On June 11, 2021, Germany’s government passed a supply chain act that tackles human rights issues within the global supply chain. The Act on Corporate Due Diligence in Supply Chains is one of the toughest laws to address human rights and environmental abuses. The bill will ensure German multinational corporations are held legally responsible for any human rights or environmental abuses found across their global supply chains.
The law has been years in the making.
Starting in December 2019, German Labor Minister Hubertus Heil and Development Minister Gerd Müller announced their intention to prepare a mandatory due diligence law for human rights abuses.
Then in 2020, results of a survey assessing German companies' due diligence efforts in line with the German National Action Plan (NAP) on Business & Human Rights were released.
On 12 February 2021, the ministries announced that they had agreed on a compromise for a legislative proposal.
The Act on Corporate Due Diligence in Supply Chains will officially go into action starting in 2023.
How will companies fare?
Under the act, companies in Germany above a certain size must establish due diligence procedures that prevent human rights and environmental abuses within their global supply chains and take action if they find violations at their foreign suppliers. Starting in 2023, companies with more than 3,000 employees in Germany will be affected. From 2024, the rules will expand to companies with more than 1,000 employees.
The law will fine large companies up to 2% of their annual global turnover if they fail to meet the rules and regulations. The bill enables the government to temporarily exclude from public tenders companies which received fines of 175,000 euros or more based on the new law.
Statistics from within the country suggest that the first stage of this regulation rollout will affect 900 companies, while the second stage will put 4,800 companies under the spotlight.
Human rights laws on a global scale
More countries are putting pen to paper and developing strict laws that punish companies who violate human rights. In Canada, the House of Commons Bill C-423 was introduced in 2018 to fight modern slavery. Although the bill failed, it helped pave the way for another landmark bill passed in early 2020 that covers both child labor and forced labor. The Modern Slavery Act, or Senate Bill S-211, includes an amendment that prohibits the import of forced labor and child labor-made goods in the country.
According to a 2018 report from the UN’s International Labor Organization (ILO) and the Walk Free Foundation based in Australia, around 40.3 million people are engaged in some form of modern slavery, which is three times the figure witnessed during the transatlantic slave trade.
Avetta is a member of the United Nations Global Compact and embraces the Ten Principles that address human rights, ethical labor, environmental concerns, and anti-corruption. By utilizing Avetta’s supply chain risk management solutions, businesses can focus on ethical and transparent business practices—helping eradicate modern slavery from their supply chain while also creating a healthier workplace.