Germany has announced a draft law opening firms up to fines for failing to meet standards on human rights and the environment in their supply chains.
Labour minister Hubertus Heil announced the law at a press conference on Friday where he said: “The law is a signal to companies that weigh human rights against economic interests.”
Heil said details had not been settled, but penalties could be up to 10% of turnover, according to Reuters.
Companies will have to publish a basic declaration on their respect for human rights, perform regular risk analysis, implement preventive measures, mitigate risks, and document processes, according to the Business and Human Rights Resource Centre.
The law will be introduced in stages, applying to firms with more than 3,000 employees from 2023 and those with more than 1,000 the year after. Companies with fewer than 1,000 employees will be exempt.
The law was first mooted in 2019, building on Germany’s 2016 National Action on Business and Human Rights, which encouraged firms to voluntarily disclose supply chain risks. Last year Heil said survey results that found most firms were not fulfilling due diligence responsibilities showed volunteering was “not enough”.
Since then agreement has been reached between ministries on a way forward.
Johanna Kusch, coordinator of German campaign group Supply Chain Act, said the announcement was an “important and long overdue step in the right direction”.
“Made in Germany must no longer be allowed to represent child labour or factory collapses in the supply chains of German companies,” she said.
Last year business groups said such a law “must not impose obligations on companies that even our federal government is unable to enforce in agreements with other countries”.
Meanwhile, members of the European Parliament have put forward proposals for a similar law covering firms operating in the EU.
France introduced a supply chain due diligence law in 2017.
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