Supply Chain Act
CAHRES
Corporate responsibility
Countries make laws. This also applies to developing countries, many of which are very rich in natural resources. Why should EU companies now take responsibility for ensuring that human rights are respected, and environmental standards are met at the umpteenth point in their supply chains?
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The answer is actually very simple. Money rules the world. In 2019, global foreign exchange trading per day was US$6,590 billion. The European Central Bank had foreign exchange reserves of €69 billions at the end of 2019. The national central banks together had additional reserves of €827 billions including gold reserves. It is simply the case that business has more influence on the economic circumstances of companies and people in the respective supply chains than politics has on the internal affairs of other states.
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This has been known for a long time, which is why the UNHRC adopted the Corporate Responsibility Guidelines back in 2011. Still, it's a problem because consumers are very price-sensitive, and as long as other market participants don't pay fair prices, there's an imbalance in competition. This imbalance is what the Supply Chain Act is designed to address. Equal rights and obligations no longer disadvantage those who already face up to their corporate responsibility and act accordingly. Only a few companies have such market power that they can hold their own despite the fact that human rights and environmental standards along their supply chain are monitored and complied with to the greatest possible extent. What market power does a medium-sized metal processing company have on steel producers in China or India? On its own, its options are limited. But through the Supply Chain Act, it has all the other metalworking companies on its side.
However, the closing of ranks is not done consciously and directly. The companies are bundled, their interests are united by each acting on the findings of their supply chain analysis in accordance with the Supply Chain Act.
The opportunities that lie in the Supply Chain Act for Europe and every SME, as well as every European employee, are considered elsewhere. Here, corporate responsibility becomes possible even for SMEs without direct contacts along their entire supply chain.
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The law protects every company from competitive disadvantages which has corporate accountability in mind anyway. It gives all others a good reason to act in the same way. By acting similar in a crowd, European SMEs alone can change the behavior of large foreign corporations.
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Rejection of the Swiss corporate responsibility initiative
In Switzerland, the German Supply Chain Law project corresponds to the corporate responsibility initiative. This initiative was narrowly rejected in November 2020 after a massive campaign against it by business associations. Was this right or wrong?
No judgment is to be passed on this here. Switzerland does not have the market power of the EU. The close result might have been different if there had been no fear of disadvantages for the competitiveness of Swiss companies due to the fact that the EU had already passed a corresponding law. The fears in Switzerland can therefore be transferred neither to Germany nor to the EU.
Consequently, the whole situation could have been different if the corporate responsibility initiative had included the intention to follow a corresponding EU directive. Then Swiss companies could also have been brought on board, as they would not have had to fear any competitive disadvantages compared to EU companies.