BERLIN – Germany will force companies to screen suppliers for environmental and human rights abuses, such as illegal mining and child labor, in a move that some companies say will be difficult to enforce and could make them less competitive internationally.
The bill is part of a broader movement in Europe to force companies to ensure that European legal, environmental and rights standards are upheld by suppliers outside the bloc.
European governments are reacting to pressure from human rights and environmental lobbyists, who have pressured them to do more to force companies to oversee their supply chains and get rid of abuses in the manufacture of products from batteries to electric cars and smartphones, to clothing from sports. -good brand.
“From today, it is clear that high standards apply not only to German workshops and German factories,” said Finance Minister Olaf Scholz. “We protect workers all over a supply chain spanning the globe. “
Under the bill, which was adopted by the government on Wednesday and which must now be approved by parliament, every German-based company with 3,000 employees or more has two years to set up compliance procedures to monitor and stop abuses in its supply chain. They should also set up a warning system that allows third parties and victims to report abuse safely.
If passed, the law will affect up to 2,500 companies. Then, by 2024, its reach will extend to any company with 1,000 employees or more, affecting a large part of German industry.
Companies with annual revenues of more than 400 million euros, the equivalent of about $ 484 million, failing to meet the requirements could face fines of up to 2% of annual sales. Offenders can also be excluded from public tenders for up to three years.
“For some companies, this could mean economic ruin,” said Bertram Kawlath, head of Schubert & Salzer GmbH, an intermediate supplier of valves, alloys and other technical equipment to the automotive and textile industries, which employs about 350 people.
Though too small to be directly affected by the bill, Mr. Kawlath worries that his company and other small and medium-sized companies could incur additional costs to provide documentation to their large customers to prove they are playing by the rules.
“They will expect me that I document that I can rule out every human rights violation and in the end, I have all the bureaucracy I have to take care of,” he said.
The bill specifically cites problems, such as the alleged use of child labor in Asian textile factories, which have plagued fashion and sporting goods makers. He also cited allegations of slaves and child labor in illegal mines extracting materials such as cobalt which is used by the German auto industry in batteries for electric vehicles.
Hiltrud Werner, a
Volkswagen AG
The board member, in charge of law and compliance, said the initiative strikes a good balance, with sanctions for violations without going any further to create more opportunities for civil litigation against companies. The trend to hold companies accountable to human rights standards is growing, he said.
“It’s a trend around the world to make sure there are basic standards that everyone doing business in a particular country is meeting,” he said.
Led by the US, countries around the world have introduced more laws prohibiting bribery and money laundering.
“So why not human rights,” he said.
German companies warned that additional national and bureaucratic laws would put them at a disadvantage in competition.
“Every law must be multilateral and at least occur at the European level to effectively address the global challenges of the textile industry,” said Stefan Pursche, spokesman
Adidas AG
, a German sports equipment company.
Adidas outlet in Berlin.
Photo:
odd andersen / Agence France-Presse / Getty Images
The chief executive of printing machine manufacturer Heidelberger Druckmaschinen AG said the bill could not be implemented and the government’s move to shift regulatory responsibility onto the shoulders of companies.
“This law will result in nothing but bureaucracy because we will not be able to see what is happening to the end of the supply chain,” said Rainer Hundsdörfer.
Human rights groups and opposition politicians who support supply chain regulation are also disappointed by a bill that they say has been facilitated significantly by industry lobbyists. They said the previous words that held companies financially responsible for violations had been weakened and the provisions allowing victims to sue companies had been removed.
“Because there is no civil accountability, the law has no teeth,” said Uwe Kekeritz, a Green Party lawmaker.
Write to William Boston at [email protected]
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