Reinhard Houben Speaks Out Against EU Supply Chain Law: Overburdening Small Companies
The EU supply chain law, aiming to hold large corporations accountable for human rights violations in their supply chains, is one step closer to reality following an agreement between the European Parliament and Council. The directive, however, has drawn criticism from Reinhard Houben, the economic policy spokesperson for the FDP parliamentary group.
Houben is concerned that the agreement in Brussels tightens regulations too much, potentially burdening small and medium-sized enterprises (SMEs) with an unnecessary increase in bureaucracy and financial obligations. His fundamental argument is that the state should be responsible for ensuring labor standards and human rights, not private companies.
The agreed-upon EU directive will be stricter than the existing German Supply Chain Act, applying to companies with more than 500 employees and a global turnover of 150 million euros. Smaller companies, such as those with 250 or more employees and annual revenues over 40 million euros in high-risk sectors, will also be subject to obligations.
Houben cites the example of large customers requiring small companies to confirm compliance with supply chain standards, causing them to take on their work. He fears this could lead to the emergence of a "confirmation industry," weakening the competitiveness of SMEs in Germany. He also points to the potential for excessive documentation, which might not even achieve its goal of exposing human rights issues.
The German MEP advocates for a balanced approach to protecting human rights while considering the well-being of SMEs. He is particularly concerned about the exclusion of the financial sector from the EU directive, which he believes creates blind spots. Houben suggests that effective supply chain law enforcement should involve diplomacy and the mobilization of resources by national governments rather than shifting the responsibility on to private companies.
Houben's criticism of the EU supply chain law has sparked debate among the ruling coalition in Berlin, a trio known as the "traffic light coalition" comprising the Social Democrats (SPD), the Greens, and the FDP. While the SPD and Greens are proponents of the directive, the FDP voices concerns about its potential impact on German SMEs.
Houben concludes by stressing the importance of the FDP advocating for a critical stance towards the EU agreement, emphasizing the need to uphold both human rights and the well-being of businesses.
