On February 12, German government ministers put forward a draft law on corporate human rights due diligence in supply chains. On March 3, the German cabinet adopted the proposal, and it will soon be debated in parliament. And on March 8, the European Parliament made a call to “urgently adopt binding requirements” in the EU to prevent and address adverse impacts on human rights, the environment, and good governance in companies’ supply chains. If these efforts come to fruition, new laws will put in place clear rules for what companies and their investors will have to do to respect human rights.
Substantive mandatory rules for human rights and environmental due diligence are overdue, and would complement EU rules on public disclosures, including in financial services. People working in global supply chains often suffer serious labor rights abuses, including child labor, and communities face human rights impacts from environmental damage caused by mining and industrial agriculture. Children are particularly affected by a wide range of violations, including heightened risks to their health.
When companies neglect human rights, the consequences can be disastrous for those on the lowest ring of the global supply chain. In 2013, over 1,100 workers died and 2,000 were injured when the Rana Plaza building, which housed five garment factories, collapsed in Dhaka, Bangladesh. In 2019, an iron ore tailings dam in Brumadinho, Brazil, collapsed, killing at least 250 people and unleashing a wave of toxic sludge.
Companies can significantly reduce the risk of contributing to abuses in their supply chains by identifying human rights risks, taking steps to address and prevent them, and reporting publicly on their efforts. Under international norms and the German National Action Plan on Business and Human Rights, companies have a responsibility to do just that. If companies took these steps, it would be much easier for the public and investors to identify responsible business behavior.
And it is possible. Some companies have already integrated human rights monitoring into their business practices. The German government found that between 13 and 17 percent of companies already conduct human rights due diligence. In our own work, we have documented the positive steps that some jewelry and garment brands are taking already. Yet, the majority of companies in Germany are not conducting proper human rights due diligence.
Whether regulation will truly prevent human rights abuses and environmental harm in global supply chains depends on the precise content of the law. The draft law proposed by the German government has some strong points – for example, a reporting requirement and a fairly strong regulatory oversight – but it also has serious shortcomings. It only obliges companies to conduct systematic, ongoing human rights due diligence on their direct suppliers, not indirect suppliers. Under international norms for business and human rights, companies have a responsibility to conduct human rights due diligence throughout the whole supply chain. The draft law also provides that companies only have to conduct “incident-related” human rights due diligence when they have “substantiated knowledge” of potential abuses by suppliers further down the supply chain – where most abuses occur. So, serious abuses may continue unaddressed because a company has not looked into potential risks.
The law should be amended to require companies to conduct ongoing, systematic human rights due diligence along their whole supply chain. It should also include penalties for companies that fail to do so, reference key treaties such as the UN Convention on the Rights of the Child and the Paris Agreement on Climate Change, and fully define requirements on climate change and other environmental due diligence.
A robust German law is necessary to ensure respect for human rights wherever those companies operate or source from, and it is in the interest of businesses that seek to act responsibly. It would level the playing field by requiring responsible business conduct from everyone. As the country with the strongest economy in the EU, Germany should aim to set an example in an area where the EU and other countries are developing standards. The proposals for an EU law announced by the Commission and proposed by the European Parliament are significantly more robust. They include proposals regarding civil liability and include clear provisions on the environment.
During April and May, the Bundestag will debate and then vote on the proposal. Businesses should support a law that requires safeguards across the whole supply chain to ensure that the rights of the most vulnerable – the people at the bottom of global supply chains – are respected.