Making globalisation fair Supply chains

The globalisation of economic cycles has resulted in companies moving many parts of their production processes overseas. For instance, a T-shirt travels on average 18,000 kilometres before it ends up in a shop in Germany. Some 80 per cent of worldwide trade now relies on global supply chains, which provide a livelihood for more than 450 million people.

However, globalisation also has its downsides. Many products and raw materials that make our lives more comfortable are manufactured or obtained under unacceptable working and environmental conditions, with workers being paid starvation wages, or with exploitative child labour.

Our prosperity and the economic opportunities of developing and emerging economies are closely linked with each other through supply chains. This means that we have a responsibility to bear because there is a person at the start of every supply chain.

Taking responsibility for compliance with human rights The German supply chain law

Still from the video "A fair supply chain law"

A law for fair supply chains explained

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The German Act on Corporate Due Diligence Obligations in Supply Chains

Implications for businesses in partner countries and support from the German government

File type PDF | Date of status 05/2023 | File size 413 KB, Pages 5 Pages | Accessibility Accessible

In order to better protect human rights along global supply chains, for instance by preventing child and forced labour and banning substances that are harmful to humans and the environment, the German parliament adopted the Act on Corporate Due Diligence Obligations for the Prevention of Human Rights Violations in Supply Chains (also known as the supply chain law).

It came into force in 2023 and first applied to companies with more than 3,000 employees. From 2024 onwards, it applies to all companies with more than 1,000 employees.

Companies are required, in line with the UN Guiding Principles on Business and Human Rights (External link), to assess whether their business activities may cause human rights violations. Corporate due diligence obligations cover the entire supply chain – from raw materials to the final product.

Companies must take measures to prevent violations of basic human rights standards and put in place grievance mechanisms for anybody who might have been affected by violations.

The requirements are tiered based on the influence that the company can exert. Companies must ensure, both in their own businesses and for their direct suppliers, that human rights are respected, for instance the ban on forced and child labour, and that internationally recognised social standards such as the ILO core labour standards are upheld. They must immediately take remedial action if these rights are being violated.

For indirect suppliers, due diligence obligations apply if warranted by the circumstances. Companies are only required to investigate and take action if they learn of human rights violations taking place.

The Federal Office for Economic Affairs and Export Control (BAFA) is responsible for monitoring compliance with the law and imposing sanctions in case of infringements.

Further information about the supply chain law can be found here (External link).

Cover of the coalition agreement between the SPD, Bündnis 90/Die Grünen and FDP: Venturing more progress, an alliance for freedom, justice and sustainability
We support an effective EU supply chain law based on the UN Guiding Principles on Business and Human Rights that does not overburden small and medium-sized enterprises. We support the EU Commission's proposed regulation on deforestation-free supply chains. We support the ban on imports of products from forced labour proposed by the EU.
From the coalition agreement between SPD, Alliance 90/The Greens and FDP of 7 December 2021

The EU’s Corporate Sustainability Due Diligence Directive

At EU level, a regulation on corporate due diligence obligations (Corporate Sustainability Due Diligence Directive, CSDDD) came into force 24 May 2024. After an intensive discussion, the majority of EU member states voted in favour of this European supply chain law in March 2024. On 24 April 2024, the European Parliament adopted the EU Supply Chain Directive. As a final step, the EU Council of Ministers formally approved the directive on 24 May 2024. The directive must now be transposed into national law by 2026.

From a development perspective, it will be crucial to ensure that the directive has a real impact in our partner countries. It will therefore be important that the proposal includes a risk-based approach along the entire value chain, focuses on sustainable purchasing practices and gives the people concerned effective access to justice because of civil law liability. Adequate and concrete provisions for protecting the environment and the climate are also essential.

The UN Treaty

At the level of the United Nations, negotiations are underway for a binding international agreement (the UN Treaty on Business and Human Rights). These developments show that companies which are already looking into their obligations under the German due diligence act will have a competitive advantage when the EU and international regulations come into force.

How the BMZ 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 (social standards) are being violated in order to quickly gain a competitive advantage.

Germany is working to ensure that these standards are implemented and complied with worldwide since they make a major contribution to improving people's living conditions and reducing poverty in developing countries.

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 has laid the foundation for reconciling global economic development with social justice within the planet's ecological limits.

In collaboration with its partners, Germany is working to make the necessary change happen. Decent working conditions are at the centre of SDG 8 and SDG 12.

