The planned directive is intended to hold companies accountable for child labor, exploitation and environmental pollution in their supply chains. In some points, the draft goes beyond a supply chain law that has already been in force in Germany since last year.
The federal government had originally advocated for a European regulation. Most recently, Federal Justice Minister Marco Buschmann (FDP) found the law to be “unreasonable for small and medium-sized companies” in its current form. Germany therefore had to abstain from Brussels, which was seen as a dissenting vote.
The Supply Chain Act initiative, which is supported by trade unions, human rights and environmental organizations, demanded a word of power from Chancellor Olaf Scholz (SPD). The Chancellor was “being literally paraded by the FDP in one of the EU’s most important human rights and environmental projects,” explained the initiative’s spokeswoman, Johanna Kusch.
German business associations, however, welcomed the vote result. “German medium-sized businesses are drowning in reporting obligations and a flood of questionnaires even without additional burdens from Brussels,” emphasized the President of the Federal Association for Wholesale, Foreign Trade and Services (BGA), Dirk Jandura. The companies are currently under high economic pressure.
The Federal Association of Sustainable Economy (BNW), on the other hand, spoke of a “tragedy for German sustainability policy”. Without European regulation, companies would be at a competitive disadvantage on the market because they would have to comply with the regulations of the German Supply Chain Act anyway.
Negotiators from the European Parliament and EU countries agreed on the law in December. The final approval of the member states was originally considered a formality – but according to diplomats, Italy and nine smaller EU countries also abstained on Wednesday. The necessary majority was not achieved.
This means that time is running out to pass the law before the European elections at the beginning of June. The Belgian Council Presidency announced that it would continue to look for solutions, but so far this has not been seen as promising. It is unclear whether negotiations would continue with a new European Parliament after the elections.
The FDP advocates burying the previous draft. After the elections, the new EU Commission should make a fresh proposal.
