Nachrichten & Pressemeldungen - © Initiative Supply Chain Act 15 December 2023 Agreement on the EU Supply Chain Act – what do we need? Assessment of the Supply Chain Act initiative on the agreement on the EU Supply Chain Act of 15. December 2023 It is a milestone in protecting people and the environment in global supply chains: In a 16-hour marathon meeting yesterday, the EU Commission, Council and Parliament agreed on the EU Supply Chain Act. But what exactly will change with it? We took a closer look at the compromise. Whether in the textile factories in South Asia or on the cocoa plantations in West Africa: Time and again, exploitation and environmental destruction occur in the supply chains of European companies. But since yesterday it is clear: Businesses cannot and should not continue as before. This is because the EU Supply Chain Act is coming - and thus companies from all over Europe will have to take care in the future to avoid human rights violations and environmental destruction in their supply chains. It is true that the European Council and Parliament have yet to confirm the compromise reached yesterday. But this is only a formality in Brussels. Let's take a look at the content: What exactly was agreed yesterday? What is the difference between the EU Supply Chain Act and the German Supply Chain Act, which has been in force since the beginning of 2023 – and what is changing for those affected? In advance: The exact wording of the compromise text is not yet public. We will analyze this in detail as soon as it is available to us. But it is already clear: The EU Supply Chain Act will go beyond German law at crucial points. At the same time, however, it also contains some major weaknesses. Who does the law apply to? The scope of application is significantly larger than under the German Supply Chain Act: While the German law only covers very large companies with more than 3,000 employees (from 01.01.2024: 1,000 employees), the EU Supply Chain Act should apply to companies with 500 employees and an annual turnover of more than 150 million euros. If smaller companies with 250 employees or more are active in a risk sector, such as the trade in gemstones, the law also applies to them – which sectors have been included as risk sectors, but are not yet public. It is clear: Small and medium-sized enterprises are still exempt from the law. They are only affected if they are part of the value chain of larger companies. In this case, the law provides for numerous financial and administrative support from the EU, but also from large companies, so that small companies can fulfil their obligations. Companies covered by the law will have to carefully examine their supply chains in the future: Are there risks of human rights violations and environmental degradation? If so, they must prioritise these risks and then take appropriate countermeasures. Ideally, this damage does not occur in the first place, but is prevented preventively. Affected people finally get access to justice Eleven years ago, hundreds of people died in a factory fire in Pakistan while producing clothing for the German market. Fire safety at the Ali Enterprises factory was poor: The main customer KiK was not interested enough in the working conditions at his supplier. Four persons concerned brought an action before a German court seeking compensation for pain and suffering – the action was dismissed. For those affected, it has so far been almost impossible to claim compensation if a company has not complied with its human rights obligations. This is expected to change with the EU Supply Chain Act: In the future, data subjects will have access to courts in the Member States, be able to claim damages and also obtain information from companies from courts. Cases should only become time-barred after five years – all this is significant progress compared to the German Supply Chain Act, which does not contain any liability rules. Nevertheless, there are also restrictions on the EU supply chain law: Liability does not apply to collectively used rights, such as the rights of trade unions and indigenous peoples. Nor does it intervene if companies do not draw up their climate plans properly. Mixed conclusion on climate protection This brings us to the issue of climate – and similarly to the World Climate Conference in Dubai, the conclusion here is mixed. Positive is: In the future, companies will have to draw up a so-called ‘climate plan’. In other words, they must demonstrate how they are reducing emissions in their business and, above all, in their supply chain in a way that is in line with the 1.5-degree target of the Paris Climate Agreement. They also need to set intermediate goals. But from here it becomes problematic. The competent authorities should only check whether an undertaking draws up such a plan and whether it meets the substantive requirements, but not whether the undertaking also implements it. Although companies are obliged to put into effect – this is not to be checked and, in case of doubt, sanctioned. At this point, the EU has missed a huge opportunity. The two biggest weaknesses: Financial sector and downstream supply chain virtually unrecognised The result in the financial sector is even more disappointing. Although financial institutions have been shown to contribute massively to human rights violations and environmental damage, the EU Supply Chain Act does not impose any due diligence obligations on them for their investments and loans. This is because the law does not apply to the downstream supply chain. This is not in line with the UN Guiding Principles on Business and Human Rights, which clearly state that the sale of products must also be covered by due diligence. For the EU Supply Chain Act, this means: This means that companies do not have to check what their products are used for – and this applies to manufacturers of surveillance technology and pesticides as well as to financial service providers whose products are loans and investments. Thus, banks, insurers and investors are de facto not covered. After all: From now on, insurers and investors will also have to draw up and implement climate plans that are in line with the Paris Climate Agreement. But this does not change the fatal overall impression that the EU is releasing an entire industry from responsibility here. Despite the limitations: A big step for human rights! The restrictions in the area of climate protection, downstream supply chains and finance are painful compromises, which are due, among other things, to the lobbying of the large business associations. Nevertheless, the EU Supply Chain Act is a milestone: It marks a Europe-wide paradigm shift away from voluntary commitments towards mandatory corporate due diligence – and thus a great success for Europe-wide civil society, which has been campaigning for this project for years and decades. The EU Supply Chain Act now needs to be swiftly passed by the European Parliament and the Council so that the law can be adopted before the upcoming EU elections. The Supply Chain Act initiative is supported by: Amnesty International Deutschland, Arbeitsgemeinschaft der Eine Welt-Landesnetzwerke in Deutschland e.V. (agl), Brot für die Welt, Bund für Umwelt und Naturschutz Deutschland e.V. (BUND), Romero Initiative e.V. (CIR), CorA Network for Corporate Responsibility, German Trade Union Confederation (DGB), European Center for Constitutional and Human Rights (ECCHR), FEMNET e.V., Forum Fairer Handel e.V., Germanwatch e.V., Greenpeace e.V., INKOTA-netzwerk e.V., Misereor e.V., Oxfam Deutschland e.V., SÜDWIND e.V., ver.di - United Services Union, WEED - World Economy, Ecology & Development e.V., Weltladen-Dachverband e.V., Werkstatt Wirtschaft e.V.
