German industry has condemned an agreement on a new EU due diligence law and warned that new corporate rules will slow Europe’s economy and undermine its competitiveness.
On Thursday, EU countries and the European Parliament reached an agreement on a new due diligence directive designed to hold large companies accountable for violations of human rights and environmental standards in the value chain.
While non-governmental organisations widely welcomed the new law as an important milestone, German industry met the news negatively. Thilo Brodtmann, managing director of Germany’s Mechanical Engineering Industry Association (VDMA), said in a statement:
“With today’s agreement […] the EU is putting the next nail in the coffin for the international competitiveness of European industry.”
The Federation of German Industry (BDI) also warned that the rules would “threaten the competitiveness, security of supply and diversification of the European economy”.
German industry also fears that the new law will increase the bureaucratic burden on companies. Some 65 per cent of German companies are already complaining about increased reporting requirements, which industry blames mainly on EU legislation. Wolfgang Große Entrup, the managing director of the Association of the Chemical Industries (VCI), also said in a statement:
“Our companies are already suffocating in bureaucracy. Now, there are even more regulations on top. That’s another blow.”
The three German associations also called on the government to let things slide and do its best to block the law, which still needs official approval from EU countries.
The German government, made up of three parties, is not unanimous on the issue.
The Greens and the SPD are strongly in favour of the new rules. Greens MPs Wolfgang Strangmann-Kuhn and Mike Aussendorf praised the agreement as “a new global standard for international supply chains”, while SPD MP Thiemo Wölken called it “an important step towards protecting human rights, the environment and the climate worldwide”.
However, the FDP strongly opposed the compromise. FDP vice-president Lukas Köhler said in a statement:
“The EU due diligence law cannot be adopted by the Council in its proposed form.”
The FDP also recently called for a pause in the regulation of EU law, arguing that the burden on business is disproportionate and that 57 per cent of the bureaucracy comes from Brussels.
Given the split in the German coalition over new due diligence rules, the government is likely to abstain in the EU-level vote. However, enough EU countries are expected to support the legislation to reach the qualified majority needed to pass it.
