Ultimate failure: EU supply chain law without a majority

On Wednesday, February 28, 2024, a debate on the planned EU supply chain law was scheduled at relatively short notice. It became apparent that there was no majority in favor of passing the law. This is more than unfortunate! And indirectly a consequence of the policy of the German government. The FDP’s refusal to recognize and accept a negotiated legal compromise and instead to stir up sentiment among other governments against this compromise has led to German abstention and uncertainty in other EU countries.

As the Süddeutsche Zeitung reports, there would not have been a majority for the law even with the approval of the federal government. This means that what many predicted has come true: that the blockade by the FDP and the resulting abstention by the German federal government ultimately led to the failure of the law!

See also: EU states bury supply chain law

2024-02-29T09:08:18+01:00February 28th, 2024|

Vote on the EU Supply Chain Act: Chancellor Scholz must secure a democratically found compromise!

Federal Minister Heil told Reuters on February 06 that Germany is expected to abstain from the vote on the EU supply chain law (“Corporate Sustainability Due Diligence Directive (CSDDD)”). “I am very disappointed that Germany has to abstain from the upcoming vote due to an ideologically motivated blockade of the FDP,” said Heil. “An EU supply chain directive strengthens human rights in international trade relations, for example when it comes to combating child and forced labor.”

Germany’s abstention would endanger the adoption of the Supply Chain Act, as it is feared that other states will also abstain or even take a position against it.

An EU supply chain law would also be in the interest of the German economy. This would level the playing field for all companies. Instead, German companies must continue to follow the German supply chain law – while this does not apply to companies in other EU countries. Just today, numerous small, medium and large companies published their support for the CSDDD in a statement. These include companies such as ALDI Süd, KIK, EPSON, VAUDE etc. In contrast to the FDP’s claims, the companies assess the EU directive as practicable (“appropriate and implementable”) and are therefore demanding that Federal Chancellor Olaf Scholz will “secure this democratically found compromise and thus provides companies with legal certainty and fair competitive conditions.”

See: Heil no longer believes in a German yes to the EU supply chain law
See: EU Supply Chain Act: Blocking a compromise means creating legal uncertainty
See: Business & Human Rights Centre
See: Initiative supply chain law

2024-02-29T09:09:15+01:00February 6th, 2024|

Protest action in front of the FDP European Party Conference

“Stop human rights violations and environmental destruction in the supply chains of European companies. And: Stop the FDP’s attempts to stop the EU supply chain law!”

That is the message of the protest action by the Supply Chain Act Initiative on the occasion of the FDP European Party Congress on January 28th in Berlin. The EU supply chain law is expected to be passed in the coming weeks. In December 2023, the Commission, Parliament and EU member states agreed on a compromise – with the participation of the federal government and Federal Justice Minister Marco Buschmann (FDP).
Partly at his insistence, the law was weakened in key areas and is no longer a “big hit”. But it is an important step forward for human rights and the environment without placing undue burden on companies. The FDP is now retrospectively and single-handedly questioning this Europe-wide compromise. The Supply Chain Act Initiative is protesting against this. The alliance of more than 140 civil society organizations expects Chancellor Olaf Scholz to give his say and a clear commitment to the EU Supply Chain Act.

Text/Foto: Initiative Lieferkettengesetz/Paul Lovis Wagner

See also: Unternehmen wollen Regeln (TAZ vom 28.01.2024 / Autor: Jonas Seufert)
It says, among other things: “Billion-dollar shipping companies, a large German supermarket, a furniture giant, a pharmaceutical company, medium-sized clothing manufacturers from southern Germany – they all want politicians to regulate their supply chains: with a strong EU supply chain law.
That is remarkable. Because at the moment it seems as if the entire economy in Germany is up in arms against the law, which is intended to create uniform rules for the protection of human rights in the supply chains of larger companies. Too much bureaucracy, they say, an overburdening of small companies, the end of Europe as a business location. […] But if you ask around at companies, you will get a much more differentiated picture.

