That German supply chain law comes into force in January – and the federal government could soon have to tighten it again. Because the EU Commission presented the draft of a corresponding one in February European legal act, and that would cover many more companies in Germany. These companies then have to ensure that their suppliers around the world comply with human rights and environmental protection. This is to ensure, for example, that no forced or child laborers are involved in the production of a T-shirt or chocolate bar. In the event of violations, European companies face fines and lawsuits for damages.
Before this EU directive can take effect, however, the European Parliament and the Council of Ministers, the body of the 27 governments, must agree on a final version. And that will be difficult. After all, Parliament wants to further sharpen the proposal, while the Council wants to weaken it. This emerges from a compromise text by the Council, which Süddeutsche Zeitung present.
As early as this Thursday, the EU economics ministers are to meet at a Meeting in Brussels adopt their negotiating position for talks with Parliament. State Secretary Sven Giegold from the Green Party will represent Germany. Parliament will probably not finalize its position until May. But already three weeks ago, the Dutch MP Lara Wolters presented their proposed changes. As a so-called rapporteur, the social democrat is responsible for guiding the legal act through the parliament. And she wants to significantly tighten the Commission’s draft.
The German supply chain law initially applies to companies with more than 3,000 employees, in 2024 the limit will drop to 1,000 employees. The Commission, on the other hand, proposed a limit of just 500 employees and 150 million euros in annual sales for the directive. If at least half of the turnover comes from risk sectors such as textiles, food, raw materials and metal processing, the employee limit is even halved. MEP Wolters would like to further cap the thresholds – to 250 employees or 50 for companies in risky sectors in which violations of human rights and environmental protection are widespread. The social democrat also wants to brand additional branches of industry as risky. Such changes would make EU legislation cover many more companies.
“We need an effective law.”
In the Council of Ministers, on the other hand, the EU governments have agreed to fight for the threshold values from the Commission’s draft to be retained. This comes from a 125-page draft negotiating position that the 27 ministers are expected to approve on Thursday. The governments also want to give companies a year more transition time than the Commission.
There was disagreement among governments as to whether corporations should monitor the human rights situation along the entire value chain. France and Italy, for example, are said to require that a company only has to control the situation at suppliers and raw material producers, but not what happens to the finished product after it leaves the company’s factory. The draft of the negotiating position now replaces the term “value chain” in the legal text with “chain of activities” and makes it clear that the phase in which the goods are used is not covered.
The negotiating position also narrows down the circumstances under which EU companies can be sued for damages if suppliers commit violations on other continents. However, the Council of Ministers did not take up the Federal Government’s demand for a so-called safe harbor clause. This would have meant that lawsuits are hardly possible once external auditors have confirmed to European companies that their supply chains are flawless.
MEP Anna Cavazzini, trade policy spokeswoman for the European Green Group, calls it “worrying that the Council wants to further weaken the Commission’s proposal, which is already incomplete in parts”: “We need an effective law to unite violations of human rights in our supply chains to put a stop to it.”