A Franco-German perspective on the protection of human rights and environmental regulations

published on 20 October 2021 | reading time approx. 6 minutes

"Lieferkettengesetz": a strong law to protect human and environmental rights in the economic sphere

Germany recently adopted a new legislation on Corporate due diligence in supply chains on human rights and environmental laws (Lieferkettensorgfaltspflichtengesetz, "SDDA"[1]). According to Labour Minister Hubertus Heil, "this is the strongest law in Europe so far against worker exploitation. It is the end of companies weighing human rights against their economic interests".

While this law concerns groups employing more than 3000 employees in Germany as of 1/1/2023 (and 1000 employees as of 1/1/2024), it will also impact SME's as suppliers of those groups.

Main differences with the French "Devoir de Vigilance" Law

While France has had similar legislation ("Loi relative au devoir de Vigilance") since 2017[2], there are still some particularities that impact foreign companies and may set additional requirements on French enterprises.

The new German legislation requires companies to implement preventive and remedial mechanisms in order to avoid primarily human rights violations but also breaches of environmental laws.

While both French and German legislations aim at similar results, the German law gives comparatively detailed indications as to the different mechanisms each company must implement.

The key differences between France and Germany lay in:

• the detailed description given by the German legislator on the effective content of the due diligence plan, whereas the French law is less precise.
• the remediation measures to be taken in case of a violation or imminent risk of violation. While in France the scope only goes up until sub-contractors with whom one has an established relationship, in Germany even the indirect suppliers can be subject to a due diligence program, if there is substantiated knowledge of a potential or actual violation.
• the implementation threshold is lower in Germany than in France, as referring to any undertaking having more than 3,000 employees (and 1,000 from 2024 onwards), vs a threshold of 5,000 employees under the French law.
• the German law provides for administrative sanctions (up to 2 percent of global turnover for companies above 400 M€ turnover) in case of serious non-compliance, while French law only refers to judicial liability claims.

The French Vigilance plans already implemented by the French Groups through the Vigilance Plans will certainly serve as a solid basis for designing their German due diligence plans. However, such plan will have to be adapted to the scope of German operations (in Germany and foreign subsidiaries controlled by the German mother company) as well as to the direct (and sometimes indirect) suppliers.

The European mandatory human rights diligence Directive expected to be released in 2022

Next to the new German legislation, the European parliament issued in March, 2021 a draft of a potential corporate due diligence Directive through a Parliaments Resolution[3]. It remains to be determined how and when the European Commission will implement this request for a European solution. For now, the Parliaments' proposal is significantly stricter and sets higher standards than any of the laws implemented by the member states. As such, the current proposal suggests that high risk and publicly listed small and medium size companies with less than 250 employees[4] would be subject to this law.

Fears of a fragmentation on the compliance programs have risen, as companies would have to implement different compliance programs within each country if every state creates its own CSR legislation, making a European solution indispensable.

NGO's already actively challenging companies even before new legislative landscape is clarified

Interesting in this respect are also the human rights allegations against clothing retailers that were recently raised in Germany. An NGO initiated a lawsuit against Hugo Boss and Lidl, accusing them of being directly or indirectly involved in and profiting from alleged forced labor of Uighur minority in China.

While Lidl claims that they ended their working relationship with all the named producers, Hugo Boss considers that they have taken all necessary means to assure that within their production there are no human rights violations, including through internal audits and human rights protections in the code of conduct and the contractual agreements[5].

Since the German SDDA only applies effectively from 2023 onwards, this dispute is not subject to that regulation. None-the-less, it strongly relates to issues that are intended to be tackled by the SDDA and it remains to be seen how such allegations would be adjudicated (including with respect to indirect suppliers).

Similar allegations of concealed forced labor and crimes against humanity within their supply chains were raised by a French NGO´s against the companies Zara, Skecher, Sandro and Uniqlo in April this year.

Ultimately, the new German SDDA law will require French undertakings operating on the German market and meeting the turnover thresholds to adapt their Vigilance Plan to the German law requirements by the end of 2022.

As an international law firm originating from Germany with significant compliance expertise in our French office, we may assist French groups in this respect.

For ease of reference, a short Table comparing the French Vigilance law and the German SDDA is set out hereafter (for a better view please use desktop version)  :

[1] Bundesgesetzblatt (bgbl.de)

[2] Before Germany, other countries such as France, UK, Australia or the Netherlands had already implemented similar legislations.

[3] Textes adoptés - Devoir de diligence et responsabilité des entreprises - Mercredi 10 mars 2021 (europa.eu)

[4] According to the Ministry of Economy, this law should serve as an action plan for the European Directive.

[5] HUGO BOSS Group: Menschenrechte & Arbeitsbedingungen

https://group.hugoboss.com/fileadmin/media/pdf/sustainability/
company_commitments_DE/HUGO_BOSS_-_Stellungnahme_zu_Xinjiang.pdf

[6] Including in the calculations employees in direct or indirect subsidiaries whose registered office is located in France

[7] Including in the calculations the direct and indirect subsidiaries whose registered office is located also abroad.