ANDThe German Supply Chain Act will enter into force in six months. It forces larger companies to adhere to certain social, human rights and environmental standards throughout the supply chain, otherwise penalties are imposed. There is much criticism about the sometimes unclear specifications and great legal uncertainty. The Scientific Advisory Board of the Federal Ministry of Economy and Climate also considers these concerns justified. Next Wednesday, he presents an expert opinion on the German due diligence law and much more comprehensive plans of the European Commission, which includes an interesting proposal for a solution.
The list of “safe countries of origin” should be drawn up within the framework of European regulations, this is the most important recommendation of independent economists and lawyers for the green federal minister of economy, Robert Habeck. Suppliers from these safe countries would then not have to be screened by EU companies beforehand. According to a report that was previously available to the FAZ, safe countries of origin should be countries that have both “ratified the relevant human and labor rights conventions” and “have a functioning constitutional system.” The Advisory Board concluded that violations of human and labor rights could be effectively brought to justice in such countries. It is therefore ineffective to force EU companies to ‘monitor’ these suppliers.
To facilitate cooperation with companies from unsafe countries of origin, the EU should also draw up positive and negative lists that certify compliance with human and labor rights or indicate systematic violations, scientists suggest. Such lists can reduce the control effort. The Advisory Board draws attention to the unnecessary effort that arises when companies operating abroad have to be screened by each of their business partners in the EU as a precautionary measure.
I am not sure if these provisions have had the desired effect
An advisory board chaired by Munich professor of economics, Klaus Schmidt, warns against the overly stringent planned European supply chain directive and basing it on the often higher standards in the EU in terms of labor market regulation, consumer, animal and environmental protection. According to the Advisory Board, these differences alone do not constitute grounds for expanding corporate due diligence: “If universal human and labor rights are protected, it would be arrogant to require companies operating in other EU countries to comply with EU regulations there. must.”
Researchers are also looking at a possible conflict between competition law and sustainability standards. As consumers are increasingly interested in upholding sustainability standards, companies must be able to respond effectively to them: “This may require inter-company coordination, an agreement on standards, and a voluntary commitment to sever business relationships with suppliers deemed problematic.” . To ensure that such agreements do not infringe competition law, EU competition law should be amended.
Are legal regulations regarding corporate due diligence desirable at all? “There are different opinions on this, also in the scientific advisory board. Skepticism stems from the fact that such laws can also serve protectionist purposes by inducing companies to change supplier relationships, ”the advisory board reveals an internal conflict. In that case, there would be no better protection of human rights, and such legislation could also harm developing countries economically. It is uncertain whether these laws will have the desired effect. Therefore, it is important to assess their implications for supply chains, human rights situations and companies. Felix Bierbrauer, a financial researcher from Cologne, was responsible for the report, and many prominent economists contributed.