German govt agrees on supply chain law including environmental obligations

The German government has come to an agreement on the supply chain law, which aims to ensure human rights and the protection of the environment in production along global supply chains, reports Tagesschau. In the future, large German companies will be responsible for ensuring that their suppliers comply with sustainability and human rights standards or face fines and exclusion from public projects. Additional civil liability risks for companies, an issue that was met with considerable resistance from parts of German industry and caused delays in the negotiation process, will be excluded from the law. The German parliament will vote on the bill in June. "There is no way around the responsibility for human rights. That is why I am glad that we can now push through the German supply chain act – against tough lobby resistance and after hard and tough negotiations," said federal labour minister Hubertus Heil (SPD). Development minister Gerd Müller (CSU) said he felt a great weight lifted from his heart: "This law will give millions of children and families in developing countries a bit better opportunities in their lives and prospects for the future." SPD parliamentary group vice chair Katja Mast responded: “This means Germany will have the strongest supply chain law in Europe.” The Confederation of German Employers' Associations (BDA) argue that “the law is and remains over-regulatory and superfluous.” The German chemical industry said in a joint statement by employer association BAVC and industry umbrella group VCI that the law “places high demands on German industry, as it has been extended to include further due diligence obligations in the environmental area.” The groups warn specifically against additional burdens on small and medium-sized enterprises.

In an interview with Wirtschaftswoche Online, Müller said the law is “an important first step” to control supply chains and argued these standards need to be extended globally. “We need to move from free trade to fair trade worldwide,” he said, adding that “climate protection will be decided in the developing and emerging countries.”

The supply chain law is a long-delayed project of Chancellor Angela Merkel’s grand coalition between the Social Democrats (SPD) and her own conservative party. After months of internal dispute, the cabinet agreed on a draft law in February 2021.