Expensive control of child labor
Companies rail against supply chain law
January 22, 2024, 7:20 a.m
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In December, the EU Commission agreed to introduce a common supply chain law. This is intended to force larger companies to respect human rights throughout their entire supply chain. Business associations warn of high control costs.
Several business associations are warning of serious consequences from the planned EU supply chain law and are calling on the federal government to stop it. “For German companies, it would tighten a number of existing requirements and thereby ultimately overburden medium-sized companies in particular and sometimes demand the impossible from them,” says a letter to the federal government and the current Belgian Council Presidency.
The signatories of the letter are the Federal Association of Wholesale, Foreign Trade, Services, the employers’ association Gesamtmetall, the medium-sized business association ZGV, the Foundation for Family Business and Politics, the General Association of Textile and Fashion, the Association of the Chemical Industry, the Association of German Mechanical and Plant Engineering and the Association of Electrical Engineering – and digital industry. According to their own statements, they speak for companies with several million employees in all EU member states.
What is the supply chain law for?
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. “Larger companies often have tens of thousands or even a six-digit number of suppliers on the first supplier level alone, a significant proportion of which change every year. The costs for just following the guidelines would often run into the millions per company,” criticize the associations.
As a result of the planned regulations, European companies could withdraw from certain regions and become less attractive as trading partners. This will not improve the situation in the source countries and will weaken European companies in global competition. It is also incomprehensible why the regulations should even apply to supply chains within the EU internal market. Negotiators from the European Parliament and the EU states agreed on a compromise on the project in mid-December. So far there has only been a political deal. A legal text is currently being drafted by officials – this could be finalized in the coming weeks.