For over three years, European institutions have worked hard to develop and negotiate a groundbreaking EU supply chain law, with the aim of preventing and addressing human rights and environmental harm throughout companies’ supply chains. In mid-December, many celebrated the hard-reached agreement between the EU Council and Parliament on a draft law, the Corporate Sustainability Due Diligence Directive. But now, just before getting the law across the finish line, it risks being tripped up by a German government coalition partner, the FDP (Freie Demokratische Partei, or Free Democratic Party).
For a long time, it has been clear that voluntary codes of conduct for businesses are not enough. Child and forced labor, unsafe and exploitative working conditions, toxic pollution, and other abuses are common in global value chains, and have been documented by Human Rights Watch and many others.
In a U-turn from its previous support, the party now cites “unreasonable bureaucratic hurdles” in the proposed law. The FDP refusal to support the law means that the German government would have to abstain from the vote in the EU Council, despite support for the law from the two other, larger, coalition partners, the social democrats of Chancellor Scholz and the Green party.
A German abstention during the vote on the EU supply chains law would send a terrible political message from the country that just adopted its own supply chain law. And it would jeopardise Germany's credibility—after all, German political leaders, including from the FDP, have previously agreed that the EU supply chain law should be adopted, have actively engaged in negotiations, and shaped the most recent draft.
There is also a risk that if Germany abstains, other countries will reconsider their position and withdraw their support, creating a domino effect.
The FDP portrays itself as a liberal party representing the interests of business. But the law is not contrary to business interests. In fact, 73 companies have issued a statement in favour of a European supply chains law, and the German garment retailer Vaude just published a reaction to the FDP decision, saying “No, the FDP is not speaking for us companies”. And at the European parliament, the liberal party group Renew - which includes the FDP - supports the Corporate Sustainability Due Diligence Directive.
The law would hold large companies to account for their human rights and environmental impacts across their global value chains. Under the law, victims of abuses of workers anywhere along the supply chain in any country could go to court and companies could be held liable for breaching their obligations. Even though the law has gaps, it is certain to bring pressure on companies to respect human rights, and will level the playing field across Europe.
An estimated 450 million people work in global supply chains, in different economic sectors. Human Rights Watch has documented labor rights abuses in garment factories in Bangladesh, Pakistan, and Cambodia; violations in gold and bauxite mines in Guinea, Ghana, and the Philippines; as well as abuses in agriculture and the construction sector. Human Rights Watch has also found that social audits and certifications, which many global companies rely upon when sourcing their products from across the world, are not enough to identify, prevent and remedy abuses in global supply chains.
Business and human rights should not be seen as a contradiction. In our modern, globalized world, rules on supply chain due diligence are an important tool to ensure that companies do not cause or contribute to abuses, in line with the UN Guiding Principles on Business and Human Rights. Germany should support the EU supply chains law.
For this to happen, Chancellor Scholz needs to rule on the matter and decide that his government supports the law, despite resistance from the FDP. The European supply chains law is close to the heart of social democrats in Germany. Now, Scholz needs to step up and help bring about a future in which corporations respect rights and the environment.
