Experts warn: EU supply chain law in great danger!

Experts warn: EU supply chain law in great danger!

Environmental protection and human rights organizations, including GLOBAL 2000 and Südwind, have welcomed the assessment of over 80 economists on the EU Supply Chain Act (CSDDD). In their document “Beyond Short-Term Profits” they warn about the impact of possible watering down of this law. Experts, including Sigrid Stagl from WU, see the supply chain law as a decisive step towards improving human rights, environmental protection and the fight against climate change. Johannes Jäger from Südwind emphasized that regulation is necessary to ensure safety, quality, health and human rights.

A central argument of the EU Commission's critics is the claim that the Draghi report calls for deregulation. It is stated that this report only mentions the Supply Chain Act in the appendix and does not analyze it in depth. Environmentalists are therefore calling for clearer rules for fair supply chains, as deregulation could lead to a step backwards. “It is urgently necessary to introduce an effective supply chain law to prevent child labor and forced labor,” warns Tina Rosenberger from NeSoVe.

The challenges of the EU Supply Chain Directive

The current status of the EU Supply Chain Directive is worrying. According to that Institute for Human Rights The initiative is in danger of failing, particularly due to the Federal Government's abstention from decisions in the Council of the EU. However, an effective supply chain law could make a significant contribution to combating exploitation and poor work. It requires companies to take responsibility for their suppliers and comply with human rights standards.

The diverse range of global products are often produced under inhumane conditions: 1.4 billion workers worldwide work in inadequate conditions. Things have worsened for 160 million working children during the COVID pandemic. The responsibility of the EU, as the world's largest internal market, becomes clear. Measures to improve the situation in the supply chains are therefore a top priority.

The roadmap for implementation

The Directive (CSDDD), which came into force on July 25, 2024, covers a range of human rights and environmental due diligence obligations. Companies with more than 1,000 employees or a turnover of over 450 million euros must evaluate risks in their value chains and take appropriate measures. This also includes companies from third countries.

The German EU Council Presidency in 2020 was a starting point for the discussion about the supply chain law. On February 23, 2022, the European Commission presented the proposal on sustainable corporate governance; an agreement was reached in December 2023. Another goal of the EU Supply Chain Directive is to avoid national solo efforts, which is beneficial for the EU-wide business landscape.

Failure to regulate would mean significant disadvantages for companies with existing due diligence obligations. The creative power of European companies could be weakened, which could lead to a legal patchwork in the long term. Experts warn that this would have a serious impact not only on the companies themselves, but also on global standards for human rights and the environment.