Statement from the CDA

Even the German CDA is urging the federal government to support the EU supply chain law. This is what Karl-Josef Laumann, Minister of Social Affairs in North Rhine-Westphalia and chairman of the Christian Democratic Workers’ Association (CDA), the “social wing” of the CDU, says:

“Human rights and sustainability are no longer supposedly “soft” topics in the economy. More and more companies want the state to create a better “level playing field”, i.e. to enforce the same minimum standards for everyone. Otherwise those companies that are indifferent to environmental protection and labor rights can gain a price advantage.

Sustainability in the supply chain is important for a majority of companies. According to their own statements, the bureaucratic effort for the affected companies is limited and only makes products and services minimally more expensive. Nachteile im globalen Wettbewerb befürchtet kaum einer. Hardly anyone fears disadvantages in global competition.”

See: Laumann gegen deutsche Blockadehaltung beim Lieferkettengesetz

2024-02-06T15:56:53+01:00January 29th, 2024|

Meeting in the Chancellery on the EU Supply Chain Act

A crucial meeting between the relevant ministries will take place in the Chancellery today, January 19th, 2024, at which it is expected to decide whether the Federal Government in the Council will approve the EU Supply Chain Act or abstain. Therefore, together with the Supply Chain Act Initiative, we are calling on our Chancellor Olaf Scholz to show his colors:

2024-01-22T10:44:22+01:00January 19th, 2024|

New resolution: FDP rejects EU supply chain law

In the coalition agreement two years ago, the “AMPEL”-Coalition agreed to support the EU supply chain law. It states unequivocally: “We support an effective EU supply chain law, based on the UN Guiding Principles on Business and Human Rights, which does not overwhelm small and medium-sized companies.” (siehe unten).

Now – shortly before the successful adoption of the EU Supply Chain Act – things suddenly sound completely different for the FDP. The FDP Presidium published a resolution paper on January 15, 2024, which states: “We reject the current draft of the EU Supply Chain Directive. This would create disproportionate bureaucratic hurdles and legal uncertainty…”

This is questionable in itself against the background of the joint coalition agreement. However, it also overlooks the fact that many companies (including medium-sized businesses) welcome a stricter EU supply chain law. A recent survey of 2,000 companies by the Handelsblatt Research Institute (HRI) showed that only 7 percent reject an EU supply chain law, while 44 percent of companies are already paying attention to sustainability in the supply chain and 37 percent are already partially doing so.

Johannes Heeg from the Supply Chain Act Initiative, of which XertifiX is also a member, writes: “The EU supply chain law is not about annoying bureaucracy, but about fundamental human rights and environmental standards. With its U-turn shortly before the finish line, the FDP is jeopardizing Germany’s credibility in the EU when it comes to sustainability.With its blockade stance, the FDP is also isolating itself internationally: the liberal group in the European Parliament celebrated the agreement on a compromise on the EU supply chain law in December as a great success.Chancellor Olaf Scholz is now responsible for protecting the credibility of the federal government in the EU.

See: Coalition Agreement

See: Resolution paper of the FDP Presidium published on January 15, 2024

See: Handelsblatt Research Institute (HRI) about the Supply Chain Law

2024-01-18T09:49:14+01:00January 15th, 2024|

One year of the Supply Chain Act / Extension from January 1st, 2024

The German Due Diligence Act (LkSG) has now been in force for almost a year. This means that all companies with 3,000 or more employees must, among other things, adopt a policy statement, analyze the risks among direct suppliers and, if necessary, take corrective measures if risks are identified. From January 1, 2024, the LkSG even applies to companies with 1,000 employees.

The Federal Office of Economics and Export Control (BAFA) is responsible for monitoring the implementation of the LkSG. This can even impose sanctions on companies for violations of the LkSG. In the first year, however, BAFA has not yet imposed any sanctions on companies. This is quite deliberate, because – as Torsten Safarik, head of BAFA, explains: “We see ourselves as partners of companies in order to successfully implement the law together,” as can be seen in an article in the Tagesschau.

There is also criticism of this approach because it means that changes are achieved less quickly than human rights violations in supply chains might require. The criticism is certainly justified. However, as always, it is important to find the balance between reality and expectations. The new EU supply chain directive with civil liability and applicability to companies with 500 or more employees will certainly increase the pressure on everyone involved.

See: Article in the Tagesschau

2023-12-21T12:49:54+01:00December 21st, 2023|

EU supply chain law (provisional) passed

Yesterday, the EU Council and the European Parliament reached a provisional agreement on the Corporate Sustainability Due Diligence Directive (CSDDD), which aims to protect the environment and human rights in the EU and worldwide.

