In February 2019, the German Federal Ministry for Economic Cooperation and Development (“Development Ministry”) introduced a draft law (the “Draft Law”) that seeks to mandate human rights due diligence for German companies and their global business partners, including suppliers. [...]

The Draft Law appears on the scene against the backdrop of Germany’s recent adoption of a National Action Plan (“NAP”) to implement the UN Guiding Principles for Businesses and Human Rights. The NAP included a provision on voluntary corporate action on effective human rights due diligence.  Later this year, the German government intends to take stock of how effective this provision has been in spurring voluntary corporate compliance.  Indeed, the government has committed itself to legislative measures by 2020 if fewer than 50 percent of German companies with over 500 employees have introduced an effective human rights due diligence process. [...]

What do Covered Entities Need to do?

The Draft Law lays out the human rights obligations of a covered company with regard to its own operations and those of its global business partners. In particular, covered companies must assess the risk of corporate actions contributing to human rights abuses or environmental degradation, and take appropriate preventive actions with regard to procuring global business partners. [...]

The Draft Law also requires establishing an effective complaint mechanism for workers of the company as well as of the company’s business partners. Critically, this complaint mechanism could also be made available to any person who is directly or indirectly affected by the company's business activities, particularly in the company's value or supply chain. [...]

The Draft Law also imposes stringent documentation and reporting requirements. A covered company must document its efforts in complying with the Draft Law and publish that documentation on its website and in its non-financial statement, if required under the German Commercial Code. [...]

The Draft Law envisions a designated governmental supervisory body dedicated to enforcing and monitoring corporate compliance under the law. [...]

The Draft Law certainly does not represent the final version that the German government will potentially adopt. Indeed, currently, several committees of the German parliament (the “Bundestag”) are in the process of critiquing the Draft Law, suggesting that it may be subject to significant changes. [...]