Candida Splett: Border closures and production stoppages associated with the Covid-19 pandemic disrupted supply chains. What consequences can be identified?
Melanie Müller: Many countries have realised how heavily they depend on supply relationships, be it for their imports, their exports or even both. It has also highlighted the central role of China in global supply chains. Many countries are now thinking about how to reduce their dependencies and improve their security of supply – as is the European Union.
Does that mean we have to turn back globalisation?
That would be unrealistic for most sectors. For example: We already know that the growth in digitalisation and green energy will increase demand for particular metals in the coming years. That demand cannot be met by recycling alone. Lacking meaningful extractable ore deposits of its own, Germany relies heavily on imports. On the other hand, many countries in the Global South are highly dependent on exports. For example, South Africa is the main source of platinum required by the car industry, and its exports generate crucial revenues. At the same time, there is a discussion among African countries about increasing local processing to boost the local share of added value.
What are the most important steps for improving the EU’s security of supply?
The EU needs to take a medium to long-term perspective on the question of security of supply and should not simply leave it to the individual member states. The point is not just to diversify supply chains, but also to incorporate the social, environmental and human rights aspects. Pandemics are not the only source of potential supply disruption. It could just as well be political unrest, or strikes over social or environmental standards. Environmental problems can also increase production costs – for which the consumer ends up paying. If we are truly interested in resilient supply chains, our strategies need to take account of the situation in the Global South.
So what needs to happen now?
Much progress has already been made in the past decade. The German and European discussion about supply chain laws is the outcome of a long process. For example in 2011 the United Nations adopted the Guiding Principles on Business and Human Rights, and the OECD has been setting standards in this area for even longer. The crucial point is to hold economic actors responsible for activities outside their own enterprise. That means a statutory obligation to monitor the human rights situation in their supply chains and the political environment in which they operate.
What stands in the way of German and European supply chain laws?
The biggest obstacles concern questions such as: Which companies should the obligations apply to? If companies are required to adopt a human rights agenda, who evaluates their success and are the reports open to the public? Such technical questions have enormous political implications. There are also disagreements over the relationship between the German and the European level. Some people say we need the European supply chain law first. I think Germany should go ahead with its own legal framework. We are a central political actor in the EU, and can set an example. If the EU regulation turns out to have a broader scope, we can always bring the national law into line.
What will implementation depend on?
Companies will have to learn more about what they should be looking out for: how to verify whether violations occur, which aspects are potentially detectable, and which remain hidden. Our Transnational Governance of Sustainable Commodity Supply Chains project investigates supply chains that are in some cases utterly opaque to the final purchasers. Ore is mined in one part of the world, smelted in another, and then the metal might be drawn into wire somewhere in Europe to be used in a manufacturing process in yet another country. Human rights violations can affect any of these numerous processing stages. Even with a simple product like a computer mouse it is practically impossible to trace the sources reliably. In our project we start by investigating selected complex supply chains for metals, seeking possibilities to make them more transparent and above all more sustainable. So transparency is an important objective. Finally, we have to persuade those countries where we know human rights violations to be prevalent to address and prevent the problem.
To what extent are states in the Global South already working towards sustainable production processes?
The process of realisation is already under way, and many states in the Global South have adopted their own commitments and regulations. There is also a vigorous civil society pushing in the same direction and a UN process initiated by Ecuador and South Africa to develop a Binding Treaty on Business and Human Rights. Meanwhile, some countries fear losing their competitive edge if they can no longer operate as cheaply as possible. What they tend to forget, however, are the costs attributable to poor production conditions.
What can Germany do to support them?
We can give direct support to states and firms in the Global South that are implementing the existing rules as well as to civil society actors exposing abuses. Sharing knowledge is also relevant. Finally, prevention is important. For example if a new mine is proposed, the risks that come along with it must be assessed and reduced right from the start. The point is to strengthen the relevant institutions and agencies in these countries while curbing corruption in the resource sector.
Melanie Müller heads the project "Transnational Governance of Sustainable Commodity Supply Chains".
The interview was conducted by Candida Splett, head of the online editorial team.
The Escazú Agreement Is Ready to Come into Force in 2021
Corporate Due Diligence within a Coherent, Overarching and Partnership-based EU Strategy