business Conduct

As a company, you have a responsibility to respect human rights and protect the environment. From this responsibility results what is known as a "corporate due diligence" that must be complied with. This is because, as a company, you have an influence on people's lives through your company’s activities and relationships, which means that you bear the risk of your activities having a negative impact on human rights and the environment.
Policy Statement

The impacts can be direct or indirect, which is why your responsibility relates not only to the risks in your own company, but also to the risks that arise in relation to your actions along your entire value chain.

Since global trade has become increasingly interlinked and supply chains have become significantly more complex in recent decades, corporate due diligence processes must address this complexity in order to develop practical implementation plans. This starts with companies making the issue a priority and integrating it into their corporate principles.

The introductory guide “Respect human rights” by the DGCN (in German only), DIMR and twentyfifty shows possible points of contact between human rights and corporate practice.

Hint: The Helpdesk Business & Human Rights can advise you on how to get started on the subject.

Implementation: How to proceed?

Use existing knowledge
  • Check the existing knowledge in your company
  • Bring people together who can contribute to the topic.
  • Keep a meeting on the topic short and compact. Experience has shown that a short meeting is often sufficient for SMEs to get answers to their most important questions.
  • The knowledge gained from the meeting can be used to plan further meetings with your colleagues as part of each phase of the Due Diligence Compass.
Emphasize the importance of the topic
  • Prepare by explaining why it is important for your company to address the issue of corporate due diligence and to have a holistic view on the value chain.
  • Use the toolkit to convince colleagues
    Business & human rights - An introduction
  • Be prepared for scepticism in your own company or from suppliers.
  • Make sure that you communicate the benefits of corporate due diligence along the entire value chain for the company, such as increased product quality or delivery reliability.
Implementation support: Orientation provided by the CSR Risk Check

Use the introductory online tool “CSR Risk Check” to familiarize yourself with potential environmental and human rights risks along your value chain.

The “CSR Risk Check” from the Helpdesk Business & Human Rights (in cooperation with MVO and UPJ) is a good source for the initial identification of environmental and human rights risks. It is possible to filter by product, raw material and service and / or country and receive immediate information on risks and recommendations tailored to them.


Understand your value chain

reading time approx. 4 min

Gather information about your value chain - ideally from the direct suppliers to raw material extraction as well as to central downstream stages of product use and recycling.

Basic understanding: What to pay attention to?

Jump to implementation

Although value chains are complex and resemble heavily branched networks, a simplified analysis can help at the start.

Explanation: Differentiating between the supply and value chain

The value chain of your company is comprised of all activities that convert input into output through value creation. This applies to all companies with which there is a direct or indirect business relationship and which either (a) supply products or services that contribute to the company's own products or services or (b) receive products or services from their own company.

The value chains are separated into three stages: The upstream stages of the value chain, your own value creation and the downstream stages of the value chain.


Figure: Illustration of supply and value chain

Source: own representation.


The upstream stages of the value chain (supply chain) include all stages that are necessary for the manufacturing of the respective product, from the extraction of the raw materials, to their processing (sub-suppliers), and transport to the manufacture of intermediate products and components (direct suppliers). The starting point is your added value creation at locations in Germany and abroad. The downstream stages of the value chain include processes that follow the creation of a product or service. This includes further processing, use by the end user or recycling and disposal of a good or its components. It also includes the effects of investments.

Based on: Study | BMAS | 2020 | Respect for human rights along global value chains. | Risks and opportunities for sectors of the German economy | P. 222 | Click here.


For a manufacturing company…

... the upstream supply chain includes the extraction of (agricultural) raw materials, their transport and processing into preliminary and partial products as well as the work of direct suppliers.

For a service company…

... it is particularly important to consider the downstream supply chain from a sustainability perspective. For example:

  • Financial service providers need to consider investment decisions.
  • Travel agencies need to consider their travel offers (such as working conditions of hotel staff).
  • IT service providers need to consider potential misuse (such as through spyware).
Key questions for orientation:
  • Which stages does your company’s value chain comprise? Who are the (key) suppliers?
  • Which activities/processes take place in the supply or value chain?
  • Where/in which regions/countries do activities/processes take place?

It is normal if in the beginning information isn’t available for all guiding questions. Begin pragmatically and collect existing knowledge in the company. Don’t worry, these information gaps will close with time.


Implementation: How to proceed?

Gather internal knowledge
Ask direct suppliers
  • Ask your direct suppliers whether they can provide information about their supply chains (e.g. self-assessment, audits, certificates, etc.).
  • Use the opportunity to develop information on the implementation of environmental and social standards together with suppliers (see step 3.5 Supplier Review and Skill- Building).

Supplier Review

Structure and visualise the value chain
  • As a next step, structure the value chain along the guiding questions mentioned above.
  • Visualise your results – for example, in the form of a matrix that maps the central supply chain levels, suppliers, processes and production locations. The figure provides the basis for the following steps, especially in relation to the exchange with your own employees for risk analysis in phase 2.
  • If your value chain is complex or you have a large range of products, focus on specific areas of the value chain.
  • The selection can be sorted according to purchase costs or key product groups.
Implementation support: Visualisation of your supply chain

The starter kit in the "Sustainable Supply Chain" tool from the Bavarian State Office (in German only) for the Environment contains a template for visualising the supply chain. Please feel free to add to this if necessary. Use this as a starting point and add elements if necessary.

