The German Bundestag has already passed a law, now the EU Commission is following it up: Large companies in the European Union should be held responsible for child or forced labor and environmental pollution by their international suppliers.
On Wednesday, the Brussels authority presented a proposal for a corresponding EU supply chain law. The directive could become stricter than the German regulation. On the one hand, significantly more fashion and textile companies could be affected by the new rules because the sector was classified as more risky than others. On the other hand, the EU draft deals more with environmental destruction than the German supply chain law.
Which companies are affected?
Specifically, the draft provides for several limits. EU companies are affected if they generate annual sales of more than 150 million euros worldwide and have more than 500 employees. There are stricter rules for companies that work in sectors where the risk of exploitation and environmental degradation is higher – such as the textile industry, mining or agriculture. 250 employees and a turnover of 40 million euros are planned here. For companies from third countries, only the turnover counts, but this must be generated in the EU.
According to the EU Commission, around 13,000 EU companies and 4,000 companies from third countries are affected. But there are also other estimates: The CDU politician Markus Pieper assumes that 14,000 German companies alone could be affected.
What are the differences to German law?
While the planned EU directive still has to be negotiated further by the European Parliament and the EU countries, the German law has already been passed. It will apply from 2023, initially for companies with more than 3000 employees. From 2024 onwards, this threshold will drop to 1000 – there is no provision for a sales criterion. According to statistics, there are around 2,890 companies with at least 1,000 employees in Germany. Environmental destruction is also covered by the law, but only if it is accompanied by human suffering or corruption.
The planned EU law also provides that victims of violations of labor rights and environmental regulations would have the opportunity to sue in the competent national courts. According to the draft, however, this is only intended for long-term business relationships with suppliers. Should the directive come into force as now proposed, the German law would have to be amended.
That depends on the companies
According to the proposal, Member States should establish rules on the civil liability of companies for damages. This includes that the affected companies would have to determine whether their business had a negative impact on human rights and the environment and, if necessary, mitigate or prevent violations. According to the Commission, EU countries could impose fines on companies that do not comply with the requirements.
What the law brings to consumers
Consumers should be able to trust that no products produced with child or forced labor are offered or that profit is made at the expense of the environment. At the same time, it is possible that fewer products will be on offer at very cheap dumping prices if the basis for the lowest wages is removed.
That’s what associations and NGOs say
There is criticism and praise. The requirements of the EU draft are “disproportionate for many medium-sized textile and fashion companies”, criticized the Textile + Mode Association on Wednesday. The association also criticized the fact that the textile and fashion sector was classified as more risky than other areas in the draft. “The fact that textiles and fashion are worse off than other industries does not correspond to reality,” said Uwe Mazura, general manager of the German Textile and Fashion Industry Association.
The “Supply Chain Law Initiative” alliance, in which trade unions and environmental organizations are represented, welcomes the draft and speaks of a cornerstone for less exploitation and environmental destruction.
However, the draft does not go far enough for the initiative: “For the big hit, the EU would have to tackle the hot iron more consistently: due diligence not only for large companies,” said Johannes Heeg, spokesman for the initiative, in a statement on Wednesday. The organization demands clear climate-related obligations in the supply chain and a liability regulation without loopholes, which creates justice for those affected by human rights violations.The German Trade Union Confederation also welcomed the law in principle, but would like to have more say for employee representatives.
That’s what politicians say about the draft
Opinions differ similarly in politics. While politicians from the Greens and the SPD welcome the EU Commission’s plan, Union politicians and the FDP think it goes too far. Federal Development Minister Svenja Schulze (SPD) spoke of a strong premium and hopes that women in particular will benefit from the planned directive.
“It is good that the EU Commission is proposing an ambitious supply chain law,” said Renate Künast (Greens), member of the Bundestag. “It is clear to us that the large corporations covered by the proposal must also reduce their greenhouse gas emissions “, said the SPD MP Tiemo Wölken.
“It would not be surprising if European companies withdrew from some regions of the world as a result of this proposal,” said CSU politician Markus Ferber. He fears that these gaps would be exploited by Chinese competition. Svenja Hahn from the FDP criticizes that the Project could burden companies with too much bureaucracy. (dpa / FashionUnited)