How strictly do EU companies have to check whether they profit from forced or child labor in other countries? A new law should regulate this. The economy warns of drastic consequences.
The German economy is putting pressure on Chancellor Olaf Scholz not to agree to the planned EU supply chain law. In a letter to the SPD politician, which was available to the German Press Agency, they warned that companies could withdraw from Europe and that companies could be confronted with unfounded lawsuits and sanctioned with excessive penalties.
“The planned directive will confront companies with considerable legal uncertainty, bureaucracy and incalculable risks,” it says. The federal government should not agree to the project.
The letter was signed by the presidents of the Federation of German Industries (BDI), the Confederation of German Employers’ Associations (BDA), the German Chamber of Commerce and Industry (DIHK) and the Central Association of German Crafts (ZDH).
What is the EU Supply Chain Act about?
The EU Supply Chain Act aims to hold large companies accountable if they profit from child or forced labor outside the EU. Larger companies must also create a plan to ensure that their business model and strategy are compatible with meeting the Paris climate goals to limit global warming.
Negotiators from the European Parliament and the EU states agreed on a compromise on the project in mid-December. But there is still only a political deal. A precise legal text is currently being drafted by officials – this could be finalized in the coming weeks.
There is already a supply chain law in Germany, but the EU version goes beyond the requirements of the German law. This applies to companies with more than 1000 employees.
This limit is likely to be reduced by the EU version. It is also envisaged that companies can be held liable under civil law and, for example, assert claims for damages. This has so far been ruled out in the German supply chain law.
According to the federal government, almost 80 million children worldwide work under exploitative conditions in textile factories, quarries or on coffee plantations – “also for our products,” according to the Federal Ministry for Economic Cooperation and Development. According to the aid organization Terre des Hommes, many products can be affected by child labor. These include flowers, clothing, computers, tobacco, fireworks, footballs, cosmetics and food.