Incoming German supply chain law will weaken SMEs - Just Style
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Incoming German supply chain law will weaken SMEs

By Hannah Abdulla 20 Jul 2020

Germany's government is to introduce a law that will force companies to ensure human rights and social minimum standards are met in their supply chains, a move the country's textile trade body says is a "slap in the face" for the German economy.

Germany’s government is to introduce a law that will force companies to ensure human rights and social minimum standards are met in their supply chains, a move the country’s textile trade body says is a “slap in the face” for the German economy.

Federal Ministers Gerd Muller and Hubertus Heil said companies were failing to be accountable for their human rights responsibilities under a voluntary approach.

The comments followed the presentation to the Interministerial Committee of results of a process to monitor the implementation of Germany’s National Action Plan for Business and Human Rights, which launched in 2016.

The plan serves to implement the UN Guiding Principles on Business and Human Rights (NAP) in Germany. The German government initially counted on companies joining the effort voluntarily, but it also arranged to evaluate the success of this voluntary approach.

In the first round of monitoring, only 465 of the 3,300 companies that were contacted returned completed questionnaires – although the deadline was extended twice and more companies were invited to participate in the survey. Only around 18% were shown to be in compliance with the requirements.

There are 7,300 larger-scale German companies with more than 500 employees that are required to show how they ensure that human rights and social minimum standards are met in their supply chains. Only 455 of the 2,250 companies contacted in the second survey round returned valid responses. The results show that significantly less than 50% are meeting the requirements on due diligence.

Compared to the results of the first company survey in 2019 the share of compliers is said to have “scarcely changed.”

The Coalition Agreement will now come into play: “If an effective and comprehensive review of the NAP in 2020 finds that companies’ voluntary commitment is insufficient, we will introduce appropriate legislation at the national level and advocate an EU-wide regulation.”

“The results of the second company survey are again disappointing,” said Muller. “What we need now is a legislative framework as stipulated in the Coalition Agreement in order to ensure that human rights standards are realised along supply chains, eliminating child labour and securing fundamental ecological and social minimum standards. We invite the private sector to participate openly and constructively in this process. Fairtrade in global supply chains is the most important key with which to unlock development, create jobs and protect the environment in developing countries. The global economy and our prosperity must not be built on exploiting people and nature, or on child labour. Like a boomerang, that would come back to hit us. Our eco-social economic model can be a blueprint for a global economy.”

Heil added: “There is no avoiding our human rights responsibilities. The results of our survey show that a voluntary approach is not enough. We need national legislation in order to also ensure fair competition. The supply chain law will only require companies to do what is manageable and reasonable. And it will create legal and operational certainty for companies.”

But Textil+Mode, also known as The Association of the German Textile and Fashion Industry, has criticised the move to pass a supply chain law adding it will weaken small and medium-sized enterprises in their competitiveness.

Dr Uwe Mazura, general manager of the Association, said the decision was a “slap in the face of the German economy”.

“Anyone who talks about fairness in supply chains should also deal fairly with their own economy. Instead, the ministers are planning a law that is distorting competition and is hostile to small and medium-sized companies, which will burden our companies without solving the real causes of the problem. The companies in the German textile and fashion industry work according to the highest environmental and social standards worldwide. Liability for third parties along global supply chains means an extreme distortion of competition to the considerable disadvantage of German SMEs.

“At the height of the corona lockdown, German medium-sized companies in the textile and fashion industry stood by their word and stood up for their business partners and employees in emerging and developing countries and found common solutions to overcome the crisis. This shows in practical terms how family entrepreneurs and medium-sized companies take responsibility every day. This has also been demonstrated by numerous entrepreneurs in the fight against the Covid-19 pandemic when it came to producing masks and other protective equipment at home.”