Frequent violations of human, labor, and environmental rights continue to impact supply chains globally, with notable prevalence in the Global South, but also in the Global North. The German Supply Chain Due Diligence Act (SCDDA, in German: Lieferkettensorgfaltspflichtengesetz [LkSG]), enacted in 2023, represents significant progress in upholding rights within the context of socio-ecological transformation across value chains. However, the law faces challenges, particularly in terms of its prospective enforcement and the absence of a cohesive link between social and ecological rights. This article provides a commentary and argues that addressing these issues should be a priority.
A Legal Tool for Social-ecological Transformation – Or a Toothless Tiger?
As of January 1, 2023, the SCDDA became effective. Its overarching objective is to mitigate human rights violations arising in the value chains of multinational corporations. Consequently, the SCDDA mandates German companies (headquartered in Germany with a workforce of at least 1,000 workers, including those on temporary contracts lasting more than six months) to identify and respond to potential or realized violations of human rights and environmental risks within their global value chains – be it the company’s own business operations or those of its direct suppliers. In case the company has well-founded knowledge of potential human rights or environmental risk violations, these obligations are extended to include indirect suppliers. To this end, the law provides for the establishment of a risk management system and a complaints mechanism that enables individuals, as well as trade unions and NGOs to indicate the violation of certain rights by a company and initiate a control by the responsible authorities (see below).
From the perspective of socio-ecological transformation conflicts, the SCDDA is very welcome: due diligence acts make it possible to enforce workers’ rights even in the face of resistance from the company and thus drive forward the restructuring of value chains for the sake of ecological sustainability in the social interest of all: in the case of the SCDDA, administrative oversight and enforcement is the responsibility of the Federal Office of Economics and Export Control (Bundesamt für Wirtschaft und Ausfuhrkontrolle, BAFA), which can impose fines on companies that fail to fulfil their due diligence obligations. Recent experience shows that corporate voluntary commitments to enforce human rights in their supply chains are inadequate. Legal obligations cannot, of course, resolve the power asymmetry between companies and employees, but they can slightly mitigate it. In general, law has become an important instrument in socio-ecological transformation as demonstrated by recent climate lawsuits. However, the enforcement of due diligence is not only a legal, but a highly political discourse: the fact that the SCDDA has itself been the result of social and political struggles further underlines this. Its implementation will also depend on the will of political and social actors: trade unions and NGOs can help to enforce the law more effectively by building solidarity networks along value chains.
An Underrated Link: Social and Ecological Rights in the SCDDA
However, the German Supply Chain Act also suffers from some flaws that reduce its value as a legal remedy in socio-ecological transformation conflicts: this mainly concerns the lack of a linkage between social and ecological rights.
Already during its conception phase, the SCDDA showed an emphasis on human rights and labor law aspects while ecological aspects were secondary. The government at the time commissioned a study to assess the extent to which German companies were already implementing corporate responsibilities in their supply chains. This was done to get an idea of the need for binding public regulation as opposed to voluntary commitments. In the study, companies were asked solely about the monitoring and enforcement of social rights, such as labor standards. Environmental concerns, and therefore the need for ecology-related regulation, were not assessed in the survey. When the law was first announced, the draft featured a range of ecological rights. However, the companies’ environmental obligations ended up being drastically reduced by the time the law was adopted.
In its current form, the SCDDA defines a set of risks containing eleven specific human and labor rights completed by a catch-all definition covering the violation of other related social rights as well as three ecology-related risks (Section 2 of the law). While the social dimension of the law covers a variety of issues, such as child labor, slavery, and the right to freedom of association, independent ecological risks are limited to the ban of mercury, persistent organic pollutants, certain pesticides, and illegal handling of hazardous waste. Beyond these explicit ecological risks, environmental concerns are only considered in relation to concrete human rights violations. Here, the included rights feature a prohibition of the pollution of ground, water, as well as disproportionate consumption of air and water in relation to harms to affected individuals.
Looking at the law in its entirety, environmental sustainability is connected to social sustainability with an emphasis on the latter. As highlighted before, this approach of connecting ecological concerns to workers’ rights is not reprehensible per se, as it grants affected individuals the possibility to enforce a more sustainable design of supply chains and thus improve local social and ecological conditions. However, the act’s narrow focus on human and labor rights limits its effectiveness in addressing systemic environmental challenges such as deforestation, biodiversity loss and climate change, as ecological damage does not necessarily go along with concrete human rights violations. In addition, human rights violations arising from harmful interference with environmental processes may only become apparent after a significant period of time has passed. Without robust measures to address ecological rights, companies are prone to overlook or actively disregard the environmental impacts of their operations, leading to negative consequences for ecosystems, communities, and future generations.
