Will Germany become a leader in the drive for corporate due diligence on human rights?
German companies are the backbone of the fourth largest economy in the world. They have become household names around the world and their supply chains support the livelihoods of hundreds of thousands of workers globally.
Yet many continue to be linked to human rights abuses ranging from the infamous 2013 Rana Plaza collapse in Bangladesh, which claimed over 1,000 lives, to labour and land rights issues in mining, agriculture and other sectors.
The news of a leaked draft law by the German Federal Ministry for Economic Cooperation and Development (BMZ) is an indication of a first step towards addressing this contradiction. The proposal relates to sustainable supply chains and reportedly includes an element on human rights due diligence for German companies.
While it is important to recognise that the proposal has not been endorsed by other ministries and thus in its currently reported form has no legal consequences, the draft is of political significance within and beyond Germany. It presents an important opportunity to move the debate forward now and call for decisive action from all parts of the Government.
So far, the German Government has relied on voluntary commitments by companies to respect human rights. In its coalition agreement on implementing the National Action Plan on Business and Human Rights, the Government has however committed itself to legislative measures if by 2020 fewer than 50 percent of German companies with more than 500 employees have introduced an effective human rights due diligence process.
The present emphasis on voluntary action has been criticised by the United Nations Economic and Social Council and civil society groups. Concerns have also been raised regarding the current design of the methodology by which companies’ human rights efforts are to be monitored.
The scale of human rights allegations against German companies illustrates the need for regulation. Since 2005, the Business & Human Rights Resource Centre has made over 280 approaches to German companies asking them to respond to allegations of human rights abuse, making it the third-most approached country of headquarters, surpassed only by the USA and the UK.
Over 90 percent of reported abuses concerned incidents abroad, illustrating the global scale of their human rights impacts. And while some German companies such as adidas, which has the best score of companies ranked in the Corporate Human Rights Benchmark, have taken action to introduce robust human rights due diligence, many other companies lag behind.
A framework on legal liability for German companies could help change this. As reported by German media, the Development Ministry’s proposal contains a number of strong elements, and rightly has a comprehensive approach to the human rights responsibilities of German companies’ foreign subsidiaries and contractors. The draft law is said to include the following:
- The law would apply to companies with more than 250 employees and 40 million Euros in annual turnover. Specific sectors mentioned include agriculture, energy, mining, textiles, leather and electronics.
- The law would require companies to carry out internal country and sector-specific supply chain risk assessments, appoint a compliance officer to monitor compliance with the law’s requirements, and establish an effective complaints mechanism.
- Potential sanctions would include fines of up to five million Euros, imprisonment and exclusion from public procurement procedures in Germany.
German civil society organizations including Germanwatch, Südwind, CorA and Venro have welcomed news of the proposed draft and expressed their support. They caution against focusing such a law on labour rights abuses alone and have asked whether and how foreign workers would get better access to justice in German courts. However, civil society groups have also said this opportunity should not be missed or fall flat due to opposition from other ministries, who are encouraged to back the initiative.
Various German companies would support such law as well. Textile discounter KiK for example is among those who have previously spoken out in favour of mandatory due diligence. From a business perspective, regulation would provide legal certainty and level the ‘playing field’. All responsible companies should thus in principle welcome such an approach.
The Development Ministry’s proposal should be seen in a broader context in which several initiatives are calling for regulatory shifts towards mandatory corporate human rights due diligence in Europe, France being the first country to actually introduce such legislation under the Duty of Vigilance law. As the fourth largest economy in the world, Germany would be well-positioned to provide strong leadership and further drive government efforts to address the impacts of businesses on human rights.
With the German presidency of the Council of the European Union (EU) coming up in 2020, the draft law and subsequent debates could also increase momentum around a common approach to human rights due diligence legislation at an EU level. Civil society and trade union leaders have called on the Finnish government to set an ambitious agenda on business and human rights during their upcoming EU presidency later this year, and Germany could help ensure this stays a priority.
BMZ minister Gerd Müller has previously demonstrated his willingness to set a strong tone on business and human rights in Germany. This latest development represents a welcome step forward. All actors, including relevant ministries and German companies, should seize this opportunity, as well as ensure that the monitoring of the National Action Plan is as robust and meaningful as possible.
Against a political backdrop of rising nationalism, this is a crucial time to focus on real solutions by strengthening corporate human rights due diligence and legal certainty and affording better protection to those workers and communities left most vulnerable.