Frankfurt am Main—When German carmakers seek cobalt from Congolese mines or when a chocolatier sources cocoa beans from Ghana, they may soon no longer be able to hide behind their suppliers if it turns out that the producers are using child labor or flouting environmental standards.
Under a new law proposed by the labor and development ministries, companies above a certain size will have to meet social and environmental rules all along their production chains.
The mooted law was spurred on by a deadly fire in a textile factory in Pakistan and a devastating dam collapse at a Brazilian iron ore mine that killed more than 250 people — both of which had links to German companies.
Three in four Germans back the proposals, and even major employers like car giants BMW and Daimler and coffee chain Tchibo are on board.
But industry is divided over the plan, with opponents arguing that it is unworkable and could burden firms with more unwieldy bureaucracy and a mountain of legal cases.
Even some government members are sceptics, with Economy Minister Peter Altmaier concerned that the law would put German exporters on the back foot in international competition.
Clear rules
In 2012, 258 people died in a factory fire in Pakistan’s worst industrial disaster.
A judicial probe found serious safety errors including a lack of emergency exits, poor safety training for workers, and the failure of government inspectors as contributing to the high death toll.
The factory in Karachi was part of the supply chain of German textile discounter Kik, which denied any role but agreed to pay $6 million (5.1 million euros) in compensation to the families of the victims.
“Thanks to many voluntary initiatives in the textile industry, a lot has been improved in recent years,” Kik spokesman Henning Marten told AFP.
But he noted that “we need rules that are clear and binding for everyone”.
The aim of the proposed Lieferkettengesetz — meaning “supply chain law” — is for companies to track workers’ rights and environmental standards, not just in their own structures but also at their sub-contractors or suppliers.
“Only with a legal framework can we create the conditions for effective environmental protection and respect for human rights by companies abroad,” said German platform Lieferkettengesetz.de, which is pushing for a swift passage of the law in Berlin.
For instance, chocolate producers import cocoa from West Africa, where “no one can rule out the possibility of child labor,” Lieferkettengesetz.de said.
Industry players fear a wave of lawsuits could be launched alleging negligence in their duty of care towards suppliers.
But analysts say the reality may be less painful.
“The bill calls for an obligation to make an effort and not an obligation to succeed” at stamping out human rights or environmental failings altogether, said Freshfields lawyer Mina Aryobsei.
France has seen fewer than ten legal cases since its introduction of a similar law in 2017, according to Marius Scherb, also at Freshfields.
European response
The greater fear for opponents is that the proposed law would unfairly target small businesses, leaving them at a disadvantage against other European or foreign competitors.
Germany’s proposed regulations would cover companies with more than 500 employees, while a similar French law adopted in 2017 counts only companies with more than 5,000.
Around 150 companies fall under the rules in France, but Germany’s law would target “around 7,300”, Scherb said.
Critics say that it would be better for Berlin to push for change in Brussels rather than press ahead alone.
“National initiatives are counterproductive” in a country that prides itself on exports, according to Joachim Lang, director of Germany’s powerful BDI industry federation, warning that they threaten competitiveness.
Proponents say however that Germany must take the first step.
“A European regulation is a good idea, but what credibility is there if you don’t get your own house in order first?” asked Lieferkettengesetz.de spokesman Johannes Heeg.