Hazardous waste disposal, Côte d'Ivoire.

Implementing environmental standards

Measures to protect the environment and environmentally-friendly production processes conserve ecosystems and support the sustainable management of natural resources. They promote development and are economically viable in the long term. In addition, they provide a competitive edge for companies 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 regard. 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 textile production

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 is developing 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 of the International Labour Organization (ILO), around 160 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 have to work under exploitative and dangerous conditions.

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

Calling on the private sector to respect 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 huge importance of fair trade in the fight against 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 “Transformation of Agricultural and Food Systems”.

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 2014 New York Declaration on Forests, Germany and almost 180 other governments, corporations and civil society representatives made a commitment 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.

In late 2022, the European Parliament and the Council of the European Union agreed on a directive on deforestation-free supply chains, which is expected to enter into force soon.

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 advocates for the interests of developing countries and emerging economies to be given greater consideration, so that their products have a chance to compete on the global market.

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 those 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) is a global initiative for more financial transparency and accountability in registering and disclosing revenues from the extraction of natural resources. 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

Through their business activities, companies have an impact on the living and working conditions of their employees, on their customers, on the environment and on the wider business environment.

The supply chain law, which came into force in January 2023, is one of the tools Germany is using to ensure decent working conditions worldwide. The BMZ is also supporting an EU-wide regulation on corporate sustainability, based on the UN Guiding Principles, and an EU regulation against products from forced labour.

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.


Quickly explained
Still from the video "Achieving fair incomes"

Achieving fair incomes

In the Global South, in particular, from where we source many of our agricultural commodities, many farmers and their families do not have enough money despite all their hard work. In many cases they cannot even afford to buy the food they need – and their children have to work and cannot go to school.

In order for the situation of these families to change in the long term, all actors must play their part: farmers’ cooperatives, companies, governments and civil society organisations in both the producing and consuming countries.

This video explains how we are working together with all the actors to achieve fair incomes.

Quickly explained
Still from the BMZ film "Is soy farming harmful to the climate?"

Is soy farming harmful to the climate?

The cultivation of soy has a negative impact on the environment, the climate and small farmers. This animated BMZ film explains what we can do about this.

Still from the video "On the road to a sustainable cocoa sector"

On the road to a sustainable cocoa sector

Its market share of 40 per cent means that Côte d'Ivoire is the biggest cocoa producer in the world. The country has 800,000 small farmers who cultivate cocoa trees. Cocoa is an important commodity for the country; it plays an important role in economic and social terms. Yet the cocoa sector is facing considerable challenges.

With its Pro Planteurs project, the German Initiative on Sustainable Cocoa wants to contribute to increasing sustainability in the cocoa industry.

Côte d'Ivoire
Standbild aus dem Video "Forum Nachhaltiger Kakao – Schulungen, Nachhaltigkeitsstandards und Zertifizierung"

German Initiative on Sustainable Cocoa

In Côte d’Ivoire cocoa is mostly farmed in remote rural areas. In many cases, the plantations are old and their productivity is low, not least because farmers are using outdated agricultural practices.

That is why the members of the German Initiative on Sustainable Cocoa have developed training materials and are offering training activities. This gives farmers the chance to learn how to make farming profitable.

Still from the video "Coffee and honey from Ethiopian forests"

Coffee and honey from Ethiopian forests

In Nono Sale, a district in south-western Ethiopia, the Federal Ministry for Economic Cooperation and Development (BMZ) is promoting the development of a sustainably operating farming region in cooperation with local actors. Sustainable harvesting of forest products, especially coffee and honey and bee products, can increase peoples’ incomes and protect natural forests. Farmers receive support in the form of training and other measures that help them improve the quality of their products. Farmers are linked up with new markets for forest products in close cooperation with partners from the private sector who are involved in the initiative for sustainable agricultural supply chains.

Forest protection
Still from the BMZ video "Sustainable supply chains through forest protection"

Sustainable supply chains through forest protection

Forests are vital not only for the survival of plants and animals but also for us humans. More than 1.6 billion people depend directly on forests. And yet, we keep cutting down trees and destroying forests to meet growing consumption needs. This land is then used for growing agricultural commodities such as soy, palm oil, rubber, cocoa and coffee. Many companies and governments have realised that this cannot continue. They have committed to developing deforestation-free supply chains.

As at: 26/04/2023