The German Parliament passed a law on Friday requiring large and medium-sized businesses to do their due diligence in combating human rights violations along their supply chain. The law introduces a shift to mandatory compliance with international norms on labor exploitation.
The Bundestag adopted the draft law by a large majority. The law introduces obligations for companies above a certain size to adopt and implement due diligence procedures that prevent human rights and environmental abuses along the companies supply chain.
Failure to implement such procedures or act on violations may result in fines up to 2 percent of the company’s international revenue. Any company found to be in violation of the law may be excluded from public procurement for up to three years.
The law applies to companies with more than 3,000 employees as of 2023, and 1,000 employees in 2024. This would ultimately result in approximately 4,800 companies being affected.
Human rights groups have applauded the German Parliament for taking actionable steps to help ensure companies are acting responsibly, but caution that more needs to be done.
Human Rights Watch said the law “will require large companies to regularly and systematically identify and address human rights and environmental risks” but “does not incorporate the highest international standards.”
Miriam Saage-Maaß of the European Center for Constitutional and Human Rights said that while the law allows for increased public pressure on governments to protect “workers at the end of the supply chain … from whom [companies] profit,” the law also “falls short of civil society expectations … [and] international human rights standards.”
A coalition of 50 companies that included Ben & Jerry’s and Tchibo had called upon the Bundestag to strengthen the law during preliminary debates. The coalition asked the German Parliament to apply the UN Guiding Principles consistently and ensure proactive due diligence obligation cover the full supply chain.
However, lobbying from other business groups lead to a last-minute debate called by conservative MPs citing civil liberty concerns. The resulting final draft requires companies to act on specific incidents, and then only if they have substantiated knowledge of the abuse.