Femnet e.V.

In 2011, the responsibility for human rights diligence was concretised on an international level in the so-called Guiding Principles for Business and Human Rights of the United Nations. The "Supply Chain Law Initiative" aims to legally establish these human rights due diligence obligations of companies and is thus guided by the implementation of an internationally recognised standard.

Due diligence means that a company must use a risk analysis to identify significant risks to human rights and the environment in its global business activities. It must take effective and reasonable precautionary measures to protect people and the environment. The duties of due diligence apply to the entire business activity of a company, i.e. the supply chain from the extraction of raw materials to their disposal. Serious effects must be reviewed on site, complaint mechanisms for affected parties must be established, existing violations must be stopped and damage must be repaired. Companies must report transparently on the measures taken.

Companies guarantee the safety and quality of their products already now. They agree on standards, exact delivery times, failure and compensation clauses with their suppliers. This can be followed up: human rights due diligence obligations can be integrated in existing processes and taken into account within contract negotiations. The complexity of the measures should be appropriate to the size of a company. Particularly medium-sized companies often attach importance to reliable, long-term and in sometimes direct relationships to their suppliers. Enterprises, especially smaller ones, have the possibility to join industry-wide solutions.

The initiative demands that companies operating in Germany respect internationally recognised human rights also abroad. These include, for example, the right to life, the right to physical integrity, the prohibition of forced and child labour, freedom of association, the prohibition of discrimination in the workplace and the right to health. These are established in the Universal Declaration of Human Rights, human rights conventions and the International Labour Organisation (ILO) Declaration on Fundamental Principles and Rights at Work. The environmental standards that companies must comply with include locally applicable environmental protection regulations, individual environmental standards from international agreements and the European-wide standard of best available technology, unless deviations can be justified.

The United Nations has agreed that in principle all companies should take responsibility for human rights in their supply chains. In view of the specific requirements, however, a law should be a measured solution, and it should place correspondingly large companies with a wide influence under greater obligation than smaller ones. The Supply Chain Law initiative therefore calls for the Supply Chain Law to apply to all companies with 250 or more employees*. Companies with fewer employees - so-called small and medium-sized enterprises (SMEs) - would be affected if their main field of activity is in a high-risk sector, such as textiles and leather or the chemical industry. Micro-enterprises with fewer than 10 employees* should be excluded from the legislation. SMEs often have short decision-making processes and long-term business relationships. This makes it easier for them to meet the requirements of a supply chain law without having their own corporate responsibility department. Some SMEs are already systematically dealing with human rights, for example in industry initiatives such as the Fair Wear Foundation or the Round Table on Human Rights in Tourism

The law should apply to companies with their headquarters or head office in Germany, to companies with a branch in Germany and to companies that regularly import products into Germany. A similar regulation exists in the Dutch law against child labour.

A law without sanctions is a mere paper tiger and remains ineffective. That is why we are calling for companies to pay fines if they fail to comply with their duty of care and have not published measures. Companies that do not meet the requirements should be excluded from public procurement or foreign trade promotion.  If a company has not done enough to adequately prevent damage to people and the environment, it must be held liable for this damage and pay compensation. All sanctions must be appropriate. Even in the event of damage, a company can relieve itself by demonstrating that it has taken appropriate measures. It is then up to the competent court to decide on these individual cases.

The principle is: Those who cause damage must take responsibility. This does not only apply to damage caused by a company itself, but also to damage caused along the supply chain, for example by subsidiaries, important business partners or suppliers. After all, a large number of damages occur in riskier production stages or businesses. As a general rule, companies are only liable if damage was identifiable and avoidable with appropriate measures. This means: only if a company has demonstrably acted negligently or deliberately disregarded its duty of care, it will be prosecuted. A company must prove that it has exercised due care in principle. The connection between the actions of a company and the damage, for example bodily injury, damage to property or land eviction, must be proven by the injured party in each individual case.

The KiK case20 has shown it is necessary to close the gaps in German law and protect the rights of those affected in a better way. The textile company KiK itself has been calling for more legal certainty and binding rules on human rights due diligence since the lawsuit against its own company was filed. The most important aim of liability is to avoid damage through preventive measures.

As expected, the major employers' and trade associations have pointed out their refusal to any form of binding regulation since the beginning of the discussions on a supply chain law. On the other hand, a growing number of companies such as BMW, Daimler, Tchibo and Vaude are clearly in favour of a supply chain law. They increasingly see the need to change their business models in order to respect human rights. If they invest in these steps, they do not want to be at a competitive disadvantage compared to companies that continue to act irresponsibly. Moreover, they can achieve much less on their own than if all competitors were also obliged to take these steps. For example, if several customers of a supplier company are obliged to work locally to improve working conditions, they can achieve more than a single company. If a smelter is legally obliged to demonstrate how it prevents human rights violations in the extraction of raw materials, its customers will also find it easier to trace the origin and mining conditions of the metals used. The advantages of a law are obvious for companies that want to consistently respect and implement human rights in their business.

In 2011, the United Nations Human Rights Council adopted the Guiding Principles on Business and Human Rights - an international catalogue of recommendations on respect for human rights in global business, which proposes a mix of binding and voluntary measures. To implement these guiding principles, the German government adopted a "National Action Plan on Business and Human Rights (NAP)" at the end of 2016. This is based on the principle of voluntary action. Companies are called upon and supported to respect human rights abroad. The effectiveness of the NAP is to be reviewed by 2020. If it turns out that by 2020 less than 50 percent of large companies with more than 500 employees* have voluntarily introduced processes to respect human rights, the action plan states that a law will be reviewed. The coalition agreement provides for a Supply Chain Act in this case. The German government has decided to introduce a monitoring procedure to review the 50 percent target. Companies were asked about their implementation of the due diligence obligations. This procedure has been the subject of numerous political disputes and has a number of methodological weaknesses. In a first survey of companies, the deadline for reporting was postponed twice and the sample was extended due to hesitant participation. The evaluation showed that only about 20 percent of the companies that responded meet the requirements of the NAP -  nine years after the adoption of the UN Guidelines.

