Negotiators from the European Parliament and the EU states have agreed on a supply chain law.
The aim is to hold large companies accountable if they profit from child labor or forced labor outside the EU, according to communications from the European Parliament and the EU states on Thursday. Larger companies must also create a plan to ensure that their business model and strategy are compatible with the Paris Agreement on climate change, EU states announced.
According to the planned rules, companies are responsible for their business chain, including business partners of the company and, in some cases, for downstream activities such as sales or recycling. The financial sector should initially be excluded from the requirements. In principle, the rules apply to companies with more than 500 employees and at least 150 million euros in sales. Companies that are not based in the EU are subject to the law if they have a turnover of more than 300 million euros in the EU. The EU Commission should publish a list of affected non-EU companies.
It is also planned that companies can be held accountable in European courts if human rights violations occur in their supply chains. The agreement still has to be confirmed by Parliament and the EU states, but that is usually a formality. However, MEP Svenja Hahn questioned on Thursday whether that would happen in this case. According to the FDP politician, crucial points were not discussed in the nightly negotiations.
Germany needs to sharpen things up
The chairwoman of the Internal Market Committee in the EU Parliament, Anna Cavazzini, spoke of a good day for human rights, but she would have liked even stricter rules for climate and environmental protection. The Green politician also emphasized that the EU supply chain law goes beyond the German law. In the future, more companies will have to record risks across their entire supply chain. The EU Supply Chain Act is a so-called directive that the federal government still has to implement into national law; a supply chain law has already been in force in Germany since the beginning of the year.
The European law professor and SPD MEP René Repasi pointed out that the law makes German companies liable for breaches of duty of care, which has so far been excluded in the German Supply Chain Act. Companies could be held liable under civil law and claims for damages could be asserted, for example.
Vehement criticism from business
Business associations fear that there will be too much bureaucracy for companies and that this will put them at a competitive disadvantage compared to companies from third countries that are not affected by the rules. After the agreement, employer president Rainer Dulger announced: “The result is a hasty and poorly crafted compromise.” DIHK general manager Achim Dercks said the regulations were neither practical nor proportionate. The Association of German Mechanical and Plant Manufacturers described the project as the “next nail in the coffin for international competitiveness”.
Similar criticism also comes from liberal ranks. European MP Hahn sees a rollercoaster of bureaucracy rolling towards companies. There is also criticism from the Union. The chairmen of the CDU/CSU group in the EU Parliament, Daniel Caspary and Angelika Niebler, fear that companies could withdraw from Africa because of the requirements and that foreign companies from China, for example, could fill this gap.
Scientist sees law as a historical bombshell
Researcher Sarah Jastram from the Hamburg School of Business Administration described the agreement as a historic moment and a bang for European human rights regulation. “This is the most far-reaching economic human rights regulation in the world,” said the professor. Clara Brandi, a professor at the University of Bonn, said after the agreement that the law had some weaknesses and gaps. “With a view to climate protection, the law could have been more ambitious,” said the economist.
What applies in Germany so far
The German supply chain law currently applies to companies with more than 3,000 employees. According to the Federal Ministry for Economic Cooperation and Development (BMZ), around 900 companies are affected. From 2024 it will apply to companies with more than 1,000 employees. Affected companies must also analyze under the German requirements, among other things, how great the risk is that they will benefit from human rights violations such as forced labor. If they have evidence of violations, they must take action “to prevent, stop, or minimize the extent of that violation,” the law says.
The specifications are monitored by the Federal Office of Economics and Export Control. It also investigates complaints submitted. If the Federal Office discovers omissions or violations, it can impose fines. Companies that have not adhered to the rules can also be excluded from public contracts.
Almost 80 million minors suffer from child labor
According to BMZ figures, almost 80 million children worldwide work under exploitative conditions in textile factories, quarries or on coffee plantations. “Also for our products,” says the ministry. According to the aid organization Terre des Hommes, many products can be affected by child labor. These include flowers, clothing, computers, tobacco, fireworks, footballs, cosmetics and food. (dpa)