Christoph Werner considers the European supply chain law to be misguided. The boss of the drugstore chain dm believes that the state is shirking its responsibility.
Mr. Werner, what would it mean for you and dm if the EU Supply Chain Act were to pass in its current version?
It would be a further tightening of what we already have through the German Supply Chain Due Diligence Act. As far as I can see, it now includes the possibility of suing companies. However, we had already taken all the necessary measures when the German Supply Chain Due Diligence Act came into force. So we are prepared accordingly.
How much did that cost you?
About 700,000 euros. These are consulting costs because we first had to find out more. We also needed people to implement the risk management system for us. We need the appropriate training and software solutions to be able to monitor and manage the whole thing. That’s roughly how you get the total.
Do you expect European law to make it even more expensive?
Yes, we assume that, because the system will then have to be adapted accordingly. And there are ongoing costs too. But I wouldn’t make a big fuss about it, these are a bit of the “costs of doing business”. All companies have to invest, so the competitive conditions are equal. I just don’t understand why they now want to spread the errors of the German supply chain law to all European countries.
In your opinion, what is not well regulated?
For example, the fact that the sources of supply must be disclosed. We sell many branded items that are produced by branded item manufacturers and they compete with the private labels that we produce ourselves, i.e. the dm brands. For the brand manufacturer it is a competitive advantage that it has certain supply sources. If we now tell him that he has to disclose them, then we know his advantages and can theoretically imitate that. Now that would be practical for me as dm managing director, as I could use the same sources of supply with my private labels. But such a regulation is anti-competitive and leads to less innovation and therefore to a lower standard of living in the long term.
Another problem is the complaint system for employees along the supply chain abroad. Theoretically, an employee abroad who produces preliminary products for you can complain to us in Germany. But it is rarely the case that a factory only works for one person. Most employees abroad work for products and brands around the world. So there is no longer any orientation for people. This is very much thought out of Germany, but can hardly be implemented. But all of these are just individual examples. Actually, my problem with the supply chain law is much more fundamental.
dm boss Werner: “We shouldn’t expand the situation just so that we can save German companies from a competitive disadvantage.”
Namely?
The end does not justify the means. The request is of course correct. We want social and environmental standards to be met for the products we consume in the European Union. The only question is how we achieve the goal and who the relevant actors are. I advocate that something like this needs to be solved in terms of regulatory policy through trade agreements and not through the economy. However, I observe that trade agreements concluded with the European Union are now more the exception than the rule. Instead, they are now saying that the economy should do it. In principle, the requirement for companies is that they act in accordance with European legal standards in the countries in which we produce. But we don’t really have the ability to enforce such things. The quantities demanded are not high enough for this.
So if you threaten to get your primary products from somewhere else, doesn’t that impress the manufacturers?
If we ask a large manufacturer: Can you please prove that you comply with these and those social standards? Then it often comes back: Yes, do you want to order now or do you not want to order? Manufacturers also have the opportunity to sell their primary products elsewhere. In a globalized economy there is not just Europe. Demand is increasing from Asia, especially from China, where these legal standards are not required. We put ourselves in a disadvantageous position because we demand things that others do not demand. The path we are taking is a wrong path.
But that is precisely why it should be in your interest that there is a European law. If all EU companies impose these requirements, the power on the market will also increase.
I’m not a fan of saying: That’s already bad in Germany, so it has to apply everywhere now so that Germans aren’t disadvantaged. We should not expand the situation just to save German companies from a competitive disadvantage.
Politically, we see the problem of increasing demand from other parts of the world in the same way. There is a reason why the EU is not reaching negotiating conclusions. It can no longer enforce these social and environmental standards because it has lost power.
Yes. In today’s world, the West no longer has the same assertiveness it had in the past. This has become particularly evident in connection with the sanctions against the Russian Federation, which many countries have simply no longer adhered to. And I think we have to face this new geopolitical reality. We will no longer enforce the standards against the will of the countries in question. This was already a form of aggression before. The saying from the Empire, “The world should heal from the German character,” was viewed very critically when I was at school. Just because we believe certain values are right at the moment, we also consider this invasive way of conducting politics to be legitimate. But things are seen very differently in other parts of the world. And that’s a problem.
But what does this mean: If you support the purpose, what is an appropriate and realistic means of enforcing supply chain standards?
There could be seals that demonstrate compliance with the standards. For example, look at the organic seal, which determines exactly which quality standards must be adhered to and how this must be proven. One could create such a seal for European human rights standards. Many companies would definitely join in and say: Oh, that’s something that is well received by customers. In my opinion, this is a much better way.
This may work as a control mechanism for a company like dm, which sells directly to end customers, but not for companies that produce intermediate products and sell them to companies.
In the end there is always a final product that is purchased by the customer. I think the development of organic products can give you real optimism. In the past it was only sold in organic food stores to a relatively small target group that was also a bit organic among themselves. And now look at how many organic items are offered at Aldi and Lidl. The fact that these seals exist means that consumers are starting to pay attention. And then retailers and manufacturers realize that they can make a difference. That would be a much better and more market-based approach. And you still wouldn’t just accept that the world is bad.
This article appeared firstwhich, like stern, is part of RTL Deutschland.
Source: Stern
