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The German government has massively toned down the National Supply Chain Act, which obliges companies to comply with human rights and environmental standards in their global supply chains. The Ministry of Economic Affairs, led by Katherina Reiche (CDU), in coordination with the Labour Department under Bärbel Bas (SPD), instructed the responsible supervisory authority, the Federal Office of Economics and Export Control (Bafa). This is to take a "cautious and company-friendly" approach to enforcing the requirements in the future.
This de facto gutting follows the cabinet's decision at the beginning of September to amend the law. The controversial government draft provides for a radical reduction in bureaucracy, which was already agreed in principle in the coalition agreement. The obligation for companies to prepare detailed annual reports on their due diligence obligations is to be abolished without replacement and with retroactive effect. According to the plans, nine out of thirteen possible fines will be removed from the catalog of administrative offences.
To immediately relieve the burden on companies, Mr Reiche's office has now instructed the export authority not to check company reports at all with immediate effect. Furthermore, in accordance with the planned law, which has not yet been passed by the Bundestag, the Bafa will discontinue ongoing fine proceedings and not open any new ones based on the cancelled offences.
Fines only for the most serious offences
Fines for the remaining relevant offenses are only to be imposed for particularly serious violations of human rights and under very stringent conditions. At the same time, the Bafa has been instructed to take an extremely "restrictive" approach if the cases actually warrant it.
At the same time, the export control authorities are to further expand their supporting activities, for example, in the form of implementation assistance and the promotion of cooperation. In the medium term, the local law will be replaced by a "low-bureaucracy implementation of the European Supply Chain Directive (CSDDD)", according to the Ministry of Economic Affairs. The government has promised to minimize the burden on the economy.
Apple and Samsung repeatedly pilloried
Shortly after taking office in May, German Chancellor Friedrich Merz (CDU) appealed to the EU legislative bodies to immediately abolish the European Supply Chain Directive, which was not adopted until 2024. "We will repeal the national law in Germany," the conservative emphasized regarding the relevant provisions in Germany, some of which go beyond the EU's CSDDD. Federal Finance Minister and Vice-Chancellor Lars Klingbeil (SPD) emphasized other points shortly afterward: "Of course we have to look now: How can reporting obligations be curbed, how can bureaucracy be reduced? But overall, we agreed that the Supply Chain Act is important."
The EU Commission's draft for a package to reduce bureaucracy envisages the CSDDD taking effect later, affecting only a fifth of the companies currently subject to it and revealing less information. The directive is primarily intended to oblige large corporations to mitigate their negative impact on human rights and the environment, such as child labor, slavery, labor exploitation, pollution, deforestation, excessive water consumption, or damage to ecosystems. This also applies to subsidiaries and business partners. Those affected should set up appropriate review processes and document them. Previously, abuses in the supply chains of Apple, Samsung & Co. came to light on several occasions.
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