German government criticized by employers for human rights law that threatens to limit company supply lines

German companies have criticized Chancellor Angela Merkel’s coalition for approving a law that will force employers to take action against foreign suppliers who breach human rights violations, potentially hitting supply chains.

The ruling coalition agreed to back the legislation at a cabinet meeting this week, setting the groundwork for a set of rules under which large companies face fines of up to two percent of their annual global turnover if they do business with human rights abusers. The legislation would give the government the power to temporarily exempt public tender companies from the fines of €175,000 or more that they would face in the new bill.

The BDA employers association – which represents employers across a host of industries including banking and transport – accused Merkel’s government of pushing legislation that will put German companies at a disadvantage against other European and international companies. “Foreign companies that do not have to comply with the German rules will jump in and replace German companies and their trade business,” the BDA said in a statement.

The government has defended the legislation, with Finance Minister Olaf Scholz saying it will help protect workers at risk of exploitation, and that “Made in Germany will always mean respecting human rights.”

However, the BDA refuted this, claiming many companies in Germany will instead be forced to cease working with developing countries with poor human rights records. “The law harms precisely those people who are supposed to be protected,” it said.

Once passed, the law is expected to initially impact only around 600 companies when it comes into effect in 2023, but that will expand to 2,900 businesses the following year.

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