More fairness in global supply chains – Germany leads the way

The globalisation of economic cycles has resulted in companies shifting many parts of their production processes to developing countries and emerging economies. Some 80 per cent of worldwide trade now relies on global supply chains. And no other major industrialised country is as highly integrated in international supply chains as Germany.

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

Still from the video "A fair supply chain law"

A law for fair supply chains explained

Background information
Seamstress in the textile factory of the Desta Garment company in Addis Ababa, which produces for a German retail chain, Ethiopia, 2.12.2019

Cover: Supply chain law FAQs

Supply chain law FAQs

File type PDF | Date of status 03/2021 | File size 294 KB, Pages 6 Pages

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.

Supply chain law FAQs

Other ways Germany is promoting fair global supply and value chains

A young worker at the port of Dhaka in Bangladesh

Achieving decent work for all

Global competition for markets and investors is tough. In some developing countries fundamental workers’ rights are violated in order to quickly gain a competitive advantage.

Germany is working to ensure that internationally recognised social standards are implemented and complied with worldwide because they make a major contribution to improving living conditions and reducing poverty in developing countries.

Logo: Marshall plan with Africa

Marshall Plan with Africa Internal link

With the Marshall Plan with Africa the German Development Ministry is taking its cooperation with African countries in a new direction. One goal of the Marshall Plan is to achieve sustainable economic development on the African continent. An important precondition is that more value is created on the ground and that trade with and within Africa is strengthened.

Logo: Sustainable Development Goals

Implementing the 2030 Agenda

In the 2030 Agenda for Sustainable Development, the international community has expressed its conviction that global challenges can only be resolved through joint action. The Agenda lays out the basis for reconciling global economic development with social justice within the planet's ecological limits.

Germany is delivering on its responsibility and is ready to do its part and work together with its partners to make the necessary change happen. With Goal 8 (decent work for all) and Goal 12 (responsible consumption and production) the 2030 Agenda is making a contribution to good working conditions worldwide.

Hazardous waste disposal, Côte d'Ivoire.

Implementing environmental standards

Measures to protect the environment and environmentally-friendly production processes conserve ecosystems and help with the sustainable management of natural resources. They promote development and are economically viable in the long term. In addition, they give companies a competitive edge because more and more consumers are calling for sustainable production standards.

Governments and also companies themselves can use market mechanisms to create incentives for modern environmental and resource management. Environmental standards are an important building block in this. They foster development that is compatible with sustainability and help to conserve natural resources for future generations, too. The BMZ supports its partner countries’ efforts to introduce such standards.

Workers in a textile factory in Bangladesh, where special attention is paid to compliance with legal social and environmental standards

Improving environmental and social standards in the textile industry

Worldwide, there are more than 60 million people working in the textile and garment industry – most of them in developing and emerging economies. The sector is characterised by complex supply chains. Germany is engaged in activities to promote environmental and social standards at various levels of this highly integrated sector.

This is a topic that is pushed intensively by the BMZ within international organisations and in its cooperation with partner countries. Together with the private sector and civil society the BMZ has developed initiatives such as the Partnership for Sustainable Textiles (External link). The BMZ has also initiated the government-run textile label Green Button (External link). The Green Button is put on textiles that have been produced in line with highly ambitious social and environmental standards.

A boy in Mali working with a sewing machine

Eliminating child labour

According to the latest estimates from the International Labour Organization (ILO), around 152 million children between the ages of five and 17 are working under conditions that constitute child labour, almost half of them under exploitative conditions that are often harmful to their health and dangerous.

Frequent causes of child labour are poverty, income volatility because of economic crises or natural disasters and misguided economic and social policies. Germany is working with great commitment to ensure that no more children anywhere in the world are obliged to work under exploitative and dangerous conditions.

Production of antimalarial drugs in Bukavu, D.R. Congo

Requiring the private sector to meet human rights

The BMZ human rights strategy states that, if there is a risk of human rights being violated, the German government puts values before economic interests.

With a view to asserting human rights worldwide in the private sector, the BMZ is involving all actors: governments, companies, trade unions, civil society and academia.

Fair trade products

Promoting fair trade

Fair Trade is a partnership based on dialogue, transparency and respect that strives for greater equity in international trade. Consumers play a key role in all this. Their decisions about what to buy can have a direct impact on the working and living conditions of people in developing countries.

The BMZ supports fair trade and provides citizens with information about how fair trade works, about fair trade products and about the importance of fair trade when it comes to combating global poverty.

Peach harvest in Tunisia

Promoting agricultural value chains

An agricultural value chain comprises all the levels of the production, processing and distribution or export of an agricultural product. The competitive position of farmers depends to a large extent on the reliability of their contractual relationships with others in the value chain.

Fostering value chains through development cooperation interventions is especially useful and necessary if official structures are weak and there is a lack of infrastructure, adequate services, legal certainty and standards for quality and production. Promoting agricultural value chains is one of the priorities of the BMZ’s special initiative One World – No Hunger.

Palm oil fruits in Indonesia

Promoting deforestation-free supply chains

Every year several million hectares of forest are lost because they are converted into agricultural land. In the light of that fact, promoting deforestation-free supply chains is an important aim of German development cooperation.

In the New York Declaration on Forests, Germany and almost 180 other governments, corporations and civil society representatives made a commitment in 2014 to make global agricultural commodity supply chains deforestation free by 2020. In 2015, Germany, Denmark, France, the Netherlands, Norway and the United Kingdom signed the Amsterdam Declaration on Deforestation and the Amsterdam Palm Oil Declaration.

Market in Beira, Mozambique

Fairness in global trade

Through its development policy the German government is helping to establish a stable and socially responsible world economic order in the spirit of a “global partnership”. An open and fair trading system which is based on clear rules and enables developing countries to integrate into global value chains is a precondition for achieving this.

To reach this goal, some important institutions and agreements that regulate the world economy need to be developed further. At international conferences and in negotiations, the German government pushes for more weight to be given to the interests of developing countries and transition countries, so that their products have a chance to compete on world markets.

Workers in a coal mine in Zambia

Extractive Industries Transparency Initiative (EITI)

Developing countries and emerging economies can generate significant revenue from their natural resources. This income is important for the countries’ economic growth and social development. If the level of this revenue is not disclosed to the public, this can lead to mistrust, weakened governance and even conflict.

The Extractive Industries Transparency Initiative (EITI) promotes fiscal transparency and accountability in the extractive sector. The German government has been supporting EITI since it came into being in 2003.

Employees of a wine laboratory in Tbilisi, Georgia

Promoting corporate responsibility

An enterprise has an influence through its business activities on the living and working conditions of its employees, on its customers, on the environment and on the wider economy. How a company approaches the responsibilities that entails is an important aspect of modern business policy.

The supply chain law (passed in June 2021) is one of the tools Germany is using to ensure decent working conditions worldwide. The BMZ also supports the Global Compact (External link), an alliance between business, politics and civil society that was founded by the United Nations with the aim of strengthening corporate social responsibility.