German law, Polish duty
Although the European Parliament is still putting the final touches on the Supply Chain Due Diligence Directive (CSDD) Germany already implemented due diligence into its legal order earlier this year. Similar regulations are also already in place in France, the Netherlands, Norway and the United Kingdom. Poland is waiting for the CSDD to come into force. However, this does not mean that we can still wait with the implementation of the new rules. The regulations in force in the aforementioned countries are not without impact on Polish entrepreneurs. The consequences concern not only the aforementioned Due Diligence Act, but also the Packaging Act.
Human rights and the environment under the magnifying glass
The Lieferkettensorgfaltspflichtengesetz (LkSG), or Supply Chain Due Diligence Act, was passed in Germany on June 11, 2021, and came into force on January 1, 2023. It currently applies to companies based in Germany with more than 3,000 employees. As of January 2024, it will be extended to entities with more than 1,000 employees. The Supply Chain Law contains nine specific due diligence obligations that must be observed. The most important of these are:
establish a risk management system, which includes conducting risk analyses (the analyses are to include the direct suppliers of the German enterprise) and appointing a person responsible for monitoring the enterprise's risk management,
adopting preventive measures against violations and risks of committing violations,
taking corrective measures when violations occur,
reporting obligations to fulfill obligations under the law.
These obligations apply to the entire supply chain used by the German company for all goods and services it offers. Under the new law, the supply chain is to include all stages in Germany and abroad that are required for a German company to produce products and provide services - from the extraction of raw materials to the delivery of the finished product or service to the end customer. The scope of due diligence throughout the supply chain thus includes the company's own business area and direct suppliers, as well as indirect suppliers, albeit in a less stringent form.
The LkSG therefore obliges German businesses to implement mechanisms that enable the reporting of human rights and environmental concerns throughout the supply chain. This means that Polish employees working for a Polish company that supplies its goods or services to a German partner must also be able to report any human rights or environmental violations committed by their employer. Therefore, Polish entrepreneurs who are subcontractors to German companies can expect additional requirements from them. This will involve a broader obligation to report environmental and human rights data than before. Already today, in contracts with German business partners, one can find clauses obliging the Polish contractor to respect human rights and care for the environment and to submit reports in this regard. Any violations can result in contractual penalties or even lead to the termination of cooperation. The German law calls for the implementation of specific solutions, including record-keeping and collection of evidence for due diligence. In order to adapt to the new rules of cooperation, Polish entrepreneurs are forced to develop and adopt appropriate procedures for reporting, monitoring and reporting the above issues as soon as possible, as well as to develop and implement processes to minimize risks and respond appropriately when such violations occur. They can also expect to be audited by a German counterparty, or to have to implement certain certification systems. In addition, they will have to document their activities in this regard and report annually to the Federal Office of Economics and Export Control.
Packaging management
Supply chain due diligence obligations are not the only ones that Polish businesses bound by contracts with German partners must fulfill. They are also affected by Germany's amended Packaging Act (German: Verpackungsgesetz, VerpackG), which has been in effect in Germany since January 1, 2019. It places greater responsibility on manufacturers and distributors for the packaging waste they put on the market for the first time and ensures that all entrepreneurs bear the costs of collecting and recycling their packaging. Subsequent amendments were made after the law went into effect, with the most recent coming into effect on January 1, 2023. The Packaging Act regulates the handling of packaging, how it is used and how it is traded across borders in and to Germany. This means that Polish companies cooperating with German companies, regardless of whether sales are made online or in a retail store, are also required to participate in the so-called dual system, a nationwide packaging take-back system that separates responsibilities on two levels. Every business subject to the Packaging Act has an obligation:
register its anticipated annual packaging waste with the publicly accessible LUCID Central Packaging Trade Register, which maintains a database and contains information on entrepreneurs (the registration obligation includes the exporter itself, as well as registration of the nature and type of packaging),
conclude (after receiving an identifier from the LUCID Registry) a contract with a company in Germany for waste disposal and recycling, stating the estimated amount of waste that will be produced.
As of January 1, 2022, producers and distributors of packaging not subject to participation in the dual collection and recovery system must provide evidence of compliance with the collection and recycling requirements of the packaging they use. In particular, this applies to transport packaging, commercial and outer packaging, and reusable packaging that does not typically accumulate as waste with end consumers after use. The obligation to provide evidence only applies to packaging that has actually been returned to the manufacturer or distributor. Then, entrepreneurs who introduce transport or bulk packaging (e.g., in the B2B sector, industry, manufacturing, or wholesale) should ensure that such packaging is disposed of. To assess the accuracy and completeness of documentation, entrepreneurs are required to put in place appropriate self-monitoring mechanisms and document how much packaging they have placed on the market and received in a given calendar year, and how it was recovered. This evidence must be kept and shown to the competent German authorities upon request.
The main objective of introducing this law is to avoid or reduce the negative impact of packaging waste on the environment. To achieve this goal, the law regulates the rules for the activities of individual entities, through which the possibility of avoiding or minimizing the formation of packaging waste and preparing it for reuse will increase. This regulation is primarily aimed at manufacturers and distributors who place previously unregistered packaging on the market. A manufacturer within the meaning of the Packaging Act is a distributor who places packaging on the market for the first time on a commercial basis (including importing packaged products into Germany). Since importers are also considered manufacturers, this definition also includes Polish companies that sell in Germany and export their goods to Germany.
As of July 3, 2021, Polish entrepreneurs selling to German end-consumers who do not have a branch in Germany have the option of appointing an authorized representative (being an individual or legal entity or a partnership with legal capacity established in Germany) in Germany to fulfill on their own behalf the obligations imposed on them by the aforementioned Packaging Act. If a decision is made to appoint such a representative, the Polish entrepreneur must make the appropriate registration himself. The authorized representative will then be treated as a manufacturer with respect to the obligations regulated by the Packaging Act and will assume the obligations of the contracting Polish entrepreneur in this respect. It should be noted here that each entrepreneur may appoint only one authorized representative, while the appointment itself must be made in writing in the German language.