Our companies are rarely held accountable for abuses in their supply chains. Even if they dump raw acid in Congolese rivers, fail to mitigate oil spills in Nigeria or Ecuador, procure from places with abysmal working conditions, source from genocidal regimes, or invest in hydroelectric dams while fully aware of rights violations, corporations often do not have to answer for their actions.
Such impunity fuels downward competition. If our companies turn a blind eye to abuses and scour the world for the lowest possible costs, government from low- and middle-income countries may try to increase their export competitiveness through labour repression and environmental degradation.
German draft law on abuses in supply chains faces uncertain future
The German development ministry BMZ is fighting for legislation that would force companies to take responsibility for human rights abuses in their supply chains.
Indeed, when one government represses workers’ rights, other exporters follow suit, to remain internationally competitive. For this, they may be cheered by international finance — just as Deutsche Bank and the Wall Street Journal championed Brazil’s President Jair Bolsanaro, as “the desired candidate of the markets.”
If our companies were liable for abuses, they would have an incentive to source more judiciously. To avoid costly litigation, they would try to reduce the risks of human rights abuses and environmental degradation. Deutsche Bank would have far less reason to favor Bolsanaro.
Legislation would help internalize international externalities and create a level playing field so that responsible businesses that already go to great lengths to reduce risks of abuses in their supply chains are not undercut by less scrupulous competitors.
Importantly, if more countries adopt such legislation — perhaps at the E.U.-level — and buyers deliberately avoided places with terrible track records, low- and middle-income country exporters would have a far greater incentive to respect human rights and permit civil society activism.
So, if corporate accountability is so great, why don’t we have it already?
There is a global coordination problem — reflecting self-interest and despondency. First, whenever campaigners propose legislation, domestic companies raise concerns about international competitiveness. Understandably, companies worry about being undercut by competitors not liable for such legislation. This saps political support.
Second, despondency. By observing the world, people develop beliefs about what others think and do. If politicians and activists do not see public support or peer countries legislating, they may not even contemplate reform or anticipate success. Instead, they reluctantly accept the status quo. Expectations and self-interested concerns curb support for legislation to internalize international externalities. And it helps explain why the United Kingdom has a very weak law on modern slavery, merely requiring companies to upload a statement.
But, in continental Europe, change is afoot.
In Switzerland, over 100 NGOs, unions, and businesses are pushing for corporate accountability. Surveys indicate widespread public support. It will soon be put to a public referendum. If this passes, Swiss companies will become liable for human rights abuses in their global supply chains.
Earlier this month, British NGOs launched a campaign for similar legislation: mandating that our companies reduce risks of human rights abuses and environmental degradation, or else be liable.
Beyond Switzerland, corporate accountability is gaining ground across Europe — with activism in Belgium, Germany, Finland, and Luxembourg. The Finnish campaign is supported by 130 NGOs, trade unions, and companies; 200 parliamentary candidates; and four political parties.
Just last month, the German Ministry of Economic Cooperation announced a draft law on human rights due diligence. Many politicians champion EU legislation, to create a level playing field. This all builds on the French Duty of Vigilance Law, passed in 2017.
This is big, and it’s exciting. It shows that unregulated globalization is not inevitable. Campaigners are changing the rules.
