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An eleven-year-old works in a mine in Mexico: New requirements for companies with more than 250 employees and more than 40 million euros in annual sales

Photo: Eduardo Verdugo / dpa

The EU Parliament has spoken out in favour of a relatively strict supply chain law. A majority of MEPs voted in Brussels in favour of rules that hold companies responsible for combating child labour, exploitation and pollution along their global supply chains. Accordingly, the requirements should go beyond the measures provided for in the German Supply Chain Act and also apply to the financial sector, for example.

The severity of the new rules exceeds previous plans. This is because companies based in the EU, which have more than 250 employees and more than 40 million euros in annual sales worldwide, are to be subject to them across all sectors. Initially, the Supply Chain Act was only intended for companies with 500 or more employees and a turnover of 150 million euros. Companies based outside the EU will also have to comply with the new rules if they have a turnover of more than 150 million euros and at least 40 million euros of it in the EU.

In the future, the companies concerned will be obliged to identify the negative effects of their activities on human rights and the environment "and, if necessary, to prevent, stop or mitigate them," the parliament decided. In addition, they must also monitor compliance with environmental and social standards at their partner companies in the value chain. These include suppliers, sales partners, transport companies, storage service providers and waste management.

The EU Commission proposed the law last February. The 27 member states agreed in December on a position that would weaken the Commission's proposal somewhat. For the final negotiations between member states and the EU Parliament, the position of the MEPs was still missing, which now goes beyond the Commission's proposals. In Germany, a supply chain law has already been in force since January, which may have to be adapted to EU requirements.

Harsh criticism from the business community

The German and now also the European legislative project is sharply criticized by business representatives. They warn of excessive bureaucracy and a weakening of European companies on the world market.

The German Chamber of Industry and Commerce (DIHK) criticized that the draft law lacked practicality, proportionality and legal certainty. »The Supply Chain Act imposes a new and incalculable liability risk on companies.« They are expected to exercise control that is beyond their own control, said DIHK President Peter Adrian. Supply chains often consist of several hundred, sometimes several thousand companies. As a rule, however, only the direct supplier is known to a company. Small and medium-sized enterprises would be "completely overwhelmed" by the planned guidelines.

The employers' association BDA even warns of a migration of companies due to more regulation. In times of crisis, companies need flexibility and scope for innovation – "and less bureaucracy from Brussels," BDA Managing Director Steffen Kampeter told Redaktionsnetzwerk Deutschland. The EU Parliament's proposal on supply chains would bring more regulation and no additional protection for human rights.

Tiemo Wölken, legal policy spokesman for the European SPD, on the other hand, sees the EU law as an opportunity to ensure that double standards are not applied, "but that we ensure that human rights and environmental protection apply equally everywhere in the world".

In particular, the CDU and CSU delegation in the European Parliament had campaigned for less strict regulations until the end. For example, subcontractors and the financial sector should be excluded and only larger companies should be affected. In a debate in parliament on Wednesday, CDU MEP Axel Voss called for the bureaucratic effort to be stopped. However, such amendments did not find a majority.

366 MEPs were in favour of the planned EU supply chain law, 225 MEPs voted against, 38 abstained.