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EU Supply Chain Law: No profit from environmental damage and forced labour

Large companies should no longer make profits from child or forced labor in their international supply chains. This emerges from a draft EU supply chain law that has already been published. It could become even stricter at EU level than the German regulation.

    Large companies should no longer make profits with child or forced labor in their international supply chains. This emerges from a draft for an EU supply chain law that has already become known. It could become even stricter at EU level than the German regulation.

The Bundestag has already passed a law, now the EU Commission is following it up: Large companies should no longer make profits with child or forced labor in their international supply chains. This emerges from an already known draft for an EU supply chain law, which could become even stricter than the German regulation. On the one hand, significantly more companies could be affected by the new rules, on the other hand, environmental destruction could be dealt with even more. However, changes to the design are not excluded. What is already known:

Which companies are mainly affected

Specifically, the draft provides for several limits. Companies in the EU are affected if they generate annual sales of more than 150 million euros worldwide and have more than 500 employees. There are stricter rules for companies working in sectors where the risk of exploitation and environmental degradation is higher. 250 employees are planned here. Depending on the risk, companies from third countries have a turnover of 150 million or 40 million euros, which must be generated in the EU. Such high-risk industries include the textile industry, mining and agriculture.

According to the EU Commission, around 13,000 EU companies and 4,000 companies from third countries are affected. But there are also other estimates: The CDU politician Markus Pieper told the "Rheinische Post" that he assumed that 14,000 German companies alone would be affected.

What are the differences to German law

While the planned EU directive still has to be negotiated further by the European Parliament and the EU countries, the German law has already been passed. It will apply from 2023, initially for companies with more than 3,000 employees.

From 2024 onwards, this threshold will drop to 1,000. According to statistics, there are around 2,890 companies in Germany with 1,000 or more employees. Smaller companies are not affected. Environmental destruction is also covered by the law, but only if it causes human suffering or corruption.

What to expect from the companies

According to the draft, the member states should establish rules for the civil liability of companies for damages if their due diligence obligations are not observed. This includes that companies should identify risks of human rights violations and environmental degradation in their supply chains and take appropriate measures to minimize potentially adverse impacts on human rights and the environment.

What the law brings to consumers

Consumers should be able to trust that no products produced with child or forced labor are offered or that profit is made at the expense of the environment. It cannot be ruled out that there could be fewer dumping prices if the basis for the lowest wages is removed.

How the bill has been evaluated so far

There is criticism and praise – depending on who you ask. The Association of German Chambers of Industry and Commerce (DIHK) warns of overloading German companies. "There is a risk of enormous effort and high costs – for comparatively little effect," said DIHK President Peter Adrian of the German Press Agency.

The "Supply Chain Law Initiative" alliance, in which trade unions and environmental organizations are represented, welcomes the draft and speaks of a cornerstone for less exploitation and environmental destruction. However, the draft does not go far enough for the initiative: "For the big hit, the EU would have to tackle the hot iron more consistently: due diligence not only for large companies," said a spokesman for the dpa initiative.

Opinions differ similarly in politics. While politicians from the Greens welcome the project of the EU Commission, it goes too far for Union politicians. "It's good that the EU Commission is proposing an ambitious supply chain law," said Bundestag member Renate Künast (Greens). "It would not be surprising if European companies withdrew from some regions of the world as a result of this proposal," said CSU politician Markus Ferber. He fears that these gaps would be exploited by Chinese competition. © dpa

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