Online-Tool | Bavarian State Office for the Environment | Nachhaltigkeitsmanagement für KMU – Nachhaltige Lieferkette. Process steps and starter kit | Available here


Get support from management

reading time approx. 3 min

The strategic direction and the creation of the policy statement should be supported by management from the beginning, which would provide your company with the tools to approach due diligence processes with the necessary commitment.

Implementation: How to proceed?

Sensitise the management
  • Make management, the supervisory board and shareholders aware of the importance of environmental and human rights due diligence along the entire value chain for your company.
  • Shed light on the various topics that your management can relate to, such as increasing regulatory requirements, increased expectations from clients and consumers as well as the possibility of establishing more robust value chains in order to improve product quality and delivery reliability.
  • Secure the support and backing of the management for the implementation of the due diligence processes – from the strategic enshrining of the process to the complaint’s management. 
  • Try to ensure that support is not only expressed in revised corporate principles, but that it is specific and direct. This includes, in particular, the provision of adequate human and financial resources.

Business & human rights - An introduction

Implementation support: Familiarise yourself with relevant sustainability issues and risks
  • Identify the key sustainability issues in your industry before you talk to management. This will prevent the exchange from becoming too abstract and inaccessible to management.
  • Engage (at least briefly) with the risk analysis that follows in phase 2.
  • The CSR Risk Check is a good first source for identifying environmental and human rights risks.
  • The guideline "5 steps to managing the human rights impacts of your company" by the DGCN (in German only) helps to get an overview of your own activities and supply chains as well as possible human rights risks.
  • A look at sustainability reports from companies in your sector can also be helpful. The website "Ranking of Sustainability Reports" provides an overview of good sustainability reports.
Start the exchange in the company in order to establish corporate due diligence
  • To ensure that the respect for human rights and the protection of the environment along the entire value chain flow even more embedded in your corporate culture, the support of the company's management is important.
  • Even if the topic is only dealt with in more detail later in the process, you should discuss at an early stage how both supervision and coordination (vertical embedding) and operational implementation (horizontal embedding) can be designed (see step 3.2 Embedding the topic in the company).
  • Determine whether, for example, there should be a cross-departmental team that coordinates the topic.
  • Think about whether the responsibility (at the beginning) should be in the hands of a single person, or whether several people from different departments should drive the topic forward.
  • Decide which departments are relevant in order to translate the corporate principles into concrete measures. As an SME, you don't need to make this process too complicated. It is important, however, that the knowledge of the various departments can be gathered and used.
Global Compact Network Germany

The United Nations Global Compact is the world's largest initiative for responsible corporate governance. Based on ten universal principles and the Sustainable Development Goals (SDGs), it pursues the vision of an inclusive and sustainable global economy for the benefit of all people, communities and markets, today as well as in the future.

The Global Compact Network Germany (DGCN) brings together more than 800 German companies and organizations that have signed the UN Global Compact. In the network, they can find out more about corporate responsibility issues and work together on practical solutions.

The DGCN offers various methods of support in the areas of human rights, the environment, anti-corruption and the SDGs. Through regular webinars, workshops and trainings as well as numerous publications, the DGCN supports companies by providing practical information, opportunities for learning and discussing about the integration of sustainability aspects as well as the implementation of due diligence processes.


Review your corporate principles

reading time approx. 2 min

Companies usually don't start "from scratch" - use existing principles, e.g. health and safety procedures and adjust them if necessary. In practice, it already indirectly includes references to the protection of the environment and human rights. You can build on that!

Implementation: How to proceed?

Identify existing corporate principles
  • Get an overview of existing company principles.
  • Use general principles such as guiding principles, values or codes of conduct as a basis, along with topic-specific documents such as publicly available environmental principles from your environmental management team or corporate governance guidelines for combating corruption. 
Explanation: The importance of corporate principles

Corporate principles are an important guide for your business activities and your employees. They convey the basic values embedded in the corporate philosophy and specify what your company and your employees stand for, what goals you are pursuing together, and what principles you use as a guide in order to achieve them.

Your policy statement defines the “character” of your company and forms an important framework for your future actions, internally and externally. The policy statement serves to communicate your corporate principles.

Analyse the link to environmental and human rights risks
Hint: Integration into an existing document or a stand-alone document?

For smaller companies, it makes sense to integrate the corporate principles into an existing document.

On the other hand, an argument for a stand-alone document is its highlighted position and its ability to act as an effective sign – both internally and externally - that management is taking the issue seriously.

Regardless of whether an integrated or stand-alone document is used: Ensure coherence between documents in terms of content and level of ambition.

The Helpdesk Business & Human Rights can advise you on this process.


Formulate a policy statement

reading time approx. 5 min

The strategic examination of environmental and human rights due diligence processes is based on the formulation of corporate principles. Consider specific requirements that arise in particular from human rights due diligence.

