In June, Germany’s Parliament passed a bill that will hold German multinational corporations accountable for any and all environmental and human rights abuses found in their supply chain. Global corporations are already being ushered towards environmental, social and governance (ESG) compliance, in order to drastically reduce carbon emissions and avoid suppliers that do not meet the recent standards.
“The German government has taken a critical step to ensure that companies operate responsibly,” said Juliane Kippenberg, associate director, children’s rights division, at Human Rights Watch. “Respect for human rights in global supply chains is not something that should be optional.”
Beginning 2023, the law will affect organizations with over 3,000 employees in Germany, and from 2024, it will extend to corporations with more than 1,000 employees. Companies that fail to comply with the regulations could face fines equivalent to 2% of their annual revenues. Around 900 companies are expected to be affected in the first stage of this regulation, and 4,800 companies as the second stage begins.
German Giant Daimler AG, better known as Mercedes-Benz, has welcomed the initiative, claiming they already take action and their suppliers meet the regulations; but is still reluctant to some of the aspects of the bill, such as the 2% fines, documentation that would lead to unnecessary bureaucracy, and some “vague” terms. “Incalculable risks arise for companies,” said Joachim Lang, general manager at the Federation of German Industry.
Although this law makes for important progress in environmental and human rights advocacy in supply chains, changes do not happen overnight.