No Impact of Supply Chain Due Diligence Act (SCDDA) on India: GTRI

With effect from January 1st, 2023, Germany enacted the law to combat forced labor in supply chains and other violations of labor law as an initiative to protect human rights. It’s called the Supply Chain Due Diligence Act (SCDDA). The law applies both to companies that operate in Germany and to companies abroad that do business with Germany. Smaller companies will be covered by the law from January 2024.

However, according to think tank Georgia Tech Research Institute (GTRI), the law will not have a significant impact on India. GTRI said that India already has appropriate legislation in place to deal with any type of labor law violation, including child labor and discrimination in the workplace. The report also confirmed the minimum wage requirements in place in the country.

On the positive side, Germany has shifted the responsibility for identifying risks and taking action from government to business. Covering violations of labor laws, child labor, forced labor and occupational health and safety, the SCDDA promotes due diligence in supply chains.

Since traceability is an important concept, the SCDDA includes the identification and taking of corrective actions by German companies for their operations and those of their partners, in addition to the proactive approach to upholding labor laws and basic human rights.

“This means that companies need to collect information about their suppliers, their operations and the risks they face,” said Ajay Srivastava (co-founder of GTRI), adding that the SCDDA protects companies that do not comply with the law , a civil liability imposed .

It should be noted that all member states of the EU (European Union) have regulations on forced labor that are constantly being updated and tightened. For example, France and the Netherlands have the most comprehensive regulations on forced labor. In addition, in September 2022, the EU published a new regulatory proposal to ban forced labor products. Once adopted, the proposal will ban trade in forced labor products on the EU market, regardless of where the products were made.

“The law could increase costs for companies as they have to implement new due diligence processes and extensive compliance measures. However, the law could also have a positive impact on workers, as it could help prevent their exploitation,” the report said. It also said the SCDDA is complex legislation that may face critical challenges in implementation.

The report also highlighted the implications of strict implementation of SCDDA. It states that Congo is Germany’s preferred destination for mining cobalt, a key component of electric vehicle batteries produced in the country. Given that human rights issues play a strong role in Congo, the SCDDA could exclude Germany in a difficult situation. They would also have to stop importing manufactured goods from China due to concerns about the treatment of Uyghurs.

Germany is India’s largest trading partner in Europe and has always been one of India’s most important global partners. Bilateral trade between the two countries totaled US$24.8 billion in 2021-22 and Germany is the ninth largest investor in India with cumulative FDI inflows of US$13.8 billion from April 2000 to September 2022.

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