Earlier today (11 June 2021), the German parliament adopted the Supply Chain Act. The new law enforces companies to bear responsibility for human rights violations within their supply chains.
Specifically, businesses will be required to identify and account for their impact on human rights – including forced and child labour, forced evictions, oil pollution, and land grabbing – across overseas suppliers.
The law will come into play on 1 January 2023 for companies with 3,000 or more employees. From 2024 onwards, the Supply Chain Act will also be relevant to companies with more than 1,000 employees.
Violations of the new law may result in a maximum fine liability of €8m or 2% of the company’s average annual turnover. Companies that do not comply could be excluded from public tenders.
For and against
The adoption is largely deemed a step in the right direction. The European Coalition for Corporate Justice (ECCJ), for example, which represents a 250-strong cohort made up of NGOs, trade unions, consumer organisations and academics, believes the law is ‘a good start’.
“This law ends decades of German politicians wilfully giving business a carte blanche to abuse people and the planet with impunity,” said ECCJ director Claudia Saller.
The European Center for Constitutional and Human Rights (ECCHR) similarly described the law as a positive step. “For decades, German companies have profited at the expense of people and the environment,” said director of ECCHR’s Business and Human Rights programme, Miriam Saage-Maaß.
“That a due diligence law was finally passed today is an important and long overdue step. Voluntary social standards have failed… With the due diligence law, the German government is finally making human rights and environmental protection mandatory for companies.”
Environmental NGO Fern also praised the law’s recognition that human rights abuses ‘go hand in hand’ with illegal deforestation.
In the lead up to the parliamentary vote, however, not all were in favour. The German-African Business Association told Germany’s international broadcaster Deutsche Welle (DW) that it was not in favour.
“We think it’s wrong to respond to a global problem with a national law. This doesn’t change the global human rights situation,” said industry body CEO Christoph Kannengiesser.
“All it does, is create additional competitive disadvantages for our own companies here [in Germany] which are global leaders in terms of their standards.”
A ‘timid law’ for larger companies only?
While NGOs are largely in favour of due diligence legislation across human rights and environmental spheres, many are disappointed with the final version of Germany’s Supply Chain Act.
Fern argues the new law’s measures fail to adequately address human rights abuses and illegal deforestation. “By restricting companies’ due diligence obligations to its own business operations and direct suppliers, but not to indirect suppliers, it doesn’t take into account the complex global supply chains, and will not influence them,” Fern’s Sustainable Consumption and Production Campaigner Nicole Polsterer told FoodNavigator.
The environmental NGO also raised concerns that Germany’s stance is not tough enough, especially given the timing of the law in a European context. The European Commission is preparing to table its own environmental and human rights due diligence law later this year.
“By adopting a timid law, Germany has failed to show leadership in the wake of two recent EU legislative proposals for an EU regulation expected this autumn. Germany’s law should not be seen as a template for a future EU law as it applies to big companies only and severely restricts the due diligence…” said Polsterer.
The ECCHR’s Saage-Maaß similarly suggested the new law falls short. “The due diligence law only holds larger German companies and their direct suppliers accountable for acute or imminent human rights violations. This disregards obligations under the UN Guiding Principles: every company has the responsibility to prevent the risk of human rights violations – not only to act when it is practically too late.”
Civil liability: ‘Victims deserve more’
In the wake of the parliamentary vote, another key criticism of the law is its failure to address civil liability.
Civil liability is a legal obligation that requires a party to pay for damages or to follow other court-enforcements in a lawsuit. As Cornell Law School defines it, civil liability – which differs from criminal liability – is usually brought by a private party to sue for damages or injunctions.
According to the ECCJ’s Saller, an advocate for civil liability’s inclusion in due diligence legislation, civil liability regimes allow victims of corporate abuse to ‘get access to justice and judicial remedy’.
At a recent European Food Forum (EFF) event, Saller told delegates that workers in the food chain are desperately in need of ‘remedy’. “Food supply chains contain some of the worst adverse human rights and environmental impacts, [including] worker exploitation, gender-based violence, forced and child labour, the large-scale use of poisonous pesticides, land grabbing and deforestation. They are all present in, or connected to, global and EU food supply chains.”
Civil liability regimes are already present in some national due diligence laws, including France’s 2017 ‘law on the duty of vigilance’, and the Netherlands’ Child Labour Due Diligence Law.
While according to the ECCJ, Ministers of Development and Labour Gerd Müller (CSU) and Hubertus Heil (SPD) had originally proposed to include clauses strengthening civil liability, the Ministry for Economic Affairs and many Christian Democratic Union (CDU) members of parliament ‘significantly weakened the text’.
The adopted law does contain ‘some improvements for victims’, but for the ECCJ, the absence of new and improved civil liability rules for German companies ‘perpetuates judicial uncertainty’, condemning victims to ‘costly and lengthy’ legal battles.
“As such, the German law is out of step with the French duty of vigilance law and the European Parliament draft legislation, both of which do contain improved civil liability rules to help victims,” noted the NGO.
ECCJ’s Saller stressed that ‘victims deserve more’. “They must have easy access to German courts for human rights violations by German Companies. There should be no gaps or loopholes for letting companies off the hook…”