The Supply Chain Due Diligence Act

Supply chains in the fashion industry are often very opaque. It is rarely obvious where production takes place and under what conditions. In June 2021, a law was passed in Germany that aims to change this.

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Why should supply chains be regulated?

The textile and clothing industry, alongside other manufacturing industries, is notorious for its inhumane production conditions and blatant environmental malpractices. As early as 2011, the United Nations urged its member states to take government protection obligations seriously and to put corporate responsibility under the spotlight.
In 2016, the German government launched its National Action Plan to implement the UN Guiding Principles on Business and Human Rights. Initially, the plan called for voluntary commitments on the part of companies to achieve greater global justice—in vain, unfortunately. This was followed in 2020 by the first draft of the Supply Chain Act, which provides a binding framework for exposing and addressing abuses in supply chains. Despite the passage of the Supply Chain Act, there has still been fierce criticism. Human rights and environmental protection organizations contend that as it currently stands, the law neither holds enough companies accountable, nor covers the entire supply chain, nor takes sufficient account of environmental standards, nor gives victims of abusive practices standing to sue for damages in German courts.

How should such a law work?

In short, companies that cause or tolerate damage to people or the environment should be able to be held liable. Injured parties would then be able to hold companies accountable. Violations of human rights or environmental regulations should be uncovered through risk analyses and then remedied. Those who fail to comply with the duty of care should face fines. If there is evidence of damage to people or the environment, people who are affected should be able to take legal action in German courts.

What do opponents and supporters of the Supply Chain Act say about it?

Criticism of the Supply Chain Act comes primarily from business organizations and the companies themselves. They consider the law to be impractical and argue, for example, that it will result in a deluge of bureaucracy if damage claims are litigated in German courts. They also see a risk that German companies will become less competitive on the global market. The consequence of this would be that companies withdraw from foreign countries. Supporters of the law counter that the German initiative is needed to prompt a rethink at the European level.
Companies should take responsibility for their business activities. In any case, for the law to be effective, it would need a clause establishing legal liability—without one, it is essentially toothless. The Supply Chain Act was also formulated without the active involvement of those affected and therefore does not reflect their needs and possibilitie

What does the Supply Chain Act mean for countries in the Global South?

What does the Supply Chain Act mean for countries in the Global South? The Supply Chain Act consolidates the asymmetric relations of power and dependence that emerged in the colonial period. This is because it simply considers the flow of imports from the Global South to the European Union. The traditional image of so-called developing countries as suppliers of and workers for the “rich West” is thus maintained. On the other hand, however, the Supply Chain Act does support people in the Global South in their struggle for better and fairer working conditions. That strengthens their negotiating position in relation to local employers and foreign investor

What does the Supply Chain Act mean for consumers?

Consumers usually find it difficult to work out where and how clothing is produced. A supply chain law makes it possible to consume with a better conscience, even if consumers do not choose certified fair trade products. But even a supply chain law will not give consumers comprehensive transparency with regard to all the steps of production along the supply chain.

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