Organization, Implementation and Evaluation of Complaints Procedures under the Supply Chain Due Diligence Act – BAFA’s New Guidance

Recently, the Federal Office for Economic Affairs and Export Control (“BAFA”) published another Guidance entitled “Complaint Procedure under the Supply Chain Due Diligence Act” .

In its capacity as the supervisory authority, BAFA assumes the task of overseeing and enforcing the stipulations set forth in the Supply Chain Due Diligence Act. Additionally, BAFA bears the responsibility of disseminating cross-sector or sector-specific information, providing aid, and furnishing recommendations to ensure adherence to the Act, commonly referred to as “Guidances.”

The Guidance on the complaints procedure is BAFA’s second Guidance on the Supply Chain Due Diligence Act, published a few weeks after BAFA’s first Guidance on risk analysis.

With this Guidance on the complaints procedure, BAFA aims to provide obligated companies with support in the effective implementation of their due diligence obligation as mandated by the Supply Chain Due Diligence Act. The document elucidates the function of the complaints procedure in accordance with the Supply Chain Due Diligence Act, while also outlining the obligations imposed by the Act pertaining to the establishment, execution, and assessment of said complaints procedure. The companies are provided with specific and actionable guidance regarding the implementation of the pertinent obligations.

Complaint procedure and the duty of care

The inclusion of “adequate grievance procedures” is an essential component within the framework of legal obligations pertaining to supply chain due diligence. Pursuant to the provisions set forth in the Supply Chain Due Diligence Act, it is incumbent upon each obligated entity to establish and maintain a formalized mechanism for the receipt and processing of complaints. Said mechanism is to be designed such as to enable both internal and external individuals to duly apprise the company of any perceived or actual instances of human rights or environmental risks or infractions, whether within the confines of their own business operations or within the broader supply chain network. It is possible to implement either internal company procedures, external procedures of equal standing, or a hybrid approach that combines elements of both.

The due diligence processes, as mandated by applicable statutory provisions, inclusive of the complaints procedure, ought to be intricately interconnected and mutually fortifying. The individuals who have been identified in the risk analysis as potentially impacted by breaches of duty are intended to constitute the primary target group with the ability to submit relevant information and grievances. It is further imperative that the risk analysis duly considers the insights acquired from the management of grievances and the execution of precautionary or corrective actions, as these may offer valuable guidance for the modification and enhancement thereof. The complaints procedure affords obligated companies the occasion to obtain feedback regarding the efficacy of their risk management and individual due diligence procedures, thereby constituting a pivotal element in the ongoing advancement of their risk management and due diligence protocols.

Requirements for the complaint procedure

The primary objectives of the complaints procedure encompass two fundamental aspects. Initially, the complaints procedure serves as a proactive mechanism designed to function as an early warning system. Its purpose is to facilitate the identification and subsequent resolution of issues prior to the occurrence of any violations or harm. Furthermore, it is imperative to note that the complaints procedure has been specifically designed to facilitate the attainment of suitable redress, with the ultimate objective of terminating or mitigating grievances, while concurrently implementing proactive measures to avert future transgressions.

The primary recipients of the complaints procedure are specifically those individuals who, as per the company’s internal risk assessment, may potentially be impacted by infringements on human rights or environmental matters within their respective business domain and the supply chain of the obligated company.

In light of the aforementioned circumstances, it is imperative to proactively identify potential access barriers or impediments that may impede the accessibility of the complaints procedure for the aforementioned target groups. These barriers should be duly considered and factored in during the formulation and design of the complaints procedure. The complaints procedure ought to be well-known to all target groups for whom it is intended and must furnish ample assistance to target groups facing specific obstacles to accessibility. The adequacy of access channels and remedies for the target groups involved in the complaints procedure must be commensurate with the nature and extent of the business operations conducted by the obligated company and the associated risks therewith. 

Accordingly, it is imperative to acknowledge that in the event that a company’s risk analysis has duly identified a greater number of human rights and environmental risks, the company is thereby obligated to exert a commensurate level of diligence in relation to the establishment and facilitation of complaints procedures, ensuring that said procedures are readily accessible to the intended recipients. The specific implementation invariably falls within the purview of action and discretion of each respective company.

Note: In order to be able to adequately address the requirements of the most significant target demographics, it is imperative that BAFA emphasizes the necessity of engaging the target demographics or their respective stakeholders during the formulation of the procedure.

In relation to the formulation of the complaints procedure during its inception and ongoing activities, BAFA offers a range of guidelines that corporations are obligated to adhere to for both internal and external complaints procedures. Legal guidance is extended with respect to the rules of procedure that are accessible to the public and their substantive provisions, communication and design matters, the appropriateness, and qualifications of internal points of contact, as well as the progression of the complaints procedure and the handling of individuals furnishing information. Furthermore, the optional procedure pertaining to the amicable resolution of disputes and its distinctive characteristics are expressly delineated.

Practice note and implementation of the complaints procedure

As BAFA is the competent supervisory authority under the Supply Chain Due Diligence Act, the guidelines contained in the aforementioned Guidance, as well as the referenced effectiveness criteria of the UN Guiding Principles, should be carefully evaluated by obligated companies and taken into account when establishing, implementing, and reviewing their complaints procedures.

Establishment of the appropriate complaints procedure

Pursuant to the provisions set forth in the Supply Chain Due Diligence Act, it is incumbent upon obligated companies to establish and maintain a suitable mechanism for addressing complaints, commensurate with the legal obligations imposed by the aforementioned Act, upon its entry into force. In the event that the establishment of said procedure is to be undertaken, it is worth noting that BAFA’s Guidance offers valuable insights, particularly in relation to target demographics, human rights, environmental hazards and transgressions, accessibility, and execution. 

Companies that are currently using whistleblowing or complaint procedures are advised to assess whether the mandated suitable complaints procedure, as stipulated by the Supply Chain Due Diligence Act and the interpretative notes in the Guidance, can be integrated into their existing protocols. Furthermore, it is recommended that they identify any areas that may require enhancements or modifications. In certain circumstances, it may also be imperative to establish an ancillary grievance protocol.

Review of the effectiveness of the complaints procedure

In the event that companies have duly established suitable protocols for addressing complaints in accordance with the provisions outlined in the Supply Chain Due Diligence Act, it is incumbent upon them to undertake periodic assessments of the efficacy of said procedures, both on an annual basis and as necessitated by specific circumstances. In this regard, the determinative element pertains to whether the aforementioned procedure affords pertinent target groups the occasion and fosters their inclination to proffer reports prior to the commission of any breach of duty, and whether the redress mechanism can be employed to avert harm to individuals submitting said reports and to effectuate suitable corrective measures in the event that breaches of duty have already transpired.

Furthermore, it is important to note that we diligently adhere to all specific provisions outlined in the Supply Chain Due Diligence Act, as elucidated in the comprehensive Guidance provided by BAFA. Additionally, we ensure strict compliance with the forthcoming Whistleblower Protection Act, along with other pertinent legal obligations, to establish robust whistleblowing systems for our clientele. This is accomplished through the utilization of our proprietary whistleblowing and complaint system, WhistleFox, which has been recognized for its excellence in the field of LegalTech. Our approach is both legally sound and practical in nature.