The German machine-builders are struggling with the new supply chain law

VDMA General Manager Brodtmann says in the FAZ: “The Chinese are playing extremely hard on the world market, and our position will certainly not be improved now.”

Assembly line workers in China: A new law forces companies to also monitor the human rights situation at their suppliers.

Dhe mechanical engineering is often a small business. The valve manufacturer Schubert & Salzer from Ingolstadt is one of many examples in the medium-sized industry with a few large, but all the more small and medium-sized companies: It works with more than 460 suppliers who in turn supply more than 8000 components in 17 countries.

Thilo Brodtmann has companies like this in mind when he says that the value chains in mechanical engineering are different from those in the manufacture of T-shirts or chocolate. High-tech machine tools, for example, consist of thousands of individual parts. For the managing director of the German mechanical engineering association VDMA, this complexity leads to a major problem: It is a gateway for the federal government’s new supply chain law. The industry sees it as an imposition.

“Bursting with mistrust”

The goals of the law – i.e. respect for human rights and the prevention of environmental degradation – are undisputed, says Brodtmann. “We also support a law – but not this law. It’s just badly done. ”It still has to go through the Bundestag. And it will only take effect from the beginning of 2023 and above all target large companies with several hundred employees.

But for Brodtmann, the day on which the law has taken all the hurdles unchanged is already a “sad day”. Because: “It is brimming with mistrust of corporate self-regulation.” The hope that the law will be more bearable if it is coordinated with the corresponding plans of the EU is vague.

If companies have to guarantee that their suppliers and their suppliers’ suppliers do not harm people or the environment, the industry is not only faced with considerable bureaucratic effort. There are also lawsuits in court. Although there were indications from politics to prevent this, according to the current status not only those directly affected, but also trade unions and non-governmental organizations are entitled to intervene. There was a threat of “civil law suits through the back door”. The risks make companies increasingly nervous.

Authorities do not pass on information

How companies below the size of a group should examine their supply chains globally is a mystery to Brodtmann. That cannot be achieved. He therefore assumes that an international network of auditors and a real certification industry will emerge. Either way, the law is not only a problem for large companies that will manage the implementation and organization in the end. Rather, it also affects the small companies with only a handful of employees, “because the big ones will pass on the specifications to the small ones”. It beats all over the top.

This principle also applies to the questionable links within the supply chain. There is no white list of safe countries or regions, not even the EU internal market. Conversely, a blacklist would also have helped the industry, but federal authorities and ministries would have a lot of information about grievances around the world, but would not pass it on. In the end, companies should do what politics can’t – that can’t work.

Brodtmann sees hardship for his branch beyond the day. “It can lead to a withdrawal of German industry from certain markets without anyone being helped,” he says. This does not apply to China, the largest market for German mechanical engineering companies with a volume of 18 to 20 billion euros per year. But there, too, the German machine-builders are faced with additional problems when they kick out Chinese suppliers in a row because their production conditions are considered questionable.

VDMA man Brodtmann says: “The Chinese are playing extremely hard on the world market, and our position will certainly not be improved now.” Chinese mechanical engineering companies that are already bothering German competitors with their pricing policy, but also with their technology offensive, will have nothing against it .