A Human Rights Enforcement Debate in Germany

How to limit or eliminate human rights violations and forced labor practices in supply chains — and if companies should take action voluntarily, or be legally required to — continues to be a vexing issue, with the fierce debate taking place in Europe’s largest economy.

In Germany, businesses voluntarily monitor their supply chains for human-rights violations. However, a survey conducted by the country’s Federal Foreign Office indicated that 20 percent of companies provided “valid answers” on their monitoring practices, with less than half of those reporting reasonable due diligence. Two German ministers have proposed a law that would compel companies to monitor supply chains and, if necessary, take appropriate counter measures. 

“We need a legal framework, as stipulated in the coalition agreement, to meet human rights standards that rule out child labor along the supply chain, and ensure basic environmental and social standards are met,” Gerd Müller, Germany’s minister of economic cooperation and development, told German public broadcaster Deutsche Welle.

However, chancellor Angela Merkel’s cabinet, which was scheduled to meet to discuss the proposed law on September 9, is reportedly not unanimous in support. Also, there is sentiment that the European Union should be responsible for such legislation. 

ESG Spotlight

Sustainable Supply Chains Can Get a Funding Boost 

With environmental, social and governance (ESG) best practices gaining more focus among companies, investors and consumers, it’s no surprise that banks are following suit. Sustainable supply chain finance is an accelerating funding tool as organizations aim to build more resilient and ESG-friendly sourcing and procurement operations in the wake of the coronavirus (COVID-19) pandemic, according to a report by S&P Global Market Intelligence.

The concept is nascent, but not new: In 2014, the International Finance Corporation partnered with Levi Strauss & Co. to launch a program providing low-interest rate financing to suppliers that qualified under a “sophisticated evaluation system for labor, health, safety, and environmental performance.” That market has remained modest, though 2018 research by BSR, a sustainability consultancy, indicated that banks could, in time, provide US$660 billion in sustainable supply chain financing.

Multinational investment bank HSBC, with two sustainable supply chain programs in place, could be one of the leading lenders. “The number of conversations that we’re having, the interest and number of clients pro-actively reaching out to us have increased substantially,” Burcu Senel, HSBC head of sustainability in trade, told S&P Global Market Intelligence.

 Sustainability Stat

8%

Decrease in global carbon emissions during the first four months of the year, due to the coronavirus (COVID-19) pandemic, which slowed economies, according to researchers at the University of East Anglia in Norwich, United Kingdom. However, this “recovery” figures to be a V-shaped one, as emissions are projected to rise again as businesses reopen.

To put that decrease in perspective: Even if it could be maintained, it would need to be further reduced by more than 40 percent within the next decade to prevent global temperatures from rising to levels that scientists believe will unleash some of the worst impacts of climate change.