The Supply Chain Act, officially known as the Supply Chain Due Diligence Act (LkSG), has been in force since January 1, 2023. From this date, the companies concerned must comply with the human rights and environmental due diligence obligations in their supply chains set out in the Act. They are obliged to take measures to prevent violations and ensure that their business partners comply with the same standards.
The quality of master data, i.e. basic data about suppliers, products and customers, is crucial for compliance with these regulations. It enables companies to identify risks and take action.
In this article, we look at the importance of the Supply Chain Act and the central role of master data management
The importance of the Supply Chain Act
From 2024, the Supply Chain Act will apply to companies with more than 1,000 employees. The law aims to strengthen respect for human rights and environmental protection in global supply chains. Companies will be obliged to identify risks in their supply chains and take measures to prevent human rights and environmental violations. This includes the introduction of a risk management system, regular risk analyses, preventive measures and reporting and documentation obligations.
They must also check and ensure that all partners comply with the prescribed standards. This requires comprehensive data management and communication processes. Non-compliance can result in fines of up to 8 million euros or up to 2% of annual turnover and possible exclusion from public contracts. Automated solutions for master data management can help to overcome these challenges efficiently.
Role of master data management in supply chain management
Master data management encompasses the management of a company's basic data relating to suppliers, products and customers. This data is the basis for transparency and is therefore crucial for daily business processes and strategic decisions.
Effective master data management is essential for compliance with supply chain law. It enables companies to manage accurate and up-to-date information about their suppliers and business partners, making it easier to identify and assess risks. By providing reliable data, companies can adequately fulfill their due diligence obligations and generate comprehensive reports.
zetVisions software functions to support supply chain law compliance
The overall benefit [of master data management software] that you really see is centralized master data maintenance. This avoids duplicates. All the information that belongs to a particular process can be found in one place.
Bernd Hanft, Head of Master Data Project at TEAG Thüringer Energie AG
Automated master data management for compliance
By using special software solutions for master data management, the recording, maintenance and management of master data is done more efficiently and the error rate is reduced. This automation ensures that the data is always correct, consistent and up-to-date.
The benefits of automation are manifold: the implementation of validation rules and the automatic filling of fields according to predefined rules significantly reduces manual effort. This speeds up data collection and maintenance and enables a quick response to compliance requirements. At the same time, automation minimizes human error and ensures that data is accurate and reliable. This is crucial for accurate risk assessment and reporting.
zetVisions software functions to support supply chain law compliance
SPoT is the SAP-certified add-on for master data management from zetVisions and offers customized solutions for the flexible and efficient management of master data.
SPoT is the SAP-certified add-on for master data management from zetVisions and offers customized solutions for the flexible and efficient management of master data.
Business partner master data: The seamless recording of supplier and customer master data enables better coordination and tracking of material flows along the supply chain. An optimized and transparent supply chain helps companies to meet their due diligence obligations under the Supply Chain Act more efficiently by responding more quickly to potential risks and ensuring that all partners comply with the defined standards.
Change history: All changes to the master data are saved in a history and can therefore be traced at any time, which significantly increases transparency.
Document management: Corresponding documents relating to compliance requirements can be stored directly in the supplier data record. This enables quick and easy access to all relevant documents and improves efficiency and responsiveness in fulfilling due diligence obligations.
Risk assessment: Integrated risk assessment tools help to identify potential human rights and environmental violations in the supply chain at an early stage. The SCHUFA Compliance Service checks whether business may be conducted with the respective business partner at all. For example, it checks international sanctions and PEP lists, black & watch lists and country risk lists - directly during data entry.
Reporting: Comprehensive reporting functions support companies in creating detailed reports on compliance with due diligence obligations. Individual report templates can be created with just a few mouse clicks and export to Microsoft Excel is possible. These reports are necessary to meet legal requirements and ensure transparency towards authorities and stakeholders.
Duplicate checking and cleansing: By detecting and removing duplicate records, the software significantly improves data quality. This is important to obtain reliable information for risk analysis and reporting required for compliance.
Integration with SAP: zetVisions software is certified for master data maintenance in SAP Cloud Private Edition, Release 2023 and offers seamless integration with existing SAP systems. This integration ensures data consistency across all platforms, which is crucial for accurate and reliable compliance reporting and risk assessment.
User-friendliness: The intuitive and user-friendly software facilitates implementation and use within the company. This supports fast and efficient implementation of the necessary compliance measures.
Support and training: zetVisions offers comprehensive support and training to help customers get the most out of the software. Training ensures that users are informed about the latest best practices and can efficiently fulfill the requirements of the Supply Chain Act.
These functions and features of the zetVisions SPoT software enable companies to fulfill the requirements of the Supply Chain Act efficiently and accurately while increasing data quality and operational efficiency.
Also read our blog post "Data quality in master data management"
Preparation for future requirements and legislative changes
In view of the upcoming EU supply chain law (Corporate Sustainability Due Diligence Directive, CSDDD), which will apply in full from 2032, companies can already set the course now to meet these extended requirements. The CSDDD will require companies to proactively monitor social and environmental impacts along their entire value chain and take action. By implementing reliable master data management systems, companies can ensure that they are well equipped to meet the complex requirements of the CSDDD.
Also read our blog post "The 6 most important drivers for master data management".
Acknowledgement: Many thanks to Doris Hardt-Beischl, Strategic Account Manager, for her valuable contribution to this blog article.
