With the Act on Corporate Due Diligence in Supply Chains, which entered into force in January 2023, Germany now has legislation in place which obliges German companies to take responsibility for ensuring compliance with human rights and environmental standards in their supply chains. A supply chain consists of the suppliers of raw materials and inputs needed to manufacture or sell a product.
“Companies must now ensure that their direct suppliers are not violating human and environmental rights,” Dr Peter Gailhofer explains in the new episode of the “All change please!” podcast. They must also prepare reports, which must be publicly available, showing that they have taken appropriate steps to mitigate the risks. In conjunction with the forthcoming EU directive, the German legislation has the potential to have a positive impact on international supply chains. This positive impact will be enhanced if the EU directive covers key aspects of climate-related due diligence obligations.
Environment-related due diligence obligations fall short of the mark
As well as providing important protection for human rights such as workplace safety and the ban on child labour, the Supply Chain Act makes reference to various international environmental laws and requires companies to protect soil, air and water resources. However, it does not include any specific climate-related due diligence obligations. As a rule, environment and climate risks would have to pose a concurrent threat to human communities – e.g. to their health or the bases of their food supplies – for companies to be compelled to take action under the Supply Chain Act.
A liability mechanism offers great potential
The European directive, which is currently passing through the trilogue process, goes much further than the German legislation: the current proposals include a climate-related obligation. And in contrast to the German legislation, the draft also provides for a liability mechanism. This would enable anyone affected by environmental harm or human rights abuses to claim compensation before a European civil court more easily than before. “This type of lawsuit can have positive effects on environmental protection in other countries,” says Dr Gailhofer, a lawyer and Senior Researcher at the Oeko-Institut. In his view, the debate about climate-related due diligence rights is progress in itself. “Clearly defined rules would help to increase legal certainty.”
Knowledge rather than everyday advice
The Oeko-Institut's podcast “Wenden bitte!” – “All change please!” is aimed at listeners from politics, science, the media, NGOs and the general public – anyone with an interest in political and environmental issues. Co-presenters of the podcast are Nadine Kreutzer, journalist and presenter, and Mandy Schossig, Head of Public Relations & Communications at the Oeko-Institut. For about an hour – enough time for the “long haul of environmental podcasts” – they talk with one of the Oeko-Institut’s experts about upcoming transformations towards sustainability.