I. Introduction
The “German Supply Chain Act (GSCA)” is a critical issue that Şengün & Partners Attorney Partnership has been actively addressing for some time, monitoring and advising on organizational processes, conducting training sessions, and providing detailed reports to ensure its clients are well-prepared. In anticipation of serious consequences for all countries following the enforcement of the Act in 2023, the United Nations (“UN“) finally stepped up its efforts to prohibit products made with forced labor, which has been on its agenda for a long time. Indeed, Regulation (EU) 2024/3015 on prohibiting products made with forced labor on the Union market (“Regulation“) was published on December 12, 2024, in the context of the UN Sustainable Development Goals Target 8.7.
This article will first provide detailed information and risk analyses on the GSCA for companies, followed by risk analyses on the Regulation based on the same procedures and principles.
We should first note that, contrary to common belief, the GSCA will not only affect companies based in Germany, but also all other companies operating in the German supply chain, importing from and exporting to Germany. Therefore, the anticipated risks also apply to these other companies.
However, we observe that although the GSCA affects many private companies in Türkiye, there is no sufficient information about the Act’s legal aspects and consequences, and that those companies have not made the necessary preparations and organizations and have not created a road map. Therefore, our law firm considers it a duty arising from its legal mission to write this article and share it with the relevant parties.
It should be noted that Türkiye and Germany have an active trade relationship with a large trade volume compared to many other countries. Germany is one of Türkiye’s top five trading partners in imports and exports. In early 2024, Türkiye’s exports to Germany amounted to $238 billion 486 million and imports to $311 billion 703 million.
In this period, the foreign trade volume was $550 billion 189 million. These figures show that Germany and Türkiye have and will continue to have close economic ties in a variety of sectors. We should underline that, given the significance of trade relationships, the GSCA will have a major impact on Türkiye and Turkish private sector companies.
II. Overview of the German Supply Chain Act
What is the German Supply Chain Act?
The “German Supply Chain Act” is referred to under various titles, including the “Act on Corporate Due Diligence Obligations in Supply Chains“, the “German Supply Chain Due Diligence Act“, the “Act on Corporate Due Diligence Obligations for the Prevention of Human Rights Violations in Supply Chains“, and the “Supply Chain Due Diligence Act“. As can be understood from these titles, the Act rather focuses on “due diligence”. Indeed, the Act was drafted to require due diligence to protect the rights of every worker in German supply chains, ensure compliance with human rights and environmental standards and adopt sustainable policies. The Act is based on the “Guiding Principles on Business and Human Rights” adopted by the UN Commission on Human Rights in 2011.
In fact, Türkiye is a party to the international conventions referenced in the Guiding Principles and to all core conventions of the International Labour Organization (ILO) specified in the Declaration on Fundamental Principles and Rights at Work. However, prior to the German Supply Chain Act, the relevant regulations were not binding for Turkish companies to conduct human rights due diligence. Indeed, none of the country’s regulations obligated companies to conduct regular human rights due diligence. Therefore, we can say that the German Supply Chain Act is a first in terms of these and similar obligations.
Which Companies Does the Act Concern?
The Act concerns enterprises, regardless of their legal form, that have their central administration, their principal place of business, their administrative headquarters or their statutory seat in Germany and that normally have at least 1,000 employees in Germany, including employees posted abroad. (The Act initially concerned enterprises with more than 3,000 employees, but it was revised to expand the liability limit and will concern those with more than 1,000 employees as of January 1, 2024.) In addition, public private legal entities engaged in economic activities will also be subject to the Act.
As a rule, German companies must inspect all their supply chain processes in terms of human rights. Supervisory obligations to conduct risk analyses and establish other preventive and remedial risk management systems, including disclosure requirements, apply exclusively to companies’ own business processes and direct suppliers. In the case of intermediate suppliers, companies are only obliged to fulfill these obligations if they have substantiated information about a potential threat of human rights violations.
