Monday, July 27, 2020

Birgit Spiesshofer: "And Who Asks the Supply Chian" English Translation of Article published first (in German) in the Frankfurter Allgemeine Magazine Einspruch! (online) 23 July 2020


Dr. Birgit Spiesshofer has been undertaking truly important and path-breaking work in the area of the responsibility of business for harms that may be attached (that, of course, is the issue of the moment, that is the jurisprudence of "attachment") to the economic activities of enterprises and persons.  Her  monograph, Responsible Enterprise: The Emergence of a Global Economic Order (Munich: CH Beck, Oxford, Hart, 2018), is a remarkable analysis of the "state of the legal art" in this field and an excellent basis for thinking about the paths already being carved out for going forward (for my review of this work, see "The Enterprise of Responsibility:" Reviewing Birgit Spiesshofer, "Responsible Enterprise). 

Dr. Spiesshofer also writes frequently for the Frankfurter Allgemeine Magazine Einspruch! (online) on themes of corporate governance, sustainability, and its inevitable relations to systems of trade and political governance across borders. Though these essays are produced for a German audience, she has kindly agreed to translate some of them for re-publication here. Earlier translations include (1) "Fridays for Future, Siemens or the Australian Government - who decides?"; (2)  "Green monetary policy - "whatever it takes"?"; (3) "What is "sustainable"?" ; (4) "The Hour of the Nation-State" (see also here).

Dr. Spiesshofer has now agreed to the translation of a recent essay-- "And Who Asks the Supply Chain?" English Translation of Article published first (in German) in the Frankfurter Allgemeine Magazine Einspruch! (online) 23 July 2020. In a short and quite condensed form, Dr. Spiesshofer turns her analytical gaze to the current movement, popular with vanguard states in Europe, to provide a national legal basis for the conduct of human rights due diligence (the thrust of which are grounded in Principles 17-21 of the UN Guiding Principles for Business and Human Rights 2ndf Pillar corporate responsibility to respect human rights. Her object more specifically are current efforts in Germany, in high gear since 2019, to mandate a form of human rights due diligence within the supply chains of certain German companies (e.g., here; German proposals for supply chain law spark fierce debate).

She notes, quite rightly, that the challenges of human rights due diligence do not magically disappear because a state declares its provisions to be law. All that changes are the ways in which companies comply or more effectively comply in a way that avoids compliance. And that, indeed, has been the problem for a generation or more of well intentioned advocates who think of law as a magic elixir that once ingested will miraculously change "everything." Or, at least, perhaps make it easier to force a state actor to act. But there is more at issue here--Again, one sees the effort to impose mandatory state based due diligence provisions within developed states, with the object of assigning their enterprises the responsibility for cramming national due diligence mandates down through their global supply chains irrespective of the national desires (or capacities of the states where such activity occurs. I have written critically about this in the context of the self congratulation with whcih this impulse is cultivated (see, "The Weak Underbelly of Business and Human Rights: Reflections on the 8th U.N. Forum on Business and Human Rights" Emancipating the Mind 15(1): 11-50 (View HERE) ).

At the root of the problem, of course, is the complex and often hostile relationship between some who drive the business and human rights agenda, and the ideology of markets, an ideology that has produced the complex networks of global production chains that now require centrally planned regulation of a more direct kind. This is not to suggest that unfettered markets ought to be left to their own devices; and powerful market actors to run riot through them. The essence of markets are themselves a reflection of ideologies of values--and of valuing--that serve as the foundation of its utility as a resource allocation system. One ought not to obsess as much with the control of the market (the classical error of Soviet Marxism) as with the management of the way in which markets value (and price) their actions and the choices they make. That was the power of disclosure systems as a tool of market regulation. But its power wasn't in the act of disclosure--rather it was in the way that disclosure empowered market actors to act on their values (consumers, rights holders, investor, the state, and international public and private organizations).

One can see that the essay provides much useful fruit for thought. The essay and Dr. Spiesshofer's brief bio follow.

And Who Asks the Supply Chain?

Column by Birgit Spiesshofer, published first (in German) in Frankfurter Allgemeine Zeitung Magazine Einspruch! (online) July 23, 2020

The monitoring of the implementation of the German National Action Plan for Business and Human Rights (NAP) has not produced the expected result: less than 50 % of the companies based in Germany with more than 500 employees comply with the elements of human rights due diligence described in the National Action Plan. Now a German supply chain law shall be enacted. Why the quorum has not been reached, that only the questionnaire has in many cases brought the elements of human rights due diligence described in the NAP into an operationalisable form, that non-compliance was already given when one question was not or not correctly answered - who cares. This farce should have been avoided. A soft law instrument such as the NAP, adequately specified and further developed, would have been a good approach to meet the challenges and complexities of transnational supply chains and the German government's goal of achieving a common international understanding of corporate responsibility. In order to achieve international acceptance the concerns of supply chain companies and their home countries must be included.  

