One year of Germany's Supply Chain Act — some progress made

Chopping cacao beans with machetes. Carrying heavy sacks during harvest — all tasks that school-age boys and girls in Ghana and elsewhere should not to be doing. Yet an in-depth investigation by US TV network CBS and Swiss public broadcaster SRF recently revealed that the chocolate manufacturer Mars and the Swiss company Lindt & Sprüngli may be using child labor in Ghana. Studies suggest that around 700,000 children continue to work in the cocoa industry in Ghana. 

The problem clearly affects the entire global retail industry: Major German companies have also been accused of benefiting from child labor. The non-profit Oxfam alleges that suppliers of German supermarket chains Edeka and Rewe have violated environmental and human rights. And, according to a joint investigation by German media outlets NDR, WDR, and the Süddeutsche Zeitung, a supplier for auto giant BMW is also suspected of environmental pollution.

All these cases are potential violations of the Supply Chain Act, which has been in effect in Germany since the start of 2023. The aim of the law is to ensure that raw materials are sourced and exported from countries in the so-called Global South without violating human rights, employing child labor, or destroying the environment. 

Germany's Minister for Economic Cooperation and Development Svenja Schulze insisted that the German Supply Chain Act had already brought some success: "We hear from many partner countries that trade unions are being taken more seriously, that complaints offices are being set up, and that there have been some changes in local working conditions," she told DW.

The Supply Chain Act explained

The law stipulates that German companies with more than 1,000 employees must now take a close look at whether their goods and services meet the law's requirements. The German Labor Ministry lays out companies' obligations like this: "These obligations apply to their own business operations, to the actions of any contractual partners, and to the actions of other (indirect) suppliers," the ministry said. "This means that the responsibility of companies no longer ends at their own factory gates but extends along the entire supply chain."

Germany's Minister of Labor and Social Affairs Hubertus Heil had long been an advocate of the law, and claims that Germany is now a pioneer. Despite much criticism from companies, there are also businesses that have made special efforts "because they don't want to be pilloried," he told DW at a recent trade conference.

Criticism from businesses and NGOs

In Germany, the federal agency responsible for monitoring the Supply Chain Act is the Federal Office of Economics and Export Control (BAFA), which also assesses arms exports. Although there have been some initial audits and complaints about noncompliance with the law, no fines or penalties have yet been imposed.

Perhaps for this reason, the requirements of the Supply Chain Act do not go far enough for many NGOs. Business associations, on the other hand, have complained about too much bureaucracy and the cost of extensive documentation. Siegfried Russwurm, chairman of the Federation of German Industries (BDI), told DW, "The implementation of the German Supply Chain Act has resulted in many negative and unintended effects along with heavy bureaucratic hurdles."

The environmental and human rights organization Germanwatch had cautious praise for the new regulations, but business responsibilities specialist Finn Schufft also told DW: "There are still shortcomings. One of them is the fact that companies cannot be held liable under civil law."

Ninja Charbonneau of the United Nations Children's Fund UNICEF called the law a "milestone," but said she would have liked to see a more explicit reference to children's rights, and: "in the long run, it would be good if it applied to all companies."

An EU Supply Chain Act is now due to get the green light in April. This is similar to the German law, but is also stricter in some respects. For example, it will apply to companies with as few as 500 employees, rather than 1,000, and if companies violate the EU requirements, they could be sued for damages.

However, it will still take a few years before all the bureaucratic hurdles can be overcome and the EU law comes into force. Heil said that the German law will continue to apply until then. Now, he added, we have two years to implement the EU directives. "Without the German regulation, there would not have been the impetus for the European solution," he said.

This article was originally written in German.

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