EU Countries Agree on Supply Chain Law
The planned EU supply chain law has cleared a crucial hurdle – despite resistance in the German government. An adequate majority of EU states supports the law to protect human rights.
After weeks of debates, the majority of EU states have voted in favor of a common European supply chain law. This was announced by the Belgian EU Council presidency on the online platform X. The European Parliament must now also approve the proposal. This, however, is considered certain. The law aims to ensure that European companies uphold human rights and environmental standards in their supply chains, including with their suppliers. Companies must now document across Europe that the products they import from third countries do not involve child labor or environmental harm.
Law Weakened
The adopted draft law includes less stringent rules than the original proposal. Initially, the EU supply chain law was to apply to companies with more than 500 employees and a global revenue of over 150 million euros per year.
The new draft now applies to companies with over 1,000 employees, with an annual revenue threshold of 450 million euros. The possibility of civil liability has also been weakened. EU member states, the EU Parliament, and the Commission had already agreed on the law in December.
FDP Refused to Support the Law
In Germany, the Free Democratic Party (FDP) objected to the law. The Liberals fear that companies may withdraw from Europe due to concerns about bureaucracy and legal risks. Therefore, the German government abstained from the vote in Brussels. An abstention in the committee counts as a vote against.
Despite Germany’s abstention, whether a majority could be obtained for the directive remained uncertain. A qualified majority of at least 15 member states with a EU population share of at least 65 percent was needed for adoption. This qualified majority has now been achieved, even without Germany.
Praise from SPD, Criticism from Business
Politicians from the Social Democratic Party (SPD) and the Greens favored the initiative. Disagreements led to an open clash within the coalition government. Accordingly, Federal Minister of Labor Hubertus Heil welcomed the decision in Brussels: “This is good for human rights and the German economy because we are creating fair competition conditions for all companies in Europe.” The SPD politician had led the negotiations for the directive at the EU level.
CDU MEP Axel Voss stated that due to the narrowed scope, fewer companies would be affected by the EU supply chain law compared to its German counterpart. However, he sharply criticized that the changes were not negotiated with the Parliament. The president of the Federation of German Industries, Siegfried Russwurm, lamented that the law was another setback for Europe’s competitiveness. “The outcome is not a victory for human rights but a victory for bureaucracy,” also stated the President of the Foreign Trade Association BGA, Dirk Jandura.
While recent renegotiations brought changes that were deemed positive by the business community, the President of the German Chamber of Industry and Commerce, Peter Adrian, pointed out, “Nevertheless, it remains a major burden for companies to monitor global supply chains and direct and indirect business partners.”