More fairness in global supply chains – Germany leads the way
The downside of globalisation: Many products and raw materials that make our life in Europe more comfortable are produced or mined under unacceptable environmental and working conditions, with workers being paid a pittance or even using exploitative child labour.
Seeking to change that, the German government agreed on the draft Act on Corporate Due Diligence in Supply Chains (supply chain law). The Federal Cabinet adopted the draft legislation on 3 March 2021. It was passed in parlament on 11 June 2021.
The aim is to improve the protection of human rights all along global supply chains, preventing, for instance, child and forced labour and banning substances that are harmful to people and the environment. Companies in Germany have a responsibility to help protect human rights, too. They must ensure that fundamental human rights standards are respected in their supply chains.
The German government is pushing for the adoption of EU-wide legal standards for fair global supply and value chains. As this can be expected to take some time yet, Germany is taking the lead by adopting national legislation.
Key provisions of Germany’s Act on Corporate Due Diligence in Supply Chains
1. Clear requirements – for the first time – for corporate due diligence obligations
- This creates legal certainty for companies and affected persons.
2. Responsibility for the entire supply chain
- Corporate due diligence obligations apply in principle to the entire supply chain – from the raw materials to the completed sales product.
- The requirements that companies must meet are tiered, based in particular on the degree of influence the company has on those committing the human rights violation and also based on the different stages within the supply chain.
- Companies must take action if there are clear indications of violations being committed.
3. External monitoring by a government authority
- An established government authority, the Federal Office for Economic Affairs and Export Control, is tasked with monitoring compliance with the law.
- It checks company reports and investigates any grievances. If it identifies any violations or failures it can impose fines or exclude companies from public procurement procedures.
4. Better protection of human rights
- Not only can people whose human rights have been violated continue to use the German courts to get their rights upheld, they can now also report their grievances to the Federal Office for Economic Affairs and Export Control.