The Supply Chain Law initiative calls for binding rules for companies - regardless of the outcome of the monitoring. Any company that violates human rights in its supply chain is one too many. In 2018, the United Nations Social Committee criticised the quota regulation of the National Action Plan and recommended a legal regulation. The unplanned publication of a confidential legislative proposal from the Federal Ministry for Economic Cooperation and Development in spring 2019 heated up the discussion about a necessary law. At the end of 2019, Federal Labour Minister Hubertus Heil (SPD) and Federal Development Minister Dr. Gerd Müller (CSU) announced that they would prepare discussion points for a supply chain law.

FEMNET- addition:
By July 2020, the two ministers have brought forward their discussion points which are now due to be discussed by the cabinet, i.e. government. This debate has been postponed for several times since the publication of the discussion points. The strongest opposition to the law comes from the Ministry of Economics. Currently, the Supply Chain Law initiative uses every opportunity to push for the debate in the cabinet and to prevent the watering-down of the proposed law.

Every country must create and enforce laws to prevent harm to people and the environment. However, placing the responsibility for observing human and labour rights solely with the producing countries ignores the actual balance of power and limited leeway of financially weak states. Experience shows that the protection of human rights in production countries is often inadequately guaranteed - be it through a lack of opportunities, unwillingness, weak state structures, competition between locations or corruption. International standards make it clear that in these cases, too, companies must assume responsibility for respecting human rights in their supply chain. If producing countries themselves now create better laws (such as higher minimum wages) to respect human rights and monitor compliance more thoroughly, they run the risk of transnational corporations relocating production to other countries or sourcing their raw materials from other countries to avoid cost increases. Binding rules for companies reverse this perfidious logic of globalisation: Strong environmental and labour laws and good enforcement of these become a locational advantage for producing countries, not just cheap production. Without human rights-based rules for companies, globalisation is not sustainable.

Furthermore, binding standards for human rights and the environment strengthen the support of workers, trade unionists, people who have been displaced from their country or environmental activists. In their struggles for better work, a self-determined life and the preservation of the basis of life, they repeatedly refer to universal human rights.

A supply chain law brings positive changes on the ground: Employees in production benefit from improved working conditions when companies are obliged to comply with social and ecological standards. The health of people living in the vicinity of a factory is improved if the factory complies with mandatory exhaust gas values and, for example, has to install an exhaust gas filter.

Critics express the fear that companies will no longer invest in countries that guarantee respect for human rights insufficiently. To counteract this, accompanying development policy measures in the producing countries make sense. They show, for example, how sustainable methods in small-scale mining can promote development.

If we continue to rely on the principle of "voluntary action by companies“ it is clear that destructive and inhumane forms of economic activity will be perpetuated and further promoted by ongoing competitive pressure. Private sector investments in countries of the Global South only make a meaningful contribution to sustainable development if human rights and environmental standards are respected.

Existing laws on due diligence in global supply chains or reporting take different approaches. In general, it appears that due diligence obligations are most effective as a process requirement in combination with liability risks, and mere reporting requirements appear weak in implementation. The UK Modern Slavery Act, which imposes reporting requirements on companies, was evaluated in 2019: While the Act is said to help educate and raise awareness, the reporting requirement is seen as ineffective because it has become a tick box exercise and around 40% of eligible companies fail to meet the requirements. Additionally, there are no sanctions for non-compliant companies. It is still very early for a comprehensive evaluation of the Supply Chain Act in France of 2017 or the Act in the Netherlands of 2019. In France, a lawsuit has so far been filed against the French company Total. The French parliament has planned an initial evaluation for 2020.

Experience with the EU's Conflict of Interest Regulation shows that regulation can have different impacts on large and small economic actors in supply chains. Small and particularly informal actors may be disadvantaged or face higher barriers to compliance. Conflicts between industrial mining and small-scale miners* may intensify. It is therefore recommended that development policy measures accompany the formalisation of small-scale mining and promote opportunities for small-scale miners to organise themselves in trade unions or through interest groups. Furthermore, it must be ensured that trade agreements do not place the interests of companies above respect for human rights and environmental standards. Moreover, no regional focus in the definition of risk factors should be chosen in the scope of application, as individual countries or regions run the risk of being boycotted by moving production facilities. Similarly, a regulation should be cross-sectoral, as otherwise human rights violations in certain regions can shift from one sector, for example mining, to other sectors, such as agriculture.

Scope of due diligence

For a supply chain law to be effective, it must oblige companies to exercise due diligence along the entire value chain and must not fall short of the UN's guiding principles for business and human rights’ requirements.

Governmental inspection

For a supply chain law to be effective, it must empower a state authority to monitor compliance with human rights and environmental protection standards and give it the power to sanction companies that disregard them.

Respect for the environment

For a supply chain law to be effective, it must recognise the link between human rights violations and environmental degradation: Environmental protection and the protection of human rights go hand in hand.

Civil liability 

For a supply chain law to be effective, it must allow for civil liability and give those affected by human rights violations abroad the opportunity to sue for damages in German courts by companies that act in an irresponsible manner.

Companies concerned

For a supply chain law to be effective, it must not only apply to very big companies, but it must also target small companies in sectors with high risks regarding the violation of human rights.

Sources:

Websit of the initiative - section with faq

Demands by the initiative (pdf-file)