Germany Closer to Law on Human-Rights Liability for Companies

(Bloomberg) -- German Chancellor Angela Merkel’s government is inching closer to agreement on contentious legislation aimed at combating human rights abuses in global supply chains.

Merkel and senior ministers made progress toward a deal on the law in talks Friday and are working intensively to reach a final accord in coming days, according to Development Minister Gerd Mueller. The legislation seeks to prevent harmful practices and exploitation by making companies responsible for the actions of their suppliers.

“The goal remains to pass the law during this legislative period” before elections due at the end of September, Mueller said in an emailed statement.

Under the new rules, which need parliamentary approval, companies could be sanctioned or excluded from public contracts if their suppliers breach international standards. Industry groups have signaled their opposition to the measures, arguing that the complexity and length of supply chains means they cannot be held to account for actions beyond their control.

Oliver Zander, managing director of Germany’s metals and electrical engineering association, said the law would harm workers and companies both in developing countries and in Germany “without any benefit whatsoever.”

“Other countries will step in when German companies withdraw from developing countries due to bureaucratic and financial burdens that cannot be met,” Zander said in an emailed statement.

The goal of making companies responsible for practices in global supply chains is part of the coalition agreement between Merkel’s conservative bloc and the Social Democrats. They made a commitment to foster “sustainable” supply structures for agricultural goods like palm oil, cocoa and soybeans.

The Labor Ministry and the Development Ministry have been pushing for the law, while Economy Minister Peter Altmaier has been seeking a solution at the European level. He also wants to avoid burdening companies with more bureaucracy at a time when many are suffering due to the fallout from the coronavirus pandemic.

The government initially encouraged companies to ensure on a voluntary basis that their suppliers were complying with standards on working conditions as part of a 2016 National Action Plan for Business and Human Rights.

However, a survey carried out by the foreign ministry published last year found that only a minority of firms with more than 500 employees had met the requirements. Only a fifth of the 2,250 companies asked to participate in the survey responded.

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