17 June, 2021On 11 June, after a long campaign by unions and civil society, the Bundestag - the Federal German Parliament – passed the law on due diligence in supply chains.
The law is part of a wave of new due diligence legislation. In Norway, similar legislation – called the Transparency Act – is expected to pass, despite opposition from rightwing populists.
The German law, the Lieferkettensorgfaltspflichtengesetz, passed on 11 June, requires companies with more than 3,000 employees in Germany (from 2024 with at least 1,000 employees) to meet human and environmental due diligence obligations in their operations, and covers the actions of direct suppliers and, to a limited extent, indirect suppliers.
The second chamber of parliament, the Bundesrat, still has to pass the law on 25 June, but there are unlikely to be further obstacles. The law will apply from 1 January, 2023.
Towards the end of the legislative process, two further positive aspects were included in the law:
- The law now covers multinational companies with a branch in Germany as well as German companies with the same criteria: at least 3,000 employees in Germany (1,000 employees from 2024).
- Corporate due diligence in supply chains can be addressed by the economic committee within companies, bringing it into the remit of Works Councils, giving unions a voice.
Unions feel that even if the law does not meet their requirements on all points, it is an important victory. If a company fails to get its subsidiaries or suppliers to comply, the case may be brought for litigation in a German court.
Wolfgang Lemb, executive committee member of IG Metall, said:
“The law on corporate due diligence in supply chains marks a long overdue paradigm shift: from corporate voluntariness to legally binding regulations. It is a first important step on the way to strengthening the rights of millions of workers who are active in the global supply chains of German companies.”
Michael Vassiliadis, president of IG BCE, said:
“After many years, virtually no voluntarily process has been established by industry to safeguard the rights of the workers in the supply chain. Therefore, I fully support the due diligence law. Now, no multinational company can close its eyes when it comes to breaches of human rights and environmental standards. Furthermore, Works Councils will have the right to address due diligence in the economic committee of the company. This right, together with the possibility that our union can support victims from other countries in German courts, gives us a strong tool to improve human rights on a global level.”
In the manufacturing sector alone, more than 140 companies with over 1.5 million employees in Germany will initially be subject to the law.
In Norway, the Transparency Act aims to promote companies’ respect for basic human rights and decent working conditions along the supply chain in the production of goods and services, and to secure access to information for the general public on how companies deal with the negative consequences of their activities.
Companies have to undertake due diligence along their entire supply chain, publish the results and provide further information as requested by the general public.
8,830 Norwegian companies – those with more than 50 employees and a turnover of more than NOK 70 million (US$ 8.2 million) - will be bound by the new legislation. The legislation is based on the UN Guiding Principles on Business and Human Rights and the OECD guidelines for multinational companies.
The legislation is supported by most political parties, including the centre right, all major NGOs and the Norwegian labour centre, the LO.
IndustriALL Global Union contributed to the development of the law by appearing before for the panel that drafted the text, with examples from everyday life in manufacturing globally and advice on content.
Images: Initiative Lieferkettengesetz