Basic understanding: What to pay attention to?

Jump to implementation

A policy statement is first and foremost a public commitment to respect human rights. A company uses the declaration to express that it is fulfilling its responsibility to respect human rights.

Further information on the formal and contextual requirements (see below - implementation).
Policy Statement

Explanation: United Nations Guiding Principles on Business and Human Rights

The United Nations Guiding Principles on Business and Human Rights (UN Guiding Principles), unanimously adopted by the UN Human Rights Council in 2011, is the first international framework to formulate not only the obligations of states but also the human rights responsibilities of companies in global supply and value chains.

To implement the UN Guiding Principles in Germany, the German government has adopted the National Action Plan on Business and Human Rights (NAP).

Explanation: National Action Plan on Business and Human Rights

In the National Action Plan on Business and Human Rights (NAP), the German government formulates its expectations for companies to respect corporate due diligence along the value chain. This is defined in five core elements:

  1. a human rights policy statement
  2. procedures for the identification of actual or potential adverse impact on human rights
  3. measures to ward off potentially adverse impacts and review of the effectiveness of these measures
  4. reporting  
  5. a grievance mechanism

In addition to serving as a public commitment to respect human rights, the policy statement is also an important instrument for embedding human rights due diligence in the company. For the policy statement to be effective, it should define clear responsibilities for the implementation of human rights due diligence.

Explanation: Human rights reference tools

The National Action Plan for Business and Human Rights (NAP) formulates the expectation of companies to make specific reference to human rights reference instruments in their policy statements (page 9).

The following form the basis of the human rights reference instruments:

As an SME, you can also refer to other standards in addition to these “key frameworks”, some of which deal more concretely with the specific responsibilities of companies:

The Helpdesk Business & Human Rights can advise you on this process.


Implementation: How to proceed?

Set down the formal and contextual requirements
  • Go through the following check-list – but at the same time, see it as a process and develop the the policy statement further when, for example, in-depth results of the risk analysis are available:
    • Adoption of the publicly available policy statement by the company management
    • Reference to the international human rights reference tools (see info box)
    • Reference to industry or company-specific sustainability risks
    • Description of the process by which the company complies with its environmental and human rights due diligence
    • Description of measures, deadlines for implementation and responsibilities
    • Provide for continuous further development. For instance, the risk analysis should be expanded if your product/service portfolio changes (see step 2.1 Identify potential risks).
    • Formulate expectations for employees, suppliers, business partners and customers.
      Policy Statement
Involve internal actors
  • Internally, you should above all include those who will later be (jointly) responsible for the implementation of the company principles.
  • This can include managers, technical or functional personnel, and those who manage important business relationships or activities that may involve environmental and human rights risks.
  • The works council and employee representatives should also be involved.
  • Leverage engagement to improve the quality of corporate policies and gain greater approval. In this way, you contribute to the fact that the topic in the company becomes more important and that the entire value chain can be assessed.
Involve external stakeholders
  • At this point, it makes sense to involve external stakeholders such as trade unions, NGOs or local communities as much as possible, especially if they are addressed directly in the revised corporate principles or if this has direct consequences for them.
  • Instead of setting up your own dialogue, you can check whether the exchange is possible via an industry initiative.
  • As a next step, formulate your company’s policy statement, which should address environmental and human rights risks in the value chain.
Communicate your corporate principles internally and externally
  • Define target groups. 
    Target group-oriented communication
  • Most notably, the policy statement should reach those who are expected to implement the content. This affects the colleagues in your company, but also direct and indirect suppliers to your company as well as business partners and customers.
  • The principles should also be accessible to those groups of people who have a stake in the implementation of the principles. That can include potentially affected communities, investors, consumers and civil society actors.
  • Promote adherence to the principles.
  • Finally, select suitable communication channels. The appropriate channel may differ depending on the target group.
Hint: A question of timing

The human rights policy statement involves several content-related requirements that you will only work out explicitly in the next phases. This includes risk analysis (phase 2) and the development of measures (phase 3).

If you have not yet carried out a risk analysis, it may make sense to formulate and formalise the policy statement only after the first results are available. This makes the policy statement more company specific. It also promotes understanding by everyone involved.

Implementation support: Use templates and existing options

Check with your industry association or an industry initiative whether there are templates for human rights policy statements.

Depending on the industry/product, membership in an initiative can also make sense. For example, the Fair Trade Initiative or the Ethical Trading Initiative offer their members their own codes of conduct that members can follow. Generally, non-members can also access these documents and use them as a basis for developing their own corporate principles. For SMEs it makes sense not to work out everything independently, but to first check which documents and approaches already exist.

The DGCN's information portal includes further information, examples from companies and a webinar on the human rights policy statements.

The guide "How to develop a human rights policy" offers information on the creation of a human rights policy statement.

The information portal "Business and Human Rights Resource Centre" lists information from companies that have published a human rights policy statement.

Policy Statement

An overview of initiatives and labels can be found in the Standards Tool.

Continue with phase …

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