            A national supply chain act is, according to Max Weber's ethical categories ("Politics as a Vocation"), responding to the ethics of good intentions: "The Christian does right and leaves the results with the Lord". These good intentions have to be complemented, however, according to Max Weber, by the ethics of results requiring that the politician also takes into consideration "the (foreseeable) consequences of his actions". Only both ethical standards implemented "together make up the true person".

            Many "consequences" for companies and states in the supply chain are "foreseeable", as experience has been gained with the dilemmas of supply chain companies in sandwich positions, with the extraterritorial application of different national regulations, as well as with the French supply chain act of the "loi de vigilance". Only three examples shall be sketched out here:

Practical problems of supply chain laws.
Companies in a sandwich position, in particular in various value chains such as typically law firms with a large number of clients from different industries and different national origins, are included in the human rights due diligence of their clients and contractors. There is the claim of "human rights (minimum) standards" which suggests a uniform set of rules. In fact, "human rights" are programmatically broad and in need of concretization and are implemented differently not only by legislators but also by companies. As a result, the company in sandwich position is exposed to different requirements. National due diligence laws exacerbate this dilemma.

            Companies that (want to) work for companies that are subject to the French Supply Chain Act make the following experience: companies subject to the Act relieve themselves of their duty of due diligence by informing prospective suppliers and service providers that they must (at their own expense) carry out a due diligence audit with a specific consulting firm. The consulting company not only dictates the price, but also the terms of the contract. The comprehensive due diligence questionnaire is only suitable for e.g. a law firm to a limited extent but is not negotiable. If the information is not provided, the sanction is a low score. The due diligence questionnaires are not standardized. The question of a conflict of interest of the consulting firm is not raised. There is no legal protection against this. It is obvious that small and medium-sized companies can hardly afford this effort.

            After the Rana Plaza disaster in Bangladesh, European companies founded "Accord" and North American companies "Alliance", which wanted to enforce their respective home standards defining human rights requirements with regard to building safety, with supplier companies in Bangladesh. The standards were not identical, which caused compliance problems for suppliers working for several companies. In addition, the Bangladeshi government protested and banned Accord's activities because it saw them as an encroachment on its sovereignty. It was not only a matter of enforcing foreign standards on their own territory, but also of the high Western standards leading to the closure of factories and the increase in the price of products, thus endangering Bangladesh's competitiveness vis-à-vis Cambodia and Laos.

The consequences have to be taken into consideration.
It would be desirable that the frictions in the supply chain caused by "hard" law with extraterritorial effects be reduced at least by creating a uniform regulation at EU level for all European companies, which is coordinated with the EU CSR Reporting Directive. In addition, we would like to see "true persons" as politicians, who not only have their moral impetus in mind, but also consider the manifold consequences and implications for supply chain companies and states in a comprehensive impact assessment and take them into account in regulation. CSR Soft Law does not lose its importance. It will continue to play a decisive role in guiding the self-regulation of multinational companies and their supply chains.
 Dr. Birgit Spiesshofer MCJ (New York University), Attorney at Law, has been an Of Counsel in the Berlin office since April 1, 2010 and advises primarily on regulation, policy and corporate social responsibility (CSR). Previously Birgit worked at Hengeler Mueller (1993- 2010), after becoming a partner in July 1995. Birgit started her career in 1989 at Feddersen Laule (today White & Case). In 1990 she worked as a foreign associate at Kaye Scholer Fierman Hays & Handler in Washington D.C. Birgit established the “Gaemo Group – Corporate Responsibility International” in June 2009. She was, inter alia, Chair of the CSR Committee of the Council of Bars and Law Societies of Europe (CCBE), Co-Chair of the CSR Committee of the International Bar Association and member of the Constitutional Law and Human Rights Committees of the German Lawyers Association (DAV). She is the founding Chair of the Compliance and CSR Committee of the DAV and a member of the CSR and Anti-Corruption Commission and the Environment and Energy Commission of the International Chamber of Commerce. Since her Habilitation (2018) in International Economic Law and Business Ethics, she is adjunct professor (Privatdozentin) at the University of Bremen. Numerous publications have named Birgit as one of the leading practitioners in the area of public law. Birgit publishes and speaks extensively on regulation, policy and CSR matters. In addition, she lectures on Business and Human Rights, CSR and International Environmental Law at the Free University Berlin and the University of Bremen.

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