Austria’s economy has so far reacted skeptically to the political agreement on an EU supply chain law. Civil society initiatives, on the other hand, are celebrating success.
Negotiators from the European Parliament and the EU states are in Brussels in mid-December a supply chain law (Corporate Sustainability Due Diligence Directive, CSDDD) agreed. The draft still has to be approved by the EU Parliament and the Council, but this is only a formality after the agreement has been reached at political level.
The directive imposes obligations on companies with more than 500 employees and an annual turnover of at least 150 million euros. It also applies to smaller companies in the textile, agricultural, food production and mineral raw materials sectors. The companies covered are now responsible for ensuring that there are no human rights violations along their supply chains and that their business is in line with the Paris Climate Agreement. The directive also applies to companies that are not based in the EU if they generate a turnover of more than 150 million euros in the EU three years after the directive comes into force.
“Five years ago, none of us in Austria would have imagined that such a law would come,” says Bettina Rosenberger, managing director of the Social Responsibility Network, which has been campaigning for a supply chain law for years. In contrast to Germany and France, Austria has not yet been able to bring about a national law. In mid-October, 70 companies took part in an open letter appealed to the Austrian federal government to advocate for a strict supply chain law at EU level, including companies such as IKEA Austria, the mineral water bottler Vöslauer, Oekostrom AG and the VBV-Vorsorgekasse.
A year ago the economics minister abstained
However, cautious tones are coming from the Ministry of Economic Affairs following the political agreement at EU level. The “national need for implementation” must now be examined, writes a spokeswoman for Economics Minister Martin Kocher (ÖVP) upon request. Just a year ago, Economics Minister Kocher abstained from the vote in Brussels because, according to the ministry, there was no agreement within the government on Austria’s positioning. What was controversial in the coalition between the ÖVP and the Greens was the definition of the supply chain and the inclusion of financial service providers in the directive. The financial sector is now exempt for the time being, although this may be changed later following renewed negotiations.
“The Austrian economy is committed to sustainable, responsible and future-proof business and supports the intentions of the initiative to improve international human rights and environmental protection through a coherent legal framework,” says the Austrian Chamber of Commerce (WKÖ). At the same time, according to the WKÖ, this should not become a boomerang for Europe as a business location: a “bureaucratic avalanche” threatens to roll towards the affected companies, said Georg Knill, the head of the Industrial Association.
When asked how many Austrian companies are covered by the directive, the Austrian Economic Chamber replied that the final definitions of the directive had to be made CSDDD wait. The daily newspaper “The standard” reported at the end of November that around 600 companies were affected.
“Not every pen needs to be tracked”
Johannes Jäger, professor of economics at the BFI Vienna University of Applied Sciences, responds to the criticism of the additional effort: “Companies have to consider where major problems could potentially arise in the supply chain. “But that doesn’t mean you have to track every pen in detail.” Jäger and his colleague Gonzalo Durán from the Universidade de Chile commissioned the Chamber of Labor, the statutory representation of employees’ interests Possible effects of a supply chain law on Europe and the global south are examined.
The European Commission has estimated the administrative costs for large companies at only around 0.001 percent of sales, reports the economics professor. It also makes sense for companies to know their supply relationships exactly. Many companies would already check their supply chain for quality assurance purposes. “I think it is essential to also take a closer look at compliance with human rights standards,” says Jäger.
The global south will benefit from this because compliance with human rights includes freedom of assembly and the right to form trade unions. This strengthens the employees. At the same time, it prevents wage dumping because companies located outside the EU are also held responsible.