Although the Act appears to be binding only and directly on German companies, the practice is different. German companies are held responsible for ensuring that their suppliers also trade in compliance with the Act. As a result, they have started to exert commercial and legal pressure on their suppliers to comply with the Act. These pressures sometimes influence the contracts setting out the terms of business and have a direct negative impact on the commercial relationship. It is clear that this commercial pressure will continue to increase in the future.
Although the German Supply Chain Act has not yet been fully incorporated into the Turkish legal framework, all Turkish companies that are somehow involved in the German supply chain will be required to produce and operate in accordance with the human rights and environmental standards set out in this Act to maintain their activities.
For instance, if a Turkish company buys raw materials from Germany and there are problems in the supply chain, such as human rights violations, the Turkish company could be held liable from the situation and need to comply with the requirements of the German Supply Chain Act.
Given the volume of trade between Germany and Türkiye and the active role of Turkish companies in German procurement, it is understood that many companies will be bound by the relevant obligations.
What are the Obligations of Companies?
The Act defines the supply chain to cover all steps from the extraction of raw materials to the delivery to the end customer for all products and services of an enterprise, whether they are carried out in Germany or abroad. This process includes a) the actions of an enterprise in its own business area, b) the actions of direct suppliers, and c) the actions of indirect suppliers.
According to the principles, companies should have a set of procedures and processes in place to fulfill their duty to respect human rights.
As part of these processes, among others,
A. The enterprise should issue a policy statement to fulfill its duty to respect human rights, and its senior management should demonstrate their adoption of the human rights compliance process by sharing this policy statement with both internal and external stakeholders,
B. The enterprise should integrate its operations and supply chain into the human rights due diligence process, which is a risk management mechanism designed to enable the enterprise to identify, prevent, mitigate and account for adverse human rights impacts and human rights risks,
C. The enterprise should compensate for human rights violations caused or contributed to by its own operations.
The Act requires enterprises to carry out human rights due diligence not only on their own activities, but also on the activities of other businesses, such as suppliers with whom they have business relationships.
In this context, the main elements of human rights due diligence expected from companies are as follows:
1) Establishing a risk management system,
2) Appointing a human rights officer who will be responsible for the implementation and supervision of the risk management system within the enterprise,
3) Performing regular risk analyses,
4) Requiring senior management to issue a policy statement on human rights strategy,
5) Laying down preventive measures in their areas of business and for their direct suppliers,
6) Taking remedial actions to compensate for adverse human rights and environmental impacts,
7) Establishing a complaints procedure,
8) Fulfilling these human rights due diligence obligations for their indirect suppliers if they receive substantiated information on human rights violations,
9) Public reporting at regular intervals.
Can Companies Be Sanctioned?
It is only natural for an Act that has attracted a great deal of attention and sets out basic ethical and moral standards, such as human rights and environmental compliance, to impose serious sanctions when its fundamental principles are not respected in order to deter companies from the violations it seeks to prevent. Companies are therefore facing sanctions that can be quite damaging for them.
Enterprises may be fined up to the amounts set out in the Act or up to two percent of their annual turnover for willful or negligent failure to fulfill their obligations to conduct risk analyses, establish a complaints procedure, take preventive measures and effectively remedy the identified human rights violations. (Amounts may vary between 100,000-800,000 euros. They are calculated at 2% of the annual turnover of companies with an annual turnover of more than 4,000,000.00 euros.) In addition, the violating companies may be excluded from the award of public contracts for up to three years if they are fined more than a certain minimum amount.
Apart from these sanctions, if a firm subject to the Act violates the rules in the supply chain of its controlling company, it may be given a certain period to take and implement the necessary measures. When these requests prove insufficient, the authorities may also propose the replacement of such suppliers.
Can the Process Start with a Complaint?
The Act does not provide a basis for civil liability to compensate victims of violations. However, victims of rights violations may claim compensation for their damage as per the general provisions of tort, independently of the Act. Although the Act does not provide a basis for civil liability, it imposes significant fines on companies that fail to fulfill their due diligence obligations.
