Germany: New Supply Chain Law a Step in the Right Direction

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A 9-year old girl collects sand in search of gold at a mining site in Moroto District, Uganda. @2021 Angella Nabwowe Kasule for ISER
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(Berlin) – A new law on human rights in supply chains adopted by the German Parliament on June 11, 2021, ushers in a long-awaited shift to mandatory company compliance rules in Germany, Human Rights Watch said today. The German parliament acted to adopt the law during the last days of the current legislative period, after months of negotiations.

“The German government has taken a critical step to ensure that companies operate responsibly,” said Juliane Kippenberg, associate director, children’s rights division, at Human Rights Watch. “Respect for human rights in global supply chains is not something that should be optional.”

The law, while imperfect, will require large companies to regularly and systematically identify and address human rights and environmental risks in their direct supply chains. Companies will have to publish a report annually outlining the steps they have taken to identify and avert human rights risks, and national authorities will be empowered to initiate administrative action or impose fines on companies that fail to carry out their obligations. 

The law only applies to companies with more than 3,000 employees beginning in 2023, and to companies with more than 1,000 employees from 2024.

The legislation is a compromise after polarized negotiations between politicians seeking to impose robust regulation and those wishing to minimize it. Industry associations lobbied heavily for weaker rules. While the law is an important step toward meaningful corporate accountability, it does not incorporate the highest international standards, Human Rights Watch said.

Companies only have to take measures in specific incidents if they have “substantiated knowledge” of potential abuses, and the measures can be of a general preventative nature. The law does not require companies to undertake thorough and systematic due diligence on indirect suppliers further down the supply chain, which is often where the most serious abuses occur.

Under international norms, companies have a responsibility to conduct human rights due diligence throughout their whole supply chain – that is, to identify, address, prevent, and remedy abuses – regardless of whether they have foreknowledge of problems.

The law also does not create liability for companies that have been implicated in serious human rights abuses, and does not require companies to assess the compliance of their supply chain with important international standards in certain treaties, such as the UN Convention on the Rights of the Child, or in the Paris Agreement on Climate Change.

“The law is a step in the right direction, but has some serious weaknesses that should be addressed in the future,” Kippenberg said. “There is still a risk that human rights abuses further down in global supply chains will be allowed to continue because companies do not have to conduct due diligence for their whole supply chain. And abuses can occur in companies with fewer than 1,000 employees too.”

The next government, which will be elected in September 2021, should take steps to strengthen the law, Human Rights Watch said. In addition, supply chain legislation planned by the European Union and other European governments should go beyond the German law.

A coalition of civil society organizations, including Human Rights Watch, has been advocating for a robust supply chains law in Germany. Some companies as well as a group of 130 economists have also pushed for such a law.

“The new German law is a good start, but more is still needed to really ensure the products we buy aren’t tainted by abuse and people don’t suffer for making them,” Kippenberg said.