"Sham agreements provide no benefit"

In recent weeks, a chorus of voices from the German business community has been urging the federal government to reconsider its approach to supply chain regulation.

Alexander von Preen, the president of the Association of German Chambers of Industry and Commerce (Deutscher Industrie- und Handelskammertag, or DIHK), has called for a new economic policy, expressing concern that the bureaucratic jungle is still too dense. He emphasized that excessive regulation is stifling any entrepreneurial initiative.

Michael Gilka, CEO of the Federal Association of Medium-Sized Construction Companies (Bundesverband mittelständischer Bau- und Industrieunternehmen, or BVMB), has joined the chorus, urging the federal government in July to reduce overwhelming regulation in reference to the supply chain law. He went as far as to demand that the national supply chain law be suspended at least until the implementation of the European supply chain directive.

Thilo Brodtmann, CEO of the German Engineering Federation (Verband der Maschinen- und Anlagenbau, or VDMA), has also criticized sloppy compromises, stating they don't reduce bureaucracy. He expressed particular concern that the statement from the coalition agreement about no sanctions except in serious human rights violations is not reflected in the draft law. Brodtmann also complains that the reporting obligation, as agreed in the coalition agreement, is not fully implemented in the current draft.

The German Retail Association (Handelsverband Deutschland, or HDE) has also criticized the new federal government over the issue of supply chain regulation. However, they did not mention the implementation of the reporting obligation in their criticism. Similarly, the HDE did not demand that the federal government keeps its word to businesses and ensures serious relief through a reform of the supply chain law.

The coalition government, in its coalition agreement, promised comprehensive human rights and environmental due diligence obligations for companies, including clear reporting and sanction mechanisms. However, the current draft amendment to the Supply Chain Act (Lieferkettengesetz) does not fully implement these promises as it removes reporting obligations and limits sanctions to only serious human rights violations, aiming to reduce bureaucracy and ease burdens on companies.

Preen did not support debates on tax increase and has advocated for a powerful agenda focusing on relief, investment incentives, and fair competition.

These criticisms come at a time when small and medium-sized enterprises (SMEs) are expressing concern that excessive supply chain regulation is choking them. The business leaders' calls for action underscore the need for the federal government to strike a balance between regulation and the needs of businesses, particularly SMEs, as they navigate the complexities of the global supply chain.