Germany Adopts Revolutionary Supply Chain Human Rights Laws
While the title states that Germany’s newly adopted that targets human rights abuse across global supply chains is “revolutionary” ─ which it is ─, it certainly shouldn’t be. But nonetheless, today, on June 11th, 2021, the German Parliament has ushered in a long-awaited shift to mandatory company compliance rules. After months of negotiation, the German lawmakers finally pushed it over the finish line within the final days of the current legislative period. The bill will see German multinational corporations held legally responsible for any human rights or environmental abuses found across their global supply chains.
“The German government has taken a critical step to ensure that companies operate responsibly,” said Juliane Kippenberg, associate director, children's rights division, at Human Rights Watch. “Respect for human rights in global supply chains is not something that should be optional.”
This news comes at a time when global corporations are already being pushed towards environmental, social and governance (ESG) compliance, with a massive drive to reduce Scope 1, 2, and 3 carbon emissions from their supply chain operations and a concerted effort to avoid suppliers and manufacturers that do not meet the standards that industry-leading companies are now expected to meet.
Who will the new law affect?
With Germany’s new legislation, organisations that fail to meet the rules and regulations could be forced to pay fines potentially equivalent to 2% of their annual global turnover. However, it isn’t applicable to all.
According to Reuters, under the act, companies above a certain size will be forced to establish set due diligence procedures that prevent the abuses; from 2023, only 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.
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. The bill will also enable the government to temporarily exclude from public tenders companies that receive fines in excess of €175,000.
“Incalculable risks arise for companies,” said Joachim Lang, general manager at the Federation of German Industry. A word of warning from a respected leader, at a time when industry lobby groups and wholesale businesses fear that the new law increases bureaucracy and suggest that price rises may be inbound.
The Take of German Giants
After looking at the incoming legislation, Daimler AG, known more commonly as the automotive giant Mercedes-Benz, a company which, should there happen to be any ESG-compliance issues along its multinational supply chain, would pay a hefty fee, is welcoming of the push for change but hesitant about certain aspects of the bill.
“Daimler's position is: The respect for human rights is a central aspect of our sustainable business strategy. We, therefore, welcome the progress made on the Supply Chain Act. Although the regulations are very ambitious, the proposed legislation has a sound approach overall. It is based on internationally recognised human rights and on international agreements. And it gives companies more legal certainty in an area that has so far only been partially regulated.
Supply chains are not "chains" but rather exceedingly complex networks: Daimler alone has over 60,000 direct suppliers - and many more sub-suppliers. For this reason, we also consider the proposed risk-based gradual model to be sensible. The responsibility of the companies lies primarily in their own business area and with their direct suppliers. Companies must then take action in the deeper supply chain if there are concrete indications of human rights violations. Daimler AG already does that today.
Even though we support the proposed legislation in principle, we consider some aspects to be critical, e.g. the planned fines of up to 2% of the average annual turnover. Instead of threats of sanctions, we consider concrete measures, which companies must take in the event of deficits, to be more expedient. In addition, certain wordings are still vague and leave room for interpretation. Terms such as, e.g. "fair standard of living" should be phrased precisely in order to create legal certainty. Furthermore, documentation and reporting requirements should not lead to unnecessary bureaucracy and should be harmonised with existing rules. On the one hand, this does not help the people on the ground, and on the other hand, it puts a burden on the companies – and the implementation can pose substantial challenges for smaller companies in particular.”
This law is arguably one of the most important developments in the supply chain space so far this year. But it must be remembered that changes do not and will not happen at the push of a button and that democratic principles should be applied to the discussion prior to enshrining legislation into tablature. Environmental and human rights advocacy is a hike, not a brisk walk around the park ─ so, for German companies, it’s time to get their boots on the ground and start assessing their global, interconnected supply chain operations. And, hopefully, they’ll set a stellar example for the rest of us.
DHL partners with Riversimple in sustainability move
Riversimple Movement, a Welsh hydrogen vehicle manufacturer, has found a new partner in the world's 11th largest employer: DHL Supply Chain. The two companies, who have recently signed an MoU, pledge to bring sustainable zero-emission vehicles to the UK, and their targets don’t stop there. The duo looks to be busy, with their sights set on developing sustainability initiatives, securing the necessary finances required to achieve the volume production of hydrogen vehicles, and designing and subsequent trialling of zero-emission transport.
DHL has already begun assisting its new partner in preparing for its first full-scale manufacturing facility, which will house the production of hydrogen-electric vehicles.
“It’s exciting to be partnering with a highly innovative company like Riversimple, which has sustainability at the heart of its mission,” says Managing Director of DHL Manufacturing Logistics UKI, Mike Bristow. “As the world’s leading logistics company, it is our responsibility to guide the industry to a sustainable future.”
DHL has recently launched “The Sustainability Playbook”, designed to create a roadmap to implement the next generation of global supply chain.
“Excellence. Simply delivered. In a sustainable way.”
As one of the leading drivers in global trade, DHL claims to be aware of its immense responsibility to steer innovation. Conscious of the impact their global operations have on the environment, the company initiated “Strategy 2025” - delivering excellence in the digital world. The goal: to focus increasingly on harnessing the potential for sustainable long-term growth and expanding the already-underway digital transformations within the business.
“Strategy 2025” aims to cumulatively invest €2bn in digitalisation through to 2025, in the hope that this will enhance customer experiences. They also predict a €1.5bn yearly run rate by FY’25.
Currently, DHL boasts a large green logistics portfolio, including carbon offsetting, green optimisation, and clean fuel and energy products, all as available ways to make the supply chain industry more sustainable.
“We have repeatedly redefined logistics, from introducing the industry’s first green product to becoming the first logistics company to commit to a zero-emissions target,” says DHL.
“In the past 15 years, we have continuously improved our carbon efficiency while introducing innovative green logistics solutions to make supply chains more sustainable and help our customers achieve their environmental goals.”
DHL move to lead supply chain sustainability
As the world’s 11th largest employer, and with around 570,000 employees worldwide, DHL is in a position to lead the supply chain towards a greener future. Its recent partnership with Riversimple hopes to inspire other companies within the industry to follow.
Hugo Spowers, Founder and Managing Director of Riversimple, acknowledges DHL’s commitment to sustainability.
“We’re very pleased to be collaborating with DHL to help us achieve mass production in the UK in the near term, and hopefully partner with us on a global level as we deliver our goal of systematically eliminating the environmental impact of personal transport.