In addition, the competent authority BAFA will be able to take action if it receives a complaint based on substantiated information that a violation of a protected legal position has occurred or is imminent as a result of an enterprise’s failure to fulfill its human rights due diligence obligations. As such, affected right holders will be able to submit an application to BAFA.
How to Manage Processes in Compliance with the Act?
As mentioned above, Turkish companies will have to comply with the Act when supplying goods or services to German customers. Consequently, they will be required to provide working conditions that respect human rights, prevent child labor and adopt sustainable production processes.
Failure to comply with the Act can result in serious sanctions and business losses. In addition to financial sanctions, non-compliance may also damage companies’ reputations. Loss of reputation negatively affects long-term business relationships and leads to a loss of credibility on an international scale.
Therefore, policies need to be reviewed diligently by receiving professional assistance for compliance with the Act. Enterprises should raise awareness of the companies and suppliers with which they have a business relationship about this Act. Companies should establish internal audit mechanisms to constantly monitor their compliance with the Act.
III. Overview of Regulation (EU) 2024/3015 on Prohibiting Products Made with Forced Labor on the Union Market in the Context of UN “Sustainable Development Goals” Target 8.7
What is the Global Impact of Forced Labor?
Forced labor is defined in various international regulations, and the most common definition is that forced labor occurs when a person is compelled to work against their will by force or threat. As an example from the most well-known international legislation, the ILO Forced Labour Convention No. 29 defines “forced or compulsory labour” as “all work or service which is exacted from any person under the threat of a penalty and for which the person has not offered himself or herself voluntarily”. According to the case-law of the European Court of Human Rights (ECHR), the following conditions must be satisfied to talk about the existence of forced labor:
- The labour must be performed by the person against his or her will, and
- The obligation to carry it out must be “unjust” or “oppressive”.
(Van der Mussele v. Belgium (1983)-Conditions for Forced Labor; https://hudoc.echr.coe.int/eng#{%22itemid%22:[%22001-57591%22]}; Accessed on: 18.02.2025).
What are the Sustainable Development Goals and the Scope of Target 8.7?
Adopted in 2015 by the UN, the Sustainable Development Goals (SDGs) are a global action plan. The plan consists of 17 main goals to be realized by 2023. The goals are No Poverty, Zero Hunger, Good Health and Well-Being, Quality Education, Gender Equality, Clean Water and Sanitation, Affordable and Clean Energy, Decent Work and Economic Growth, Industry, Innovation and Infrastructure, Reduced Inequalities, Sustainable Cities and Communities, Responsible Consumption and Production, Climate Action, Life Below Water, Life on Land, Peace, Justice and Strong Institutions, and Partnerships for the Goals.
As part of this global action plan, the UN’s Goal 8 “Decent Work and Economic Growth” directly relates to business life. The goal supports sustainable economic growth and full and productive employment.
Among the targets of Goal 8, Target 8.7 aims to eradicate forced labor, end modern slavery and human trafficking, prohibit child labor and, by 2025, end child labor in all its forms.
What is the Impact of Forced Labor on the Global Economy?
Given its global impact, forced labor directly violates human dignity and constitutes a clear violation of human rights. In terms of commercial life, forced labor creates inequality and injustice in the labor market and leads to competition violations, which in turn undermines trust and justice in society.
From a commercial perspective, major markets such as the European Union and the United States appear to have introduced increasingly stringent regulations prohibiting the import of products made with forced labor. This could create barriers for exporters by restricting access to international markets. In fact, Turkish enterprises operating in those markets have an extensive trade network. Therefore, in order to prevent forced labor in their supply chains, enterprises should set policies in accordance with international legislation, effectively operate oversight mechanisms, and carefully identify the position of their suppliers in the supply chain.
Enterprises that do not take measures against forced labor may face legal sanctions and national and international bans, which may negatively affect their financial status. There are also risks such as decreased brand value and loss of customers due to consumer perception of businesses associated with forced labor. It is therefore critical for enterprises to carefully manage their supply chains, adhere to ethical standards, minimize the risks of forced labor, and closely follow regulatory changes in major markets.
