Responsibility for supply chains: altmaier puts the brakes on law

Supplier factories should comply with human rights. But the responsibility of companies should not go too far, demands the Ministry of Economics.

Syrian children working in a sweatshop in Turkey show their hands Photo: Valerio Muscella/Redux/laif

As few companies as possible should be covered by the planned supply chain law. This is what the Federal Ministry of Economics is trying to achieve in negotiations with the Ministry of Labor and the Ministry of Development. Because the ministries have not yet been able to reach an agreement, the project was even removed from the agenda of the federal cabinet on Wednesday.

The Supply Chain Act is intended to stipulate that local companies are jointly responsible for working conditions, human rights and ecology in their foreign supplier factories. After accidents like the Rana Plaza factory collapse in Bangladesh in 2013, Labor Minister Hubertus Heil (SPD) and Development Minister Gerd Muller (CSU) want to introduce such regulation. However, Economics Minister Peter Altmaier (CDU), some business associations and their supporters are consistently putting the brakes on the plan.

One of the issues at stake in the negotiations is how many local companies will be affected. While Heil and Muller want to include companies with more than 500 employees, the Ministry of Economics wants to draw the line at 5,000 jobs. In the first case, several thousand companies would be covered, in the second only a few hundred.

In addition, Altmaier’s staff:inside wants to largely eliminate the liability of the companies. The key points for the law from the labor and development ministries state that local companies could be sued in court for damages if they did not "adequately" fulfill their due diligence obligations and ignored "foreseeable" risks. Specifically, if a German textile trader learns of the dilapidated condition of a main supplier’s factory in Pakistan, he must intervene. If he does not, potential accident victims can sue for damages.

This is going too far for the Ministry of Economics

This is obviously going too far for the Ministry of Economics. "From the point of view of the business community, what matters is that possible regulations are appropriate and feasible in practice," a spokeswoman said Wednesday. In view of the corona crisis and the current recession, companies should not be put under additional pressure, she said.

The German Engineering Federation (VDMA) argues similarly. It would be impossible to control exactly how thousands of primary products were produced. They might have to answer in court for abuses over which they had little influence. Liberal Freiburg economist Lars Feld, head of the economic experts advising the government, said, "The whole thing definitely has the potential to burden us for years in such a way that economic development is substantially weakened."

In contrast, the Supply Chain Act initiative, which includes church relief organizations, trade unions and development organizations, supports the concerns of the Labor and Development Ministries. Less than one fifth "of the companies surveyed comply with requirements of the German government to respect human rights. The coalition agreement states that a legal regulation will follow in this case," says spokeswoman Johanna Kusch.

The next cabinet meeting is September 9. A compromise could be to build in transition periods and phase in liability gradually.

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