Everything you need to know about the European Supply Chain Law now

If you are a supplier of brochures and other printed materials, you have probably heard about the new Supply Chain Due Diligence Act. On 23 February 2022, the European Commission presented its proposal for a law on corporate sustainability obligations - the Corporate Sustainability Due Diligence Directive (CSDD). In December 2022, the EU had agreed on a law on the supply chain. The proposal aims to require companies to carefully manage social and environmental impacts throughout their

supply chain. The draft requires EU companies to review social and environmental impacts along their entire value chain, including direct and indirect suppliers. The aim of the push is to ensure compliance with applicable human rights standards and environmental protection in order to promote a fairer and more sustainable global economy and responsible corporate governance.

The law applies to large companies operating in the EU, with at least 500 employees and a turnover of at least 150 million euros. But as a printing company and supplier, you may be indirectly affected by this. So, companies will approach you and demand certain information.

Clients want to protect themselves

Since companies are responsible for ensuring that they and their suppliers do not violate human rights, biodiversity and the environment, they want to cover themselves. They will therefore approach you with the following or similar questions and ask for self-disclosure:

• Do you pay minimum wage?
• Do you pay the same salary to men and women?
• Is there any kind of forced labour in your company?
• What are the weekly working hours?
• What is the ratio of freelancers to permanent employees?
• Works council - yes or no?
• Are there dangerous machines in your company?
• Do you work with hazardous substances or substances that can affect the health of employees?
• Are forests cut down for production in your company?
• Does your production process generate environmental toxins?
• What do you do for an ecological energy supply?
• How high is the recycling rate of the products you process?
• Do you buy products from China?

Printers should set limits on self-disclosure

But beware: to be on the safe side, companies sometimes overshoot the mark and may ask for too many details. As a printing company, you should therefore know which information is relevant and which questions go too far. This is the only way to set limits. You should be careful with questions like "Can you guarantee that your products are produced without human rights violations?" or questions that touch on trade secrets. There will certainly be a lot of argument about what constitutes a trade secret.

Official certifications such as ISO 9001, which test according to a fixed scheme, or the ecovadis sustainability rating are helpful. Documentation of CO2 footprint or documented quality management are also useful.

Questions must be appropriate, proportionate and effective

If a questionnaire must be filled out, questions that are uncomfortable can be answered very briefly. However, you can also try to return your own questionnaires. In any case, keep in mind whether the questions are appropriate, proportionate and effective. In business relations with large Chinese corporations, for example, it would be presumptuous to expect that demands for local standards from small European printing companies would find immediate acceptance in Asia. The proportionality is not right here.

But don't worry: if you don't meet the expectations of the company placing the order, the business relationship is not usually terminated immediately. Rather, the proposed legislation aims at entering into dialogue and achieving step-by-step improvements together. Incidentally, this also applies to relations with China.

This is how the publishing house Cornelsen regulates supply chain care

Eva Bordemann, strategic buyer at the German publishing house Cornelsen Verlag, discussed in a webinar of the German Printing and Media Industries Federation (BVDM) how her company is addressing the issue of supply chain care. In 2019, Cornelsen developed a questionnaire on corporate social responsibility (CSR) and sustainability, which has been in use since 2020. "Our supplier companies have reacted neutrally to positively to the questionnaire," she says.

The publishing house sends out the self-disclosure questionnaire regularly; it is part of supplier management and a basic requirement for the qualification of new suppliers. So as a printer you have to expect such questionnaires especially for new business and new partnerships.

Risk management by cluster analysis

From the publisher's point of view, risk management is the most important duty arising for the publisher from the Supply Chain Duty of Care Act. It is true that the publisher has carried out risk analyses in the past. But until now it was more about economic risk assessment. This is now shifting to qualitative issues and the question of whether alternative producers and suppliers need to be sought. The publisher has clustered the risks according to

1. Countries: However, since Cornelsen works mainly with European partners which are subject to European legislation, Cornelsen probably does not have to claim much CSR.
2. Industries: Since Cornelsen has dolls manufactured, the textile industry is affected.
3. Product groups, for example, paper and wood (which the printing companies buy): Here, the mineral inks may lead to discussions sooner or later.

Cornelsen will use these cluster analyses to check which suppliers the company actually has to deal with. Contract adjustments and audits are on the cards here.

Supplier Code of Conduct and Commitment

Furthermore, framework agreements will be extended to include a corresponding clause. In addition, Cornelsen will probably create a

supplier code of conduct. Overall, Cornelsen is striving for a commitment with its partners - termination of the partnership is only the very last option.

The example shows: Even small companies cannot ignore the issues of sustainability and ESG. Even if printers are not yet legally obliged to become active, these topics will increasingly become part of acquisition talks. Those who position and prepare themselves clearly at an early stage will have a competitive advantage over their competitors. However, this requires not only resources but also extensive know-how. Therefore, it makes sense, especially for SMEs, to rely on holistic solutions that digitally map these processes and support them in meeting all requirements. Be prepared!