Why we need a European supply-chain act

Human-rights due diligence must be taken seriously—as the Brumadinho case showed.

On January 25th 2019 in Brazil, the dam of the Córrego do Feijão iron-ore mine in Brumadinho collapsed. A mudslide buried at least 270 people within minutes. Most of those killed were employees of the Brazilian multinational Vale. The sludge consisted of residues from ore processing, including many toxic substances. This not only poisoned the nearby Paraopeba River but also many surrounding fields—to the human catastrophe was added an ecological one.

This biggest mining disaster in Brazilian history came with advance notice. A few months earlier, a subsidiary of the German certification company TÜV Süd had found the dam to be unsafe. But the Vale managers were more concerned about the continued operation of their company. It operates countless mines in Brazil, all of which have similar tailings dams.

The decision-makers of the TÜV Süd branch on site finally certified that the dam in Brumadinho was safe. At least, that is what is stated in documents which are now the subject of judicial assessment.

If there had been a negative test certificate, Vale would have had to take mandatory safety measures. It is possible that, in addition to reinforcing the dam, the administration building and its canteen would have had to be relocated. This building was located just below the dam and was the first to be washed away. It was there that most of the victims died so tragically.

Three years have passed and a Brazilian court has fined Vale the equivalent of €6 billion. Only part of this sum will go to the surviving dependents, with part going to the state of Minas Gerais for reconstruction costs.

One question, however, has still not been clarified: what share of responsibility for this disaster falls to TÜV Süd? In the end, mining could only continue because of the positive test certificate. Is it only the isolated failure of individuals? Or might the company itself be liable?

International agreements

International organisations have been dealing with the issue of the responsibility of corporations for their global actions for many years. The Guidelines for Multinational Enterprises of the Organisation for Economic Co-operation and Development have been around for some time.

Another initiative is the United Nations Global Compact. The then UN secretary-general Kofi Annan initiated this voluntary commitment by multinational companies to ten principles, including the International Labour Organization’s core labour standards.

But the best agreements have not prevented exploitation, environmental pollution and disregard for basic human rights continuing in many parts of the world. Often not even the direct subsidiaries of multinational corporations are involved, but rather their suppliers.

The UN saw this problem and commissioned Prof John Ruggie, as its special representative on business and human rights, to develop the concept of human-rights due diligence for multinational enterprises. His reflections led to the adoption in 2011 of the UN Guiding Principles on Business and Human Rights.

The guiding principles have a threefold approach: protect, respect, remedy. States have a duty to protect their citizens from corporate interference with their human rights. Businesses are obliged to respect human rights everywhere in the world. And affected persons must have access to complaints procedures and effective legal protection in cases of human-rights violations. Governments can no longer argue that multinationals are too big to tackle and corporations can no longer imply that legislation is too weak (‘we comply with all domestic laws’).

European law

The European Union has also committed member states to a national action plan (NAP) which shows how to implement human-rights due diligence. Germany adopted its NAP in 2016, after intensive discussions with representatives of industry, trade unions and civil society. Among other things, the German plan stipulated that there should be two monitoring processes by 2020, to check whether at least half of all companies with more than 500 employees had integrated monitoring human-rights due diligence voluntarily into their business procedures.

The results were sobering: an official survey that year found only 13-17 per cent of companies complied. Hence in 2021 a supply-chain due-diligence law was passed, which will be binding for companies from 2023 and under which companies can be held accountable.

A strength of the German law is the obligation for companies to comply with human-rights due diligence in their supply chains and subsidiaries. To do so, they must introduce risk analyses and reporting and monitoring mechanisms. Penalties may be imposed in the event of a violation. A weakness, however, is that for the moment only companies of a certain size are obliged to do so.

If human-rights due diligence is really to be comprehensive, many more countries must introduce binding rules for compliance. Only then will human rights become an investment consideration, to the same extent as infrastructure, wages or taxes. This would then put pressure on countries which try to attract foreign capital by being as lax as possible on labour rights and environmental regulations.

That is why it is so important that a European supply-chain law be passed. The signal sent to other industrialised countries in the world cannot be overestimated and a level playing-field would be created for all companies operating internationally. Of course, such a European law should enhance existing national laws, such as those in France, the United Kingdom, the Netherlands and Germany.

Striking example

My union organises the mining sector in Germany and we have a long tradition of supporting unions worldwide, when it comes to dealing with the consequences of a mining accident and providing concrete help. From the first day of the disaster in Brumadinho, the responsibility of TÜV Süd was discussed. The case has always been one of the most striking instances in the public debate in Germany about adoption of a supply-chain law.

The families of those left behind are suing TÜV Süd in Germany. The firm sought to prevent this suit by insisting on a large sum as security for its costs. The victims would never have been able to raise such a sum themselves.

We as IGBCE asked ourselves what concrete solidarity could look like in this case and took the risk of enabling the process by providing the required court cost guarantee. This is certainly an unusual step for a trade union to take. Yet here is a case where a concrete answer to the question of human-rights due diligence is essential. The question of whether TÜV Süd has some responsibility for the Brumadinho disaster is now before the German courts.

We are convinced that only such processes will allow companies to grasp the full significance and potential consequences of human-rights due diligence. More than that: in the event of high compensation payments, this also has direct consequences for workers in Germany. This is one of the reasons why we have extended our information and training efforts on this topic within our union, to enable our works councils to focus more on the supply-chain issue and thus also to bring the compliance departments in the companies to sharpen their view on this complex topic.

It is time for the European Commission finally to present its draft supply-chain legislation. There have already been too many delays. Now is the time to take a decisive step forward.

This was first published by the Global Labour Column