The Due Diligence Directive imposes obligations on large companies regarding actual and potential negative impacts on human rights and the environment. This affects EU companies with more than 500 employees and a net turnover of 150 million euros and includes their own business activities, those of their subsidiaries and those of their business partners.

Companies must therefore carry out a risk analysis of their supply chains and, if necessary, initiate measures to minimize the risks. The directive also strengthens access to justice for those affected (“civil liability”), according to which those affected by negative impacts (including trade unions and NGOs) have 5 years to make claims. If companies violate the directive, they can be subject to penalties equal to 5% of the company’s net sales.

The provisional agreement reached with the European Parliament must now be approved and officially adopted by both institutions (which is considered a formality in Brussels).

It is great that the Due Diligence Directive has now been adopted in this form and will give all European companies legal certainty in the future and a level playing field in matters of human rights and environmental protection for companies with 500 or more employees. In the last point, the EU directive goes beyond the German Supply Chain Act, which can be seen as a great success and a step in the right direction!

Siehe: Council and Parliament strike deal to protect environment and human rights

Source: Corporate sustainability due diligence: Council and Parliament strike deal to protect environment and human rights

2024-01-08T09:18:46+01:00December 15th, 2023|

BMZ / BGR develop certification system for mineral raw materials

Tin, tungsten and tantalum (coltan) are mined and traded in the Great Lakes region of Africa (Angola, Burundi, Republic of Congo, Democratic Republic of Congo, Kenya, Rwanda, Central African Republic, Sudan, South Sudan, Uganda, Tanzania and Zambia). These raw materials enable the (illegal) enrichment of unlawful militias. This also puts international companies under pressure not to trade in these conflict minerals. The result is that companies are withdrawing from the region – which in turn deprives the local population of access to income.

The federal government is supporting the Great Lakes region in establishing a transparent and credible certification system for the most important mineral raw materials (tin, tungsten and coltan). To this end, the Federal Institute for Geosciences and Natural Resources (BGR) is carrying out a long-term project. The central points of the project are:

  1. Through training and further education in mining supervision and inspection, national authorities are enabled to ensure the sustainability of raw material mining.
  2. Supporting the Great Lakes Region in implementing the regional certification mechanism.
  3. The sustainable implementation of the “Analytical Fingerprint” (AFP) developed by BGR.

The traceability of the supply chain is ensured based on the mineralogical and geochemical compositions of the mineral concentrates. However, this system is only used if doubts about traceability arise when the supply chain is checked by external auditors. The project will run until the end of 2024.

See: Supraregional Africa – German development cooperation with the ICGLR – Support for regional raw material certification

2023-12-06T17:41:51+01:00December 6th, 2023|

SMEs want human rights enforced

The Frankfurter Rundschau reports that small and medium-sized enterprises (SMEs) generally support compliance with human rights in global supply chains. This was the result of a survey by the Hamburg Foundation for Business Ethics. At the same time, the survey shows that companies fear that the Supply Chain Act (LkSG) will lead to companies focusing primarily on “compliance”, i.e. on legal certainty – and less on actual changes in favor of human rights.

There is also criticism of the behavior of the business associations, which “first ignored the fundamentally positive attitude of many SMEs, then relied on prevention for too long and finally did not contribute enough pragmatically to the concrete design,” as the study quotes.

See: Article from the Frankfurter Rundschau

2023-12-06T14:54:04+01:00December 6th, 2023|

OECD updates guidelines on corporate due diligence

The Business & Human Rights Resource Center reports that the Organization for Economic Co-operation and Development (OECD) has updated its corporate due diligence guidelines. Along with the UN Guiding Principles on Business and Human Rights and the ILO Tripartite Declaration of Principles, these guidelines are the international reference for the implementation of companies’ due diligence obligations.

The update involves, among other things, companies having to specify that CO2 reduction targets are scientifically based, that not only the supply chains for the production of a product must be examined, but also the potential use of a product, as well as a tightening of the requirements for combating corruption.

See: Business & Human Rights Resource Center article

2023-12-06T11:55:55+01:00December 6th, 2023|

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