In fact, cheap labor has a negative impact on fair remuneration and working conditions. As a result of this malpractice, the quality of products and services declines. Moreover, some businesses may engage in anti-competitive behaviors to respond to reduced consumer demand.
We should remind that the prohibition of forced labor products could lead to severe trade restrictions and import bans in major markets. The eradication of forced labor is also crucial for sustainable economic growth. The ILO emphasizes that despite the growth of world economies, there are significant problems in terms of creating and sustaining decent working conditions. However, the creation of decent living conditions is an important element of development.
Which Requirements Are Introduced by Regulation (EU) 2024/3015 Against Forced Labor?
Regulation (EU) on Prohibiting Products Made with Forced Labour on the Union Market aligns with the UN Sustainable Development Goals Target 8.7. Target 8.7 concerns the prohibition and eradication of forced labor, modern slavery, human trafficking and child labor. By enforcing this Regulation to prevent the market access of products made with forced labor, the EU harmonizes with the UN’s global goals and promotes its policies for human rights and fair working conditions.
As mentioned, the EU published Regulation (EU) 2024/3015 on 12 December 2024 and put it into effect on 13 December 2024 for the purpose of preventing the market entry of products made with forced labor in an effort to increase the transparency of commercial activities and protect human rights. All products manufactured and imported within the EU are subject to the Regulation, regardless of their geographical origin. Fundamentally, products are prohibited from containing ingredients produced through forced labor at any stage in the supply chain.
At this point, we should mention an exception for end users— the Regulation does not cover the withdrawal of products that have reached end users.
Enterprises Should Create a Clear Action Plan Against the Risks of Forced Labor in Their Commercial Activities.
Under EU regulations, “forced labor” is viewed as the act of forcing individuals to work under the threat of a penalty against their free will, in accordance with Convention No. 29 of the ILO. Child labor also falls within the scope of this definition. In this context, “supply chain” is another concept that has gained prominence following EU regulations and relates to all activities from the extraction of a product to its processing, manufacturing and placing on the market.
The answer to the question “How will the Regulation be implemented and supervised?” points to the need for legal expertise and support. EU Member States will designate the national competent authorities responsible for the implementation of the Regulation by 14 December 2025. These authorities, in turn, will identify violations through inspections and impose the necessary sanctions on those responsible for products made with forced labor. Member States are obliged to fully support the competent authorities in ensuring that they have sufficient budget and expertise.
By December 14, 2026, the EU Commission will publish guidelines for enterprises to support the implementation of the Regulation and establish an EU-wide “Union Network Against Forced Labour Products”. The Network will ensure coordination between Member States and involve customs authorities where necessary. On December 14, 2027, the Regulation will become fully enforceable, and sanctions will be put in place.
In conclusion, Regulation (EU) 2024/3015 is an important step towards eradicating forced labor and protecting human rights in global supply chains. Enterprises are expected to comply with this significant regulation by getting legal support to make the necessary arrangements by December 14, 2027. For compliance, they should review their supply chains and improve their risk management processes.
Conclusion
The German Supply Chain Act and Regulation (EU) 2024/3015 may be viewed as risks but for Turkish companies they present not only a challenge but also an opportunity that should not be ignored. Indeed, Turkish companies’ compliance with the Act and the Regulation will strengthen their commercial relations with Germany and, in fact, with every actor in global trade, increase their market volumes and give them a competitive advantage in global markets. Therefore, private sector companies in Türkiye must be prepared to eliminate the risks of business losses, damage to commercial relations, sanctions and penalties and to increase their global competition capacity while having sustainable growth through compliance with these regulations.
With this article, we urge all companies to be prepared for the German Supply Chain Act and Regulation (EU) 2024/3015 in order to protect their business volumes and benefit from the positive aspects of the Act while avoiding the associated risks. Regulations are on the way, but are you ready?
Nedim Korhan Şengün, Founder and Partner
Gülşah Güven, LL.M., Partner
Birgi Kuzumoğlu, Partner
