No child labor, no environmental destruction: The German supply chain law is intended to set standards worldwide, says ex-development minister and head of UNIDO Gerd Müller.
Global supply chains account for eighty percent of world trade. They reach all parts of the world: coltan for our smartphones is mined in the Congo, the lion’s share of our clothing is sewn in Southeast Asia. A container ship from Asia has 120 million pairs of shoes on board on its way to Hamburg.
This worldwide exchange of goods and knowledge has accelerated many developments and contributed to the fact that global economic output has almost quadrupled since 1990, global trade has increased sixfold and income and prosperity have increased.
However, the previous form of globalization also has its downsides: Many companies are relocating their production to developing countries and are deliberately externalizing the social and environmental costs. It’s always cheap, cheap – that’s only possible at the expense of people and nature. Take a pair of jeans. We have it in our shop for 50 or 100 euros. In Ethiopia or Bangladesh it can be made for just five dollars.
For the seamstresses, this often means: 14-hour shifts in stuffy factories, no fire protection, termination in case of pregnancy. And that for an hourly wage of 20 or 40 cents. They often cannot even pay their children’s school fees from this. This is pure exploitation on the 19th century model.
When the Rana Plaza garment factory in Bangladesh collapsed in 2013, 1,135 seamstresses died. An unimaginable catastrophe. I’ve seen the rubble, spoken to survivors. The accident shows the conditions under which many of the 75 million textile workers worldwide still toil today – also for our clothes.
“Continue like this” is not possible. Not even in times of crisis. Large global companies in particular have a responsibility to tackle the problems. They have the market power and resources. But despite many pioneers, they still don’t do it enough.
This is where the German supply chain law comes in. When it starts on January 1, 2023, it will be the most progressive law on sustainable supply chain management in the world. All companies in Germany with more than 3000 employees are then obliged to ensure compliance with basic human rights standards such as the ban on forced and child labor in their supply chains.
And that makes good business sense: More and more consumers are attaching importance to sustainability. Studies assume that up to three quarters consciously look for fair and sustainable products when shopping – and the trend is rising. When companies don’t actively address human rights and environmental risks in their supply chains, more and more customers are turned off.
This makes sense from an investment point of view: more and more investors are paying attention to sustainability ratings based on so-called ESG criteria (environment, social, governance). From now on, companies can advertise that they are demonstrably fulfilling their duty of care by complying with the Supply Chain Act and that T-shirts or chocolate bars are not manufactured with disregard for people and the environment.
With the law, German companies are well prepared for the requirements that will come at EU level. Brussels has already presented a proposal for an EU-wide directive on corporate due diligence, which is based on German law and should be adopted at the end of 2023.
This makes economic and trade policy sense: The law requires companies to deal consistently with their supply chains and their “weak points”. Those who identify risks and know their suppliers can build more robust and resilient supply chains. Companies are prepared in this way and can better guarantee security of supply in times of crisis. The current crises have also shown this.
It is precisely this change that we must support at multilateral level. With UNIDO, the United Nations Industrial Development Organization, we are working on globally binding ecological and social standards for production and trade. We want to win more companies for sustainable supply chains, the textile seal “Green Button” in Germany shows that it is possible. And we will support suppliers so that they can actually implement the social and ecological standards.
Ultimately, there must be sustainable local industrialization that reduces poverty and creates good jobs. This is the only way for the Supply Chain Act to achieve its intended effect in its entirety.
Editor’s note: This article appeared in the FOCUS section of Die Welt in 2023.