Roundtable Discussion: Supply Chains under Review

Global supply chains are transforming – due to global crises, but also due to an increased consciousness about the human and environmental costs. German and Chinese experts discussed the recent changes in global supply chains and the role of Supply Chain Acts as they are being prepared in the EU and Germany.

How to make global supply chains more sustainable? How to reduce prevent forced labour, child labour, exploitative employment and environmental costs along supply chains? Civil society organizations in Europa have campaigned and pushed for Supply Chain Acts or Due Diligence Obligation Acts for years – now such a law will enter force in Germany in 2023, the EU Commission has presented a Directive draft with even stricter regulations.

In principle, these legislations will hold companies responsible for human rights violations or environmental destruction not only within their own operations, but also along their supply chains.

But these legal projects have also been met with criticism from businesses and countries of the Global South, as well as China. With global supply chains already transforming under the impacts of the Covid19 pandemic and the Russian invasion of Ukraine, Supply Chain Acts are likely to further change the face of international trade.

To exchange views on the future development of supply chains, FES Shanghai organised this roundtable with the Shanghai Institutes for International Studies (SIIS), bringing together Chinese and European representatives from politics and academia.

Dr. Wang Zhongmei from SIIS acknowledged the need for countries and companies to improve their resilience by diversifying supply chains, but warned against an exaggerated interventionism that would be extremely costly and might disadvantage developing countries.

Michael Windfuhr from the German Institute of Human Rights described a new tendency in international trade that is shifting its focus away from product standards towards process standards, that is not only manifesting itself in Supply Chain Acts, but also the trend of “climate neutral” products.

Approaching the issue of Supply Chain Acts, René Repasi, Vice-Chair of the European Parliament’s Delegation for Relations with the PR China, explained the current legislation process of the EU Corporate Due Diligence Directive. He reaffirmed his support and the necessity of the bill, since many initiatives based on voluntary efforts have failed to induce changes and establish a level playing field for companies. Only a civil liability for the conditions in their supply chains is going to induce a positive change, according to Repasi.

Dr. Long Jing from SIIS suggested China should be open to these initiatives and see them as an encouragement to improve labour and environmental standards within the supply chains of Chinese enterprises abroad, too. At the same time, she reiterated Chinese concerns about negative side effects where third world households are dependent on precarious labour or the possibility of a protectionist usage.

The conference made clear that supply chains are undergoing fundamental changes induced by the pandemic, geopolitical tensions and the increased awareness for production processes by consumers and governments. Whereas the EU and German legislations are helpful contributions for strengthening human rights and environmental standards along supply chains, the same could be achieved much more comprehensively by setting process standards on the agenda of an upcoming WTO reform.