At a glance
Why is this an important area for German companies?
Sustainable supply chains not only ensure compliance with legal requirements, they also strengthen long-term competitiveness. By diversifying their supplier base, companies also become less reliant on individual markets or regions – and remain afloat even in times of crisis.
What growth opportunities are available?
Companies that adhere to international standards gain access to new markets and save costs through efficient processes, the conservation of resources and waste prevention.
How can businesses get involved?
Review supply chains and monitor their carbon footprint and working conditions, while optimising processes – the key to sustainability success.
Geopolitical upheaval and crises also impact the supply chains of German companies, making diversification a smart option, particularly for those with global operations. Partnerships with the Global South, in particular, offer an opportunity to become less reliant on individual markets.
In this context, laws such as the German Supply Chain Act or the EU Corporate Social Responsibility Directive (CSRD) drive home the responsibility that companies bear – both within their own operations (CSRD, EU Taxonomy Regulation) and throughout the entire supply chain (Supply Chain Act, Corporate Sustainability Due Diligence Directive – CS3D).
If partnerships are to be successful in the long term, they need to be based on an equal footing. This means ensuring fair working conditions, reducing CO₂ emissions and waste, and introducing environmentally friendly processes.
At the same time, companies are obliged to document and disclose their measures transparently. This does, of course, increase the administrative burden. But above all, it opens up opportunities for companies that act now, enabling them to position themselves as innovative pioneers and cut long-term costs.
Unlocking the potential of sustainable supply chains
Europe plays a key role in this regard. As the world’s second-largest exporter and third-largest importer, the EU has a significant influence on the economic, environmental and social performance of other countries. Around 80% of world trade revolves around global supply and value chains, providing a livelihood for more than 450 million people, particularly in developing countries and emerging economies.
There is a downside however, with poor working conditions, low wages and unsafe work practices in many regions. Around 80 million children work in exploitative jobs worldwide. Garment workers receive an average of just 0.6% of a t-shirt’s retail price. Delivery trucks, chemicals and waste have a devastating impact on the environment. Of particular concern is the fact that, according to CDP Worldwide, supply chain emissions are 11.4 times higher on average than direct company emissions.
Cut costs, manage risks – and diversify
A sustainable enterprise benefits at many levels – the prudent use of resources not only reduces consumption and cuts costs, it also boosts efficiency across operations. Streamlined processes save time, reduce the administrative burden and make businesses more agile. Less waste also leads to lower disposal costs and reduces the environmental impact – a benefit that is reflected both in the balance sheet and in the company’s image.
Diversified supply chains are equally as important. Companies that spread their suppliers across several sources, regions or production sites reduce their dependence in times of geopolitical tension, natural disasters or supply bottlenecks. Global bottlenecks during the pandemic clearly demonstrated just how risky relying on one supplier can be. Companies with a broad source of supply remain able to deliver – and secure a competitive edge.
Sustainable supply chains also strengthen resilience, meaning dependencies are reduced and the transparency and stability of partnerships are increased. Strong relationships with suppliers build trust, improve collaboration and help organisations to confidently navigate crises such as supply disruptions and new regulatory requirements. Sustainability then becomes a form of strategic insurance. Fairness is also crucial. Customers, investors and employees now pay more attention than ever to sustainability and responsible supply chains.
Durable partnerships can only prevail and prosper if they are win-win. Companies should view local stakeholders not just as suppliers, but ideally as equal partners in a sustainable business relationship. Fair conditions, transparent communication and shared value creation foster trust, stability and social justice. They help ensure that global supply chains are sustainable not just financially, but ethically too.
Companies that step up to the sustainability mantle not only enhance their image – they also attract new customers and talent.
Establishing resilient and sustainable supply chains – step by step
- Create transparency: Map out all the stages and partners in the supply chain.
- Assess risks: Analyse environmental and social impacts.
- Set standards: Clearly define your sustainability targets and lock them into contracts.
- Strengthen supplier relationships: Foster collaboration with your suppliers, assess their sustainability performance and build their capacities where necessary.
- Be flexible: Diversify your supplier base and prepare for unplanned events or crises.
Advice on due diligence obligations for German companies
AWE’s Helpdesk on Business and Human Rights offers free initial advice and guidance on corporate due diligence. As well as free, personalised and confidential advice, the service includes events, tailored training and online tools, including:
CSR Risk Check
SME Compass: Due Diligence Compass
SME Compass: Standards Compass
Business & Human Rights Navigator
eLearning
Greater investment in partner countries that comply with due diligence requirements
Are you keen to get started and make your supply chains more sustainable? AWE is your first point of contact. It will advise you on potential next steps, put you in touch with relevant contacts and give you an overview of the funding options best suited to you.
The following support programmes are available:
develoPPP
Provides funding of up to EUR 2 million to companies seeking to improve environmental and social standards within their supply chains.
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ImpactConnect
Supports companies by providing attractive loans for investments in the Global South. They receive preferential interest rates if they implement measures to ensure fair and environmentally responsible supply chains that go beyond established standards.
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Resource and Energy Efficiency Advisory Service
Also run by DEG, this helps companies to use resources and energy more efficiently and to reduce costs. An adviser will recommend potential measures on site.
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German Sustainability Code (DNK)
Are you looking to develop a sustainability strategy and introduce sustainability reporting? The DNK allows you to create your own reports and view reports that have been produced in accordance with the DNK standard.
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