Economy & Politics

Ministerial initiative Dispute over the Supply Chain Act

At a joint press conference on Tuesday, German Development Minister Gerd Müller and Federal Labor Minister Hubertus Heil announced the so-called Supply Chain Act
At a joint press conference on Tuesday, German Development Minister Gerd Müller and Federal Labor Minister Hubertus Heil announced the so-called Supply Chain Actimago images / photo library

The entrepreneurial duty of care in protecting human rights and the environment should soon also apply to German companies abroad – at least if it is up to German Development Minister Gerd Müller (CSU) and Federal Labor Minister Hubertus Heil (SPD). At a press conference on Tuesday, both ministers announced that the so-called supply chain law would be launched during this legislative period. In Germany, around 7,300 companies with more than 500 employees would be affected by the planned Supply Chain Act.

Companies should therefore check the conditions under which foreign business partners produce their products – and be liable for violations of human rights. In addition to protecting foreign workers, German companies would also have more legal certainty for production abroad. A future law must nevertheless be proportionate, small and medium-sized companies are therefore excluded from the regulation, the ministers said. The company is also looking to talk to the companies concerned. “The economy is invited to contribute openly and constructively to the process,” said Müller.

By August, key points for the Supply Chain Act are to be decided in the cabinet. Both ministers refer to the coalition agreement between the Union and the SPD. There, the Federal Government agrees to take “national legal action” if the voluntary steps taken by German companies are not far-reaching enough.

NAP survey: 22 percent of companies meet criteria

That is not the case. Heil and Müller see this view as confirmed by the evaluation of the company survey on the National Action Plan for Business and Human Rights (NAP). In two rounds, 2250 companies with more than 500 employees were asked to what extent they also ensure minimum standards for the protection of the environment and human rights among foreign suppliers and producers.

Of the valid questionnaires from the second survey, only 22 percent met the criteria; in the first round it was only 18 percent. The results make it clear that “we can no longer rely solely on voluntary action,” Heil said.

Business associations criticized the survey. For example, a company would have to meet all 37 criteria to be considered a “fulfiller”, which would distort the results. Furthermore, there was no way to explain negative answers, it said in a joint statement by the business associations BDA, BDI, DIHK and HDE.

In contrast, the Initiative Supply Chain Act, which claims to include more than a hundred civil society organizations such as Greenpeace and Misereor, criticized in its own study that business associations, supported by the Federal Ministry of Economics and the Chancellery, had “watered down” the requirements and methodology used in the company survey.

Rejection from business

Heil and Müller’s initiative receives approval from various sides. In addition to the Supply Chain Act initiative, 60 companies, including well-known companies such as Tchibo, Nestlé and Ritter Sport, are supporting the project. A corresponding petition already has 200,000 signatures.

The Federal Ministry of Economics, on the other hand, was cautious, Federal Minister of Economics Peter Altmaier did not take part in the press conference of his cabinet colleagues. Instead, the ministry said in advance that political “rapid shots” should be avoided. A German spokeswoman for the ministry said that German companies also feel committed to respecting human rights when doing business abroad. If there is still room for improvement, there will be talks with business and within the government.

Business associations also base their opposition to the plans to the corona pandemic. International trade is already difficult in view of the crisis and the associated measures. “Businesses now need all the resources to fight corona effects.”

In addition, national solo efforts should be avoided so as not to put pressure on German companies when choosing their business partners. “Of course, companies are liable for their own illegal behavior abroad, but not for the behavior of independent third parties,” it continues.

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