17 February, 2021German unions have argued for years that a law on due diligence in supply chains – Sorgfaltspflichten - is necessary. Now their arguments are being taken seriously, and a new law on due diligence in supply chains is expected to be passed before the elections in autumn 2021.
The law will incorporate the provisions of the UN Guiding Principles for Business and Human Rights and the OECD Guidelines for Multinational Enterprises into German domestic legislation. Although the draft text of the law has not been published yet, ministers announced details at a press conference on 12 February.
The law will place legal obligations on companies headquartered in Germany to ensure that human rights and related environmental standards are observed at all levels of the supply chain. The law is expected to come into force at the beginning of 2023, and will initially cover companies with more than 3,000 employees. From 2024, it will cover companies with more than 1,000.
Subcontractors in other countries will have to comply with the same standards, although indirect suppliers will only be examined if issues are raised. This would make German companies liable for abuses that occur in their supply chains. If they fail to remedy these abuses, trade unions and NGOs would be able to take companies to court in Germany on behalf of the victims.
“The supply chain law needs to strengthen local freedom of association and take action against union busting. We need strong trade unions in the countries along the supply chains. Together with the workers, trade unions can detect abuse and punish violations to safeguard the rights of workers.”
Said Wolfgang Lemb, member of the executive committee of IndustriALL affiliate IG Metall.
Companies should be able to limit their liability if they implement a government-approved industry standard, called a Safe Harbour. German unions argue that a minimum requirement of Safe Harbour status would be that the company sign a global framework agreement (GFA) with the relevant global union. This would provide another mechanism for resolving complaints – as well as negative consequences for companies, like Volkswagen, who violate the terms of GFAs.
Globally, there is a growing tendency towards due diligence legislation. In 2017, France became the first country to introduce a national law based on the UN guiding principles. The Netherlands adopted a law on child labour in 2019, and the United Kingdom has a Modern Slavery Act. Laws have been passed in the United States and Switzerland, and are in preparation in Hong Kong and Canada. IndustriALL Global Union’s sister organization, IndustriAll Europe, is calling for due diligence rules at the EU level.
Initiative Lieferkettengesetz image: "For fashion without victims, we need a legal framework"
Unions in Germany have consistently made the case for a similar law, joining forces with more than 120 member organizations in the Initiative Lieferkettengesetz, and working hard to campaign and lobby for the law. They built political support over the years by highlighting the failures of a voluntary approach, and the law has been endorsed by prominent economists. Some companies, including Tchibo, which has a GFA with IndustriALL, also support the law.
The argument has now been won. Surveys show that 75 per cent of citizens favour a supply chain law. Increasingly, politicians from across the political spectrum recognize the need for a legal framework to create a just, level playing field for the activities of German-headquartered companies across the world.
Most multinational corporations claim that due diligence legislation is not necessary, and that they can police their own operations through voluntary codes of conduct. However, unions have shown that this is not true. They have demonstrated repeatedly that companies fail to abide by voluntary codes when it is not in their economic interest.
Michael Vassiliadis
The president of IndustriALL affiliate IG BCE, Michael Vassiliadis, said:
“Multinationals have had plenty of time to show that they can solve these challenges through a voluntary process. They have failed. Now, they need to accept the logical consequence: a law.”
Germany is governed by a grand coalition made up of the centre-right CDU/CSU and the centre-left SPD. The SPD has consistently supported the law, but even conservative politicians are coming on board. The CSU minister in charge of the BMZ, the German ministry for economic cooperation and development, which is responsible for overseas aid and development, joined the SPD labour minister in a call for the legislation.
Jörg Hofmann
IG Metall and IndustriALL Global Union president Jörg Hofmann said:
“The German federal government has achieved an agreement! The efforts of employment minister Hubertus Heil and the development minister Gerd Müller have led to this breakthrough. IG Metall welcomes the agreement on a law on due diligence. After a long and tough struggle, this is a positive signal.
“There is a downside: It will take too long for the law to come into force. We urge employers to meet the standards set by the law beforehand. In the medium term, it has to be evaluated whether the occasion-based examination of indirect suppliers within the value chain turns out to be sufficient.”
Although unions argued for a Safe Harbour provision linked to GFAs, Safe Harbours have not been included in the draft law. A word in the original paragraph ("will" to "should") was changed to reflect this.