German industry fumes over new EU corporate rules

The German industry blasted the agreement on the EU’s new due diligence law and warned that the new corporate rules would undermine Europe’s competitiveness and stifle its economy.

On Thursday, EU countries and the European Parliament struck a deal on a new due diligence directive to hold big companies accountable for human rights violations and environmental standards along their value chain.

While NGOs widely praised the new law as a milestone, German industry, in particular, was furious.

“With today’s agreement […] the EU is putting the next nail in the coffin for the international competitiveness of European industry,” Thilo Brodtmann, managing director of Germany’s Mechanical Engineering Industry Association (VDMA), said in a statement.

Similarly, the Federation of German Industries (BDI) warned that the rules would “threaten competitiveness, security of supply and diversification of the European economy”.

German industry also fears that the new law will increase the bureaucratic burden on businesses. According to one survey, 65% of German companies are already complaining about increased reporting requirements, which the industry blames mainly on EU legislation.

“Our companies are already suffocating in bureaucracy. Now, there are even more regulations on top. That’s another blow,” Wolfgang Große Entrup, the managing director of the Association of the Chemical Industries (VCI), also said in a statement.

The three German associations also called on the government to put on the brakes and do everything in its power to block the law, which still needs the formal approval of EU countries.

The German three-way government seems to be torn on the issue.

The Greens and the SPD are heavily in favour of the new rules, with Green MPs Wolfgang Strengmann-Kuhn and Maik Außendorf praising the agreement as a “new global standard for international supply chains”, while SPD MEP Tiemo Wölken called it a “major step towards protecting human rights, the environment and the climate worldwide”.

But the pro-business FDP strongly opposed the compromise. “The EU due diligence law cannot be adopted by the Council in its proposed form,” said FDP vice-president Lukas Köhler in a statement.

The FDP has also recently called for a regulatory pause on EU legislation, arguing that the burden on businesses is disproportionate and that 57% of bureaucracy comes from Brussels.

Given the rifts within the German coalition over the new due diligence rules, the government is likely to abstain in an EU-level vote.

Even so, enough EU countries are expected to support the legislation to reach the qualified majority needed to pass it.

(Oliver Noyan | Euractiv.de)