(Berlin) – The German government’s proposed law governing companies’ obligations to respect human rights in supply chains is a step in the right direction but needs improving in key areas, Human Rights Watch said today. Parliament should explicitly require companies to assess and address human rights risks on an ongoing and systematic basis along the whole supply chain, including suppliers several steps down.
The proposed human rights due diligence law will require large companies based and operating in Germany to assess and respond to human rights risks in their own operations and among their direct suppliers. For suppliers further down the supply chain, the law says that companies have to conduct “incident-related” human rights due diligence when they have “substantiated knowledge” of potential abuses. But under international norms for business and human rights, companies have a responsibility to conduct human rights due diligence throughout the whole supply chain.
“It is good news that the government has finally proposed a human rights due diligence law for businesses,” said Juliane Kippenberg, associate children’s rights director at Human Rights Watch. “But if this law is to prevent the worst abuses in global supply chains, companies need to systematically assess and address risks with suppliers who are several steps away, and not just in exceptional cases where NGOs or media ring the alarm bell.”
People working in global supply chains have suffered serious labor rights abuses, and communities have suffered human rights impacts from environmental damage caused by mining and industrial agriculture. Children are at particular risk and experience a wide range of rights abuses in global supply chains, including child labor, environmental harm, lack of health and safety measures, and labor rights violations against their parents. Yet, the vast majority of companies in Germany and beyond do not investigate and address human rights abuses or environmental harm in their supply chains.
On February 12, 2021, government ministers of labor, development, and economy jointly presented the key elements of the bill to the public, after a multi-year monitoring process found that the vast majority of companies in Germany do not systematically assess and respond to human rights in their global supply chains. The governing coalition parties – the Christian Democratic Union (CDU) and the Social Democratic Party of Germany (SPD) – had agreed to adopt a law if voluntary measures were not sufficiently implemented. Despite this agreement, the Economy Ministry, led by the conservative CDU, attempted to block a robust law for several months, causing a conflict with its coalition partner.
The recent government compromise proposal comes at the last possible moment for the law to be adopted by this parliament, with national elections scheduled for September 2021. A coalition of 124 civil society organizations, including Human Rights Watch, has been advocating for a robust supply chains law since 2019; some economists, companies, and municipalities have also pushed for such a law.
The law proposed by the government applies only to large companies that are headquartered, have a registered office, or have their principal place of business in Germany. In its first year, in 2023, it would apply only to companies that have over 3,000 employees. From 2024 on, it would apply to those with more than 1,000 employees – about 3,600 companies in all.
While the bill references some key international human rights, labor rights, and environmental standards that should guide a company’s actions, it leaves out many other important international standards, such as the UN Convention on the Rights of the Child and the Paris Agreement on Climate Change. The bill references environmental norms, but lacks a fully defined environmental due diligence, including on climate change.
The bill also does not include liability provisions for situations in which companies have been implicated in serious human rights abuses and failed to conduct human rights due diligence. It also does not require companies to consult with stakeholders at all stages of due diligence work.
On the upside, the proposed law requires companies to publish annually on their website a full report outlining their human rights risk analysis, steps taken to respond to problems, and the impact, maintaining the reports on the website for seven years. It also requires companies to submit reports to the Federal Office for Economic Affairs and Export Control.
The law empowers a competent national authority to assess whether the company is meeting its obligations and initiate administrative action against the company on its own, or if it receives a complaint, giving the company the opportunity to rectify its practices. It empowers relevant authorities to impose fines on a company that has willfully or negligently failed to carry out specific obligations, and to deny public contracts to some categories of defaulting companies. The proposed law enables nongovernmental groups and trade unions to initiate legal action in civil courts on behalf of victims.
The draft law is expected to be adopted by the cabinet in March and then presented to parliament. While the law has a good chance of being adopted because the governing coalition holds a majority of seats in parliament, the parliamentary debate promises to be fierce. Some CDU politicians have argued for no law or a weaker law, whereas members from the Greens and the parties on the left have called for far stronger requirements.
Germany should aim to set an example within the EU, Human Rights Watch said. A robust supply chain law in Germany could have a positive impact on ongoing efforts to adopt human rights and environmental due diligence legislation at the EU level. On January 27, the European Parliament’s legal affairs committee voted on a proposal to request EU legislation, including liability for companies that don’t meet their obligations.
Parliament members should strengthen the law by taking the following measures:
- Clarify that companies have to conduct ongoing and systematic human rights due diligence along the whole supply chain, including indirect suppliers;
- Extend the scope of the law to all companies above 250 employees or a €20 million balance sheet total – defined as large companies in German law, and to small and medium-sized companies if they are active in industries with particularly high risks for people or the environment;
- Strengthen provisions governing civil liability for persistent or irreversible human rights, labor rights, or environmental harm caused by, or substantially contributed to, by a company through its own operations or its supply chain; and
- Spell out obligations regarding environmental due diligence, including on climate change.
“Parliament has a key role to play now in turning this into an effective law“, Kippenberg said. “What is needed is a robust law that helps respect the rights of the most vulnerable people.”