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Global supply chains

German business has already been very active for many years in taking notice of its CSR and sustainability activities in global supply chains

©AdobeStock kamonrat

©AdobeStock kamonrat

Many - especially larger - German companies have set up their own CSR/sustainability departments in recent years. Thus, especially at large companies, more and more employees are working directly in the CSR/sustainability area. However, many small and medium-sized companies have also taken measures in the area of CSR in recent years. As part of their CSR/sustainability strategy, many companies have also taken concrete measures to implement the UN Guiding Principles on Business and Human Rights and the OECD Guidelines for Multinational Enterprises.

Social commitment is an integral part of the established German corporate culture. German companies make an annual commitment of €11.2 billion in the social sector alone. In addition, a large number of initiatives exist at international and national level to promote the ideas of CSR and sustainability, such as the UN Global Compact Network and German Global Compact Network, the Alliance for Sustainable Textiles, Together for Sustainability (TfS), Chemie³, Bettercoal, etc..

German companies enjoy a very good reputation in the course of their foreign trade activities
Companies from Germany make significant contributions to sustainable development at foreign locations through their local presence (Study Sustainability through Presence - Contributions of German Companies to Sustainable Development at International Locations). Companies often transfer standards and procedures in their foreign activities. 81 percent of the companies are on a par with or above the standards of their local competitors. The foreign commitment of German companies is long-term. Almost all companies plan to be permanently represented abroad with their own branch office. German employers are therefore in high demand among employees worldwide and are considered particularly attractive.
Recognizing the complexity of global supply chains

Many large German companies have direct suppliers (tier-1) in the high five-digit range. Some corporations have over 100,000 direct suppliers. The supplier tiers before that can cover millions of companies. Germany imported goods from abroad worth 1,089.8 billion euros in 2018, about 3 billion euros per day.

"Global supply chains are complex, diverse, and fragmented. ... They have contributed to economic growth, job creation, poverty reduction, and entrepreneurship, and can contribute to the transition from informal to formal economies."


(Source: 2016 International Labor Conference (ILC) Tripartite Resolution on Decent Work in Global Supply Chains).
Demand for liability for global supply chains problematic
Calls to introduce corporate liability for global supply chains are very problematic. The UN/OECD standards explicitly do not provide for liability. Corporate civil liability for the conduct of independent business partners and third parties is not in accordance with authoritative international standards. The OECD Guidelines for Multinational Enterprises state (Ch. II, A. 12, p. 2): "Responsibility should not, however, be shifted from the polluter of an adverse effect to the enterprise with which the polluter has a business relationship." The UN Guiding Principles on Business and Human Rights provide (UN Guiding Principle 22, Commentary, para. 3): "Where adverse impacts have occurred which the business enterprise did not cause or contribute to, but which are directly linked to its operations, products or services because of a business relationship, the responsibility to respect human rights does not require the business enterprise itself to provide remediation ..."
Observe negative developmental effects

To minimize liability risks, companies would be forced to shorten supply chains and withdraw from regions with problematic human rights situations and cease business activities ("cut and run" instead of the required "stay and improve"). Global trade would be damaged and many employees in developing and emerging countries would lose their jobs and SMEs from these countries would be denied access to global supply chains (cf. study Economic Evaluation of a Supply Chain Act, Kiel Institute for the World Economy).

It should be noted that almost 2 out of 3 workers (62%) worldwide are employed in the informal sector. Internationally recognized human rights also include the principles relating to fundamental rights in the 8 ILO core labor standards. Of 187 ILO countries, 41 have not ratified all 8 ILO core labor standards, including major industrialized nations.

The introduction of an unrealistic supply chain liability would also thwart the efforts of the German government itself to attract companies to engage and invest in Africa. Such engagement is not possible for companies if they have to take on incalculable legal risks in the process. The Afrika-Verein der deutschen Wirtschaft e.V. states (PM, March 26, 2019): "A rigid legal regime for human rights due diligence can lead to a withdrawal of German companies from challenging markets on the African continent and jeopardizes investments and business activities in African countries." Positive action on the ground in developing and emerging countries is important, as 80% of workers are not even reached through global supply chains.

13. November 2020
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13. November 2020

Business and corporate ethics

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