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8 Apr 2019

Andrew Green, Devex

Germany: Draft law on abuses in supply chains faces uncertain future

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'German draft law on abuses in supply chains faces uncertain future', 4 April 2019

draft law leaked earlier this year would require German companies to take more responsibility for monitoring their subsidiaries and contractors abroad for human rights violations, or risk fines or even jail time for their executives.

The proposal falls into a broader trend in Europe, as governments pressure their multinationals to take accountability for conditions in supply chains that can lead to deadly incidents or environmental damage. Several European countries are in the process of negotiating legislation after France adopted a law in 2017.

The German proposal goes further than the French, which only affects companies with more than 5,000 employees. The draft, leaked out of Germany's Federal Ministry for Economic Cooperation and Development, or BMZ, would apply to companies with more than 250 employees and €40 million ($45 million) in annual turnover.

The need is clearly there, advocates say. The Business & Human Rights Resource Centre, a global research and advocacy organization, has approached German companies about potential human rights abuses 280 times since 2005, the third-most behind United States and United Kingdom-based institutions.

Johannes Blankenbach, the center's representative for the European Union, said that reflects the reach of Europe's largest economy. [...]

Germany instituting mandatory due diligence for its companies could have an outsized impact — not only on its own companies but also in encouraging lower-income countries to introduce protections or improve enforcement. The law's passage is far from certain, though, and risks being eclipsed by a drive to get businesses to introduce safeguards voluntarily. [...]

In Germany, the issue of due diligence in supply chains has been on the current government's radar since it took power in 2017. Under the country’s 2014 NAP, businesses are encouraged to implement their own due diligence policies. The new coalition government agreed to implement legislation if they find that fewer than half of corporations have done so by 2020.

But civil society groups worry about how companies’ efforts will be monitored. And businesses who have implemented due diligence procedures worry that, under a voluntary process, their competitors will not. [...]

In addition to being further-reaching than the French law, [the German draft law] would compel companies to carry out assessments of their supply chains and appoint an officer to monitor compliance and register complaints. Companies that fail to meet the guidelines risk fines of up to €5 million, and officials could face prison sentences. [...]

[also refers to KiK]