The German parliament passed the Supply Chain Act. The law, which aims to force companies to take responsibility for human rights abuses such as forced and child labor, forced evictions, oil pollution and land theft within their supply chains, will come into effect on Jan. 1, 2023. As a first step, the new law will only be applicable for companies with 3,000 or more employees in Germany – including temporary workers – but be relevant for smaller companies with more than 1,000 employees as of 2024.

According to the draft law, fines of €100,000 to €800,000 are provided for violations, depending on the offense. If the company’s total annual sales exceed €400 million, the fine can be up to 2 percent of sales. As impressive as the fines may look, the law will not affect many companies after 2024: only three German textile companies have more than 1,000 employees and none more than 3,000 (source: Statista).

The European Coalition for Corporate Justice (ECCJ), representing 250 member organizations like NGOs, trade unions, consumer organizations and academics, sees it as a good start, but claims that “victims deserve more.” While the adopted law contains some improvements for victims, the absence of new and improved civil liability rules for German companies perpetuates judicial uncertainty, condemning victims to costly and lengthy legal battles.

Claudia Saller, director of the ECCJ, says: ”This law ends decades of German politicians wilfully giving business a carte blanche to abuse people and the planet with impunity. It’s a good start, but victims deserve more. They must have easy access to German courts for human rights violations by German companies. There should be no gaps or loopholes letting companies off the hook for fatal textile factory fires in Pakistan or dam breakages in Brazil.“

The European Commission is expected to present its stricter supply chain monitoring proposal later this year, including environmental rules and human rights.