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the German Supply Chain Act

Possible unintended consequences

by Andre Schwarz, Bianca Reichelt and Fabian Wagner (04.06.2021)

The Federal Government has agreed on the draft for a Supply Chain Act. The Federal Cabinet launched the draft law on 3 March. On 27 May, the coalition parliamentary groups reached agreement on the Supply Chain Act. As Manuyoo we agree in principle, with the need to curb exploitative working conditions worldwide be it in textile factories, quarries or on coffee plantations. However, we believe that this Supply Chain Legislation could have unintended consequences.

Read why here.

Background

The supply chain act seeks to improve the protection of human rights along global supply chains and, for example, to prevent child and forced labor and ban substances that are hazardous to people and the environment. This is all to be applauded since the German economy and our consumption is particularly dependent on inputs and raw materials produced in developing countries. We cannot ignore that in the procurement of some of the products we consume there exists intolerable environmental and working conditions, very low wages or even with exploitative child labor. Most of us agree that due diligence to ensure a fair and transparent supply chain on the part of German firms is required.

(Photo by Johannes Pokorn on Unsplash)

Main Concerns

Our concern as Manuyoo regarding the proposed Supply Chain Act is regarding its unintended consequences. Instead of increasing the number of global suppliers to allow more smaller companies to participate fairly in global trade, there could be a move toward more integration as German companies optimize to meet their due diligence obligations.

There may also be greater demand for sophisticated suppliers that can provide certificates and own compliance reports in an acceptable format. The Law may thus have the unintended consequence of creating new trade barriers for smaller businesses further making it impossible for them to join existing supply chains. We are already aware of the unintended consequences of the ubiquity of "Fair Trade", "Organic", and other certification on small businesses based in Africa. The requirements for attaining these certifications are often too onerous for them with the consequence that their products are not competitive enough without certification and therefore less likely to gain access to the European market.

That's why we founded Manuyoo, to give manufacturers, small startups a stage on the European market and to support them with certification and market conformity.

Therefore, as much as the law is targeted at bigger actors in the market (with at least 1000 employees) it has a potential to create knock-on effects to smaller producers in the lower end of the supply chain. It may therefore serve to entrench the existing inequalities in African and European trade relation instead of removing them.

(Preceding Photo by NeONBRAND on Unsplash)

Recommendations

Here is an idea, maybe we should campaign for the addition of a diversity provision in the law which prompts importers to expand their supply chains to include small, impact-suppliers in developing countries.

To be meaningful, however, supply chain legislation with standards on human dignity (which Manuyoo agrees with) will need, to a greater extent, education and rethinking among German and European customers. Negative effects on the African economy cannot be avoided if the mindset is not worked on, trained, advertised or discussed in Europe. Through our purchasing decisions, WE citizens can influence the working and living conditions of people in developing countries.

(Photo by Neil Fedorowycz on Unsplash)

Manuyoo Policy statement related to the Supply Chain Act:

Re 1. empowering:

  • Manuyoo changes the narrative in D/EU: every citizen can contribute to purchasing fair products. Manuyoo provides transparency here. Living fairly and sustainably means being aware of the consequences of one's living and consumption habits and acting responsibly. Manuyoo supports especially smaller enterprises and start-ups.
  • Manuyoo works with partners who sustainably create jobs, support social projects, give freedom for education and further development and promote local structures.

Re 2. sustainable:

  • For Manuyoo, sustainability is not only limited to ecological aspects, but also to economic, social and political standards, independent of the supply chain law.
  • Manuyoo works exclusively with partners in the entire supply chain who exemplify and represent humane conditions! (Fair wages / income)
  • Manuyoo and its partners do not support child labour.

Re 3. unique:

  • Manuyoo works with partners who make every effort to create many highly skilled and competitive jobs in Africa.
  • Manuyoo works together with partners who integrate the supply and value chains more strongly than before, treat them fairly and reduce dependencies on other continents.
  • Manuyoo must ensure a lot of transparency and educational work in Europe so that in the coming years more products "Made-in-Africa" are bought that have been produced sustainably and fairly.

The Authors

Published on: 04.06.2021