February 25, 2019

CSR in supply chains and the D&O risks: Germany increases the pressure

The recent first instance decision by the Dortund court in the action against German retailer KiK for compensation in relation to a factory fire in Pakistan, which was brought by a survivor and families of victims, made the news. While the action was dismissed, the matter highlights the trend towards increased CSR obligations for companies in the supply chain.

The German Federal Government now says that it intends to increase the pressure on companies to find solutions to the issue in the course of the next year. It is also considering taking legislative action. Apparently, first drafts are being circulated of legislation which could significantly tighten companies' responsibilities in relation to the due diligence of their suppliers. 

Tightening laws and obligations in this area will be an important trend to watch, not only domestically but internationally, as new liability risks will emerge for companies, their directors and insurers alike.