Regarding the inclusion of ecological rights in corporate responsibility, a look at other legal frameworks which regulate corporate responsibility can help. Other comparable inter- and transnational guidelines and standards list more comprehensive ecological rights alongside social rights. One issue in environmental due diligence regulation is that ecological rights, in contrast to human and labor rights, are not focused on a few main international conventions but exist in a number of different agreements and treaties. However, a study of the German Environment Agency (Umweltbundesamt) suggests a combination of multiple standards in the framework of the SCDDA as a way to overcome this challenge. German NGOs and labor unions demand an environment-related general clause in the act on due diligence, similar to the one in the French Duty of Vigilance law (Loi de Vigilance). Here, the environment in its entirety is defined as a specific good under protection.
Overall, the SCDDA fails to set comprehensive environmental standards. The act presented an opportunity to define and control companies’ responsibilities for environmental damage and subsequent environmental change of ecosystems. Structures and processes — such as risk analyses, complaint and prevention mechanisms — that are already laid down in the law could be used to monitor and implement ecological concerns. At present, the SCDDA fails to fulfill its potential as a comprehensive tool in legally addressing socio-ecological transformation conflicts, as its scope misses specific environmental damage as well as subsequent long-term impacts.
Failed Progress: The Corporate Sustainability Due Diligence Directive (CSDDD)
Whether critics or supporters of the SCDDA, all involved interest groups point to the need for a European directive to eventually replace the German act. While industry-related stakeholders emphasize the importance of creating a level playing field within the European internal market, environmental and social organizations see the potential for a broader application of the law to even more actors along supply chains. In February 2022, the European Commission presented a first proposal which includes a much wider definition of corporate responsibility along supply chains.
Since then, the Council, Parliament and Commission have agreed on a final draft of the directive which was to be adopted this year – until the German liberals (FDP) decided to block the law at the last minute and the federal government’s ‘German Vote’. The purely economic arguments put forward by the liberals – increasing bureaucratization and costs for small and medium-sized German enterprises in the crisis (it should be noted: for securing the most basic social and environmental rights!) – are interesting from a research perspective on socio-ecological transformation conflicts. But they are not convincing, considering that the original draft of the law already applied to companies with 500 workers or more. Moreover, these objections simply come too late: the informal trilogue between the Parliament, Council and Commission had already been completed and, according to the EU’s unwritten diplomatic rules, the adoption of a law is then generally only a formality. The FDP is gambling away trust in Germany’s reliability as a dependable negotiating partner.
However, the FDP’s blocking stance and the resulting German abstention could not prevent the CSDDD from being adopted in the Council on 15 March (and Germany from being outvoted). Final approval in parliament is now considered certain. Nevertheless, the law has been watered down in the meantime: instead of applying to corporations with more than 500 workers and at least 150 million euros in turnover, the law will apply to corporations with 1000 workers and 450 million euros in turnover after a gradual five-year approximation.
Overall, the EU’s law is nevertheless more ambitious than that of Germany, as it includes more companies in its scope and features a civil liability clause. The planned European directive also references significantly more environmental treaties. Most importantly, affected companies are required to create climate plans presenting the companies’ strategy to reduce emissions along the lines of the 1.5-degree goal of the Paris Agreement. However, there is no control mechanism to ensure the actual implementation of the laid-out strategy. Environmental NGOs warn that this could lead to more greenwashing, as companies would be able to present ambitious emission reduction plans but would not be held accountable in case of failing to achieve set goals.
Between Euphoria and Critique
Despite these existing loopholes and its watered-down version, once it comes into force the CSDDD will be the most ambitious law on corporate due diligence globally. It therefore represents an important step towards closing the gap between social and environmental human rights identified in the German SCDDA above. However, as with the SCDDA, much will depend on the actual implementation of the CSDDD. In this respect, cautious optimism is still the order of the day more than pure euphoria. This applies to the implementation of the SCDDA as well as the CSDDD. However, if the due diligence laws made in Europe were to set a precedent worldwide, this would be a huge step forward. However, it is also clear that conflicts over such laws and their implementation will continue. This is reason enough to keep focusing on the topic from the perspective of socio-ecological transformation conflicts.
Lillie Hafner
Latest posts by Lillie Hafner (see all)
Hendrik Simon
Latest posts by Hendrik Simon (see all)
- A Gap between Social and Ecological Rights: A Commentary after One Year of the German Supply Chain Due Diligence Act - 4. April 2024
- Socio-ecological Transformation Conflicts: A Central Field of Conflict and Research in the 21st Century - 2. April 2024
- Der Ukraine-Krieg und das Völkerrecht. Ist das Gewaltverbot nun endgültig tot? - 6. Dezember 2022
