Sustainable Supply Chains

Sri Lankan exporters to face tough access to Germany unless HR, sustainability standards met

Sustainable Supply Chains

Sri Lankan exporters are bound to face tough rules when accessing the German market next year onwards because of the new law that will come into effect from January 1, 2023 in that country. The Act on Corporate Due Diligence in Supply Chains will provide for German importers to make sure that their suppliers adhere to human rights and sustainability standards. The push for the new law started after the collapse of a factory building called’ Rana Plaza’ killing nearly 1000 people.   

Markus Löning, former Commissioner of Human Rights of the German government and Managing Director Löning Responsible Business and Human Rights, was in Sri Lanka recently to brief the Sri Lankan stakeholders on the new law and its implications. In an interview with Daily Mirror, he said Sri Lanka is better positioned than other countries in the region to benefit from new entry rules stipulated by this law in his country. 

Excerpts of the interview:  

Q  What kind of an impact will it have on Sri Lankan exports?

It can have a very good impact on Sri Lankan exports because it is part of sustainability standards. It asks German importers to make sure that working conditions are decent in their factories. This is a great opportunity for producers in garment, agricultural or any other sectors to have good working conditions. It is a good opportunity to enter the German market and be competitive.  

Q  How do you describe the content of the law?

The core of it is that the law is respected regarding people working in factories, fields, farms or wherever. The law says it should not be forced labour, child labour etc. Those who work should be treated respectfully in accordance with the law. At the end of the day, it is asking everyone to respect basic labour laws. Consumers in Germany love good products. They want to make sure that these products are produced in a decent way. People are more and more aware of that ever since the Rana Plaza incident happened in 2013(the collapse of a garment factory building in Bangladesh). It has been in the media. Ever since, consumers pay a lot of attention to good working conditions, building fire safety and other protections.   

Q  Sri Lanka, as a country, sticks to most standards as far as working conditions and child labour are concerned. Then, will this German law have real impact on Sri Lankan exporters?

If you look at the world map of the regions- South Asia and South-East Asia- Sri Lanka is in quite a good position. The laws here are pretty good. There needs to be some more enforcement here and there. In the overall context, the risk is lower than in other countries that surround yours. It gives Sri Lanka a good position. Of course, everybody in supply chains needs to make efforts.   

Q  What are the specific areas which Sri Lanka should rectify in your understanding?

The topics that need to be looked at are freedom of association, for example, and collective bargaining so that workers can have unions or workers’ councils if they wish to do that. Certainly, it is one of the topics always on the table. Beyond that, there are always issues of discrimination on gender or other reasons. People should be treated equally. Also, it should be looked at whether overtime regulations are respected and everybody is paid in accordance with the law. Protecting health and ensuring safety are always issues. All of the issues that this new German law looks at are labour related. They are qualified in international covenants like the International Labour Organization Covenant which Sri Lanka has ratified.   
All in all, Sri Lanka is in a pretty good position to move forward and to realize this competitive advantage.   

Q  In Sri Lanka, it is said that trade union rights are enjoyed too much. Workers can cripple the entire system to win their demands. What is your view?

The Universal Declaration on Human Rights and the ILO convention say that workers have the right to collectively bargain salaries or better working conditions. It is a human right. It should be respected. I do not want to make any comment on the actual situation of unions in Sri Lanka.   
I think the balance needs to be found here making sure that everybody that creates value in the supply chain, be it the manager or the people on the shop store are getting their fair share according to the law.   

Q  Sri Lanka faces allegations of human rights violations during the war time. Will Sri Lanka’s obligations in this regard be linked to this law?

The UN guiding principles for business and human rights are the foundation of the German and other sustainability laws. They say that companies should make sure that human rights and social situations are respected within their sphere of influence. That is usually their own factories and their important suppliers where they have leverage to make a difference. These are the places where companies could make sure that human rights are respected, and people are protected. But obligations do not go beyond. Protecting human rights in a general way is a state duty. That is what governments must do. It is beyond company’s responsibility.   

Q  What is your analysis of the potential for trade between Sri Lanka and Germany?

Obviously, at the moment, Sri Lanka needs to get back on its feet again. But, I would say the prospects are very good. I think German industry is trying to diversify their supplier base. A lot of companies are trying to find alternatives to China mainly. They are trying to find other places in South Asia and Southeast Asia where they can buy from, find reliable suppliers. Actually, Sri Lanka is in a very good position for that. You have a very developed industry. You have pacemakers here that are working on the global stage. It shows that companies in Sri Lanka can be competitive.It means they can be very good suppliers to German customers.   

Q  Implementation of these laws and regulation is the duty of the government. In what way can the exporters prevail upon the government to do it here?

Of course it is an obligation of employers to make sure that working conditions are good. The government can support that. It can make sure that there is a working health and safety inspection for example and that labour laws are implemented. Most importantly, the governments should make sure that public administration supports businesses implementing good working conditions.   

Q  Germany chairs European Union. Will this law be evolved into European law one day?

At the moment, around 10 to 12 European countries have their own laws on business and human rights. Germany has its law and France has a slightly different law, the Dutch have their specific law and a couple of others all have their respective laws. The European Union has now presented a draft supply chain law for all of Europe. It means the whole EU single market will be governed by one set of rules. This will make life easier for all companies doing business in and with Europe.