In a joint letter to the German government, the EU Council Presidency and other European decision-makers, the business organisations BGA, Gesamtmetall, Mittelstandsverbund - ZGV, Stiftung Familienunternehmen und Politik, textil+mode, VCI, VDMA and ZVEI are calling for the European Supply Chain Directive to be stopped. The vote of the ambassadors in the Committee of Permanent Representatives and then the vote of the Council of the EU Member States will take place shortly.
“The requirements of the German Supply Chain Act have already led to small and medium-sized companies being completely overwhelmed by the burdens within their supply relationships. An EU supply chain directive, as now planned, would result in a new dimension of bureaucratic overload and legal uncertainty”, warn the associations. The directive would make foreign trade more difficult and would be at the expense of European jobs and value creation.
This applies in particular with regard to three aspects of the directive:
- Companies should 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. The costs of compliance alone would often run into the millions for individual companies.
- The directive makes no clear exceptions - not even for supply relationships within the already heavily regulated EU internal market. However, an explicit exemption for all suppliers and customers based in the EU internal market would be urgently required as part of a risk-based approach.
- According to the EU plans, not only suppliers and their suppliers are to be monitored, but also business customers. However, it is a completely unrealistic assumption that SMEs could dictate to their business customers how and where the products they sell are ultimately used.
Criticism of the envisaged civil liability
“It is simply impractical to demand that companies from EU member states should be liable for breaches of duty that occur in their supply chains - and worldwide”, the appeal states. While non-governmental organisations are to benefit from their own rights of action, companies may be subject to additional evidentiary requirements. “In this way, the often incalculable liability risks can lead to companies withdrawing from affected regions”, the organisations warn.
A new litigation industry would emerge, leading to more administrative costs for companies. Uncertainty in foreign trade would increase. Yet respecting human rights around the globe is a goal that companies are clearly committed to. “The UN Guiding Principles on Business and Human Rights are decisive for European companies. They already base their global supply relationships on them today and communicate European standards to the world via their international partners”, emphasise the associations.
However, placing European companies under general suspicion would prove counterproductive in practice, “the loss of economic substance in the EU would be further exacerbated by such a supply chain directive”, they say. “Instead of taking the route via the directive, let us make a new start together and consider in dialogue with each other how we can enforce our standards for the protection of human rights and the environment even more effectively across global supply chains worldwide”, the business organisations conclude. The VDMA's urgent appeal to stop the EU supply chain law can be viewed here free of charge.
