First Case of Human Rights Violations is Filed under the German Due Diligence Act
A little-noticed but important development occured this week, that demonstrates how labor and human rights is impacting the supply chain landscape- and also shows how ESG laws are evolving much more quickly in Europe than in North America.
The firm Due Diligence Design reported how Bangladeshi workers represented by the trade union, NGWF, filed the first complaint against Tom Tailor, Amazon, and IKEA under the German Supply Chain Due Diligence Act for not “adequately monitoring” the conditions in their factories and for “endangering the workplace safety for employees.” The complaint was filed with the Federal Office of Economics and Export Control, (BAFA), the regulator for the German Supply Chain Due Diligence Act, which will now decide whether to take further action against the companies. Due Diligence Design are experts in responsible business conduct due diligence on human rights, labour, and environmental risk. in the area of helping clients, by providing deep intelligence, technical guidance and a systematic and pragmatic approach on high-risk due diligence issues across multiple sectors.
In April, affected workers represented by the trade union, the National Garment Workers Federation (NGWF), with support from the European Center for Constitutional and Human Rights (ECCHR) and NGO FEMNET filed the first complaint under the German Supply Chain Due Diligence Act against Tom Tailor, Amazon, and Ikea.
The complaint was filed with the Federal Office of Economics and Export Control, (BAFA), the regulator for the German Supply Chain Due Diligence Act. BAFA will now decide whether to take further action against the companies. This can include requiring the companies to take action to fulfil their obligations under the law and financial penalties. BAFA does not have a set timeline to address complaints.
This is a historic development, as it shows how European laws are beginning to have more “teeth”, and are beginning to create litigative events that companies like Amazon, Walmart, H&M, Nike, and other apparel manufacturers will need to navigate more and more in the near future. This legislation will begin to bring the importance of paying attention to labor rights in supply chains “home”. Our prior research showed that many supply chain leaders have remained “psychologically distant” from the realities of modern slavery, which requires awareness of its context and complexities. While corporations have increasingly sought to manage modern slavery risk in their supply chains, their understanding of what modern slavery is and what should be managed remains limited. Based on our interviews with supply chain leaders, we argued that a key problem with firms’ efforts to manage modern slavery risk is that it is a psychologically distant concept for them. Impending legislation that prosecutes firms that tolerate labor violations in their supply chain will certainly create greater awareness of this. A number of other forces are also impacting the tolerance for companies to no longer ignore developments such as the following:
- Inflation Reduction Act: Sizeable incentives to expedite manufacturers’ transition to reduce carbon
- Forced Labor Prevention Act: Onus on companies importing to US to show proof of [tbc] third-party audit
- Uyghur Forced Labor Prevention Act (UFLPA): bans any goods produced, mined, or manufactured in China’s Xinjiang Uyghur
- Germany’s Supply Chain Due Diligence Act
- EU’s Corporate Sustainability Reporting Directive
- Investors, led by BlackRock, increasingly compelling companies to track and report ESG impact
- SEC transparency and metrics on Scope 1, 2 &3
- The Supply Chain Due Diligence Act was adopted in June 2021 and came into force in January 2023. It imposes a corporate duty on companies to establish, implement and update due diligence procedures. The Act applies to companies with a registered office or principal place of business in Germany, and to foreign companies with a branch office in Germany.
- The German Supply Chain Act applies to companies with 3000 employees in Germany, changing to 1000 employees from 2024.
- The German Supply Chain Act includes sanctions for non-compliance, including pecuniary sanctions based on company turnover. Companies with average annual sales of more than €400 million can be issued fines of up to two percent of their average worldwide annual sales.
- The Act includes a special provision which allows for German-registered trade unions or NGOs to bring civil cases on behalf of parties that have suffered human rights violations within the scope of the law. Although the law expressly clarified that it does not give rise to any new liability under civil law, this procedural feature will likely increase the number of lawsuits for alleged human rights violations in German courts.
- The National Garment Workers Federation (NGWF) is the largest trade union federation in the garment sector in Bangladesh and is an affiliate of IndustriALL Global Union.
- ECCHR is a legal and advocacy organisation. It has several current legal cases against companies in Europe for environmental and human rights breaches which we have tracked in the Responsible Business Conduct brief on litigation. ECCHR is also the NGO which brought the legal case in Germany against KiK for the Ali Enterprises factory fire in Pakistan. In January 2019, the Court rejected the lawsuit on the basis that the statute of limitations had expired.
- FEMNET is a German-headquartered NGO that works on labour and human rights for women, including in the garment supply chain.