Business organizations call for a new start

Eight interest groups, namely BGA, Gesamtmetall, Mittelstandsverbund ZGV, Stiftung Familienunternehmen und Politik, textil+mode, VCI, VDMA and ZVEI, are in principle in favor of EU-wide regulation to protect human rights, but reject the current draft due to gross technical deficiencies. Small and medium-sized enterprises in particular will be far overburdened by the planned regulations. They call for a more objective debate and appeal to the German government and other EU member states to maintain their position of abstention.

More practical relevance required

Safeguarding human rights around the globe is a goal to which German and European companies are clearly committed. This is why high standards apply in their workplaces at home and abroad. Companies make a significant contribution to increasing prosperity in the Global South and improving local social standards. However, the serious technical flaws in the EU supply chain directive now being voted on, in particular the lack of harmonization, could lead to German and European companies withdrawing from markets and countries. The field would then be open to other market participants with significantly lower standards. This would do a disservice to the actual objective of the EU Supply Chain Directive. Therefore, regulation with more practical relevance and a sense of proportion is needed.

The eight business organizations are also clearly critical of the proposed civil liability for companies and their management boards, managing directors and supervisory boards. Their incalculable risks would also lead to companies withdrawing from difficult markets. In addition, the scope of the directive is far too broad, extending far beyond the protection of human rights and companies' own production and work sites. It requires companies to monitor almost all stages of their supply chains globally for violations of human rights and environmental or social standards. Industrial companies in particular often have tens of thousands or even a six-figure number of suppliers, a considerable proportion of which change every year. Many companies do not have the negotiating power to gain the required insight into the supply chain from their upstream suppliers. It therefore makes sense to limit the due diligence obligations to what companies can control and influence - their own operations, subsidiaries and suppliers at the first level of the upstream supply chain, where influence is possible due to market power and turnover.

Reasons for rejection

An important reason for the negative stance is the lack of harmonization in key parts of the directive. The fundamental goal of legislation for sustainability must be maximum harmonization. This directive does not achieve this. Without sufficiently binding harmonization through a directive, there is a risk of fragmentation of the EU internal market, as the same laws and competitive conditions for companies do not apply within Europe. In addition, this leaves the member states a lot of room for interpretation or additional regulations ("goldplating"). At the very least, a so-called internal market clause is needed here. Otherwise, European companies will be confronted with 27 different individual implementations.

The organizations also point out that in December 2022, the German government issued a declaration on the Supply Chain Directive in Brussels, which was agreed by all three government parties and pointed out red lines. Among other things, the SPD, Greens and FDP demanded that Germany could only agree to a final directive if it contained a "safe harbor" regulation for companies that have joined industry initiatives. The use of recognized certifications would mean a significant simplification and companies would no longer have to check every single supplier anew. However, the proposal for a directive currently on the table explicitly excludes such a "safe harbor" regulation.