ECONOMYNEXT – Sri Lanka’s exporters of including software and hotels who provide services to companies in Germany as well as food exporters and manufacturing companies will face human rights rules under a supply chain law which will come into effect in January 2023, officials said.
“The law does not distinguish between types of companies,” Torsten Safarik, President of the Federal Office for Economic Affairs and Export Control (BAFA) which will enforce the German Supply Chain Due Diligence Act (SCDDA) said.
“Tourism companies and all companies will have to comply.”
BAFA is now setting up a separate office which will be staffed with over 140 officers to enforce the law.
Related Link: Guidelines for Risk Analysis (In German)
Related Link: English BAFA website
German companies with over 3,000 employees will come under the law first. The threshold will be lowered later.
Companies in Germany will be required to ensure that their suppliers and partners in Sri Lanka comply with human rights, labour laws and environment or face penalties.
Some Sri Lanka manufactured exporters, which have links with global and German brands already comply with some of the principles enshrined in the law.
However many more are not aware of the potential impact of the law.
“We have many members who are exporting to Germany,” Shiham Marikar Chief Executive of Sri Lanka’s National Chamber of Exporters said.
“But they do not know anything about it. We have to get the exporters prepared. Our next step is to get the exporters do a survey and engage with the organization in Germany to get them prepared.
“As a Chamber we are also looking at giving a certificate to companies that comply with the law.”
Former Commissioner of Human Rights of the German government now Managing Director Löning Responsible Business and Human Rights said German companies will start conducting risk assessments on suppliers to check compliance.
Each company will have to audit and have knowledge of their supply chain.
German importers and business partners may be forced to drop companies in Sri Lanka that do not treat workers well or do not take precautions to minimize their impact on the environment.
However it is also an opportunity for companies that comply to maintain or expand their business, Löning said.
One of the triggers for the law was the collapse of Rana Plaza in Bangladesh which left over 1,000 people dead and consumers started asking question from apparel brands in particular.
After the disaster many global brands started their own standard which required supplies to audit and show compliance.
“Each company that conforms to OECD guiding principles will be well prepared for the supply chain,” Safarik said.
Tim Richter from the Helpdesk on Business & Human Rights, Agency for Business & Economic Development (support service of the Federal Government) which is advising German companies said more than 2,000 companies have consulted them on the upcoming law.
In Sri Lanka apparel companies and also some food exporters, who already comply with their brand partners’ standards had already made progress, but companies that do not comply may face termination of their business relationships with German buyers.
An European Union wide law is also being drawn up, which will come into effect later. (Colombo/Aug25/2022)