As reported by tagesschau.de, the planned "EU supply chain law" is in danger of failing because of Germany. Federal Finance Minister Christian Lindner and Justice Minister Marco Buschmann (both FDP) announced that they could not support the trilogue result of the consultations between the EU Commission, Parliament and member states on the draft EU Supply Chain Directive (Corporate Sustainability Due Diligence Directive - CSDDD). "In the Council of the European Union, this will result in Germany abstaining, which will have the effect of a 'no' vote," reads a letter from the two FDP politicians. According to information from the government, the letter is addressed to business organisations.
The Federal Ministry of Finance and the Federal Ministry of Justice have come to the conclusion that the trilogue result does not objectively meet the requirements for a good solution. Both ministries prove this, among other things, with the following points, which are very relevant for our VERE Association members (excerpt):
- The trilogue result would lead to companies being held liable under civil law for breaches of duty in the supply chain to a considerable extent. Nevertheless, the liability regulation means a greater burden compared to the German Supply Chain Duty of Care Act (LkSG), which does not contain a liability regulation, and would place an additional burden on the companies concerned.
- The scope of application of the draft is very broad, so that significantly more companies will be affected than under current German law, for example.
- In addition to the civil liability risk, there is also the risk of administrative sanctions: The trilogue result provides for a mandatory turnover-based fine, not only for serious offences, which is calculated according to a maximum limit of minimum five percent of turnover.
- In the context of risk management, companies could feel compelled to increasingly focus their demand on large companies. This would give them a competitive advantage over small and medium-sized companies. There is a risk of the effect of regulation-induced market concentration.
- Furthermore, considerable additional financial, personnel and bureaucratic burdens are to be expected for our companies.
- Ultimately, the result violates the criteria of fair competition and a low-bureaucracy solution.
The letter concludes with the words: "Europe must find its place in the systemic competition between the USA and China and needs a strong, competitive economy in order to assert itself in the world. We should not and must not sacrifice the protection of human rights and responsibility for the environment to achieve these goals. On the contrary: these are values that we as the EU stand up for. Our companies should also be ambassadors for these values. In the fight for our values, however, we as the EU also need a new realism and must not shackle ourselves in the wrong way with bureaucratic regulations. Because that would not help anyone."
In addition, tagesschau.de reports: "Mr Buschmann told the news agency dpa that 'the protection of human rights is part of the EU's self-image'. He therefore fully supported the aim of the directive to ensure better protection of human rights and the environment in the supply chains of European companies. However, this goal should not lead to a 'self-strangulation of our business location'."
Next steps: Federal Labour Minister Heil wants to present proposals to reduce bureaucracy in order to prevent the FDP from blocking the EU Supply Chain Directive in the federal government. He has initiated the departmental vote on his recommendation for approval of the EU proposal. Heil is linking this to key points on relieving the burden on companies, which are to be discussed in the cabinet on 7 February 2024. The proposed changes depend on the government's approval of the EU directive, in particular the easing of reporting obligations for companies and the early application of parts of the directive that provide relief.
No time to follow further developments in the EU Supply Chain Directive in detail? trade-e-bility keeps you up to date with its Legal Monitoring Service.
Is your company affected by the CSDDD? Take timely precautions now: The trade-e-bility management consultancy will work with the responsible employees in your company to set up a sustainability management system in small steps so that you are prepared for the new requirements by the time they are introduced. Christopher Blauth and Jens Haasler will be happy to answer your questions. You can request a non-binding orientation meeting at beratung@trade-e-bility.de.
