Respect for Human Rights in Global Value Chains: Risks and Opportunities for German Industries
Text: Bibiana García, Daniel Weiß
For the purpose of developing sectoral dialogues, a study has identified 11 industries in the German economy which exhibit particularly relevant human rights risks along their value chains. Two of the study’s authors explain the methodology applied, summarise their results and formulate recommendations.
The German Federal Government adopted the National Action Plan for Business and Human Rights (NAP) in 2016. This plan lays down German companies’ responsibility to respect human rights. In addition, it provides for a bundle of measures to assist companies with implementing and organising their due diligence with regard to human rights. The study “Respect for Human Rights in Global Value Chains. Risks and Opportunities for German Industries”1 is one of these measures. It analyses human rights risks found in the value chain of various German industries.
As part of the implementation of the NAP, the aim of this study is to provide a basis for the German government’s decision on which industries will be offered assistance in the form of sectoral dialogues. The entire German economy was examined from a human rights perspective and 11 “focus industries” were identified. Data on national and international activities already being undertaken by these industries to exercise corporate due diligence with regard to human rights was collected in the course of interviews and background discussions with sectoral representatives, trade unions and stakeholders from civil society. The project team developed potential starting points for sectoral dialogues and further activities for the 11 focus industries. Cross-sectoral recommendations were also formulated.
Preliminary considerations regarding methodology
According to the OECD Due Diligence Guidance, industry-specific risks are risks that are ‘prevalent within a sector as a result of the characteristics of the sector, its activities, its products and production processes’.2
One of the project team’s primary tasks was to bundle and operationalise the individual industry’s specific perspective with regard to human rights due diligence in a way that would make the process of analysing and narrowing down input in order to prepare in-depth examinations of the focus industries not only manageable but also comprehensible. The tiered methodological approach (Figure 1) takes into account both qualitative and quantitative data. In order to be able to make statements about individual German industries, information on risks to human rights and structural industry data were additionally combined and examined. Similar approaches have been used in industry-specific studies and analyses conducted in other countries, including the Netherlands and Belgium.3
Main steps in the analysis and narrowing-down stage
The starting point for the study was a general survey of all of the approximately 100 industries that make up the German economy. As a first step, a structured analysis of several data sources4 was conducted to identify those industries which, from an international perspective, exhibit risks to human rights. Similar industries were then grouped together. By using databases to identify risks and grouping industries together, it was possible to ascertain human rights risks for 29 industries. Industries where this was not the case, such as libraries, archives, museums, botanical and zoological gardens, were disregarded. This does not mean, however, that risks to human rights do not exist in those industries that were not subject to further analysis. Rather, they display less empirical evidence of risks compared to other industries.
Narrowing the number of industries down to 29 (Figure 2) made it possible to conduct, in a second step, a detailed examination of the individual industries. This not only revealed which human rights risks exist in a particular industry, but also where in the value chain these risks occur, the degree of the industry’s international integration and the industry’s economic importance for Germany. During the narrowing-down process, industries with little international integration and which, compared to other industries, have less evidence of human rights risks of special relevance were disregarded. These included mining and minerals, waste management, forestry, real estate activities and water supply. Other industries that were disregarded include those with a low level of international integration and a strong focus on using their own production sites in Germany for their value chain. This is the case for “construction”, “agriculture and fishing”, “personnel, cleaning and security services” and “transport and logistics”. However, the analyses conducted on the individual industries made it clear that these industries can be linked to risks to human and labour rights in a national context as well.
For the final selection of the focus industries, industries with similar risk profiles were examined together for the purposes of the study (the electronics industry was combined with telecommunications and digital products and services to create the category “electronics, telecommunications and digital products and services” while gastronomy and hotels was combined with travel and recreation to create “tourism and recreation”) and the remaining industries were arranged in order of their economic importance.
German focus industries
The results of the analysis suggest that a comparatively large number of human rights risks relating to fundamental rights and freedoms exists in these focus industries. In addition, many human rights risks of particular relevance can be found in the first tiers of the value chain (extraction of raw materials). These industries also have human rights risks that are (directly) related to their business activities in the value chain.5
From a structural standpoint, the findings show that these industries have a high level of international integration (import penetration rate). With regard to their upstream value chains, these industries are resource-intensive and/or import, in some instances, raw materials from countries with significant governance and human rights challenges. (Figure 3)
Case study: Automotive industry6
With € 482 billion in sales, the automotive industry is the industry with the highest revenue in Germany. It is characterised by a very complex supply chain and high level of international integration.
Outline of industry-specific human rights risks
Significant human rights risks exist in particular in the international upstream value chain (Figure 4). Human rights risks were identified especially in connection with the extraction and processing of raw materials. The automotive industry requires large amounts of raw materials such as bauxite and natural rubber that are often obtained under precarious conditions in countries with challenging governance contexts. This can lead to human rights violations such as damage to the health of workers and the local population, land grabbing, violence against indigenous peoples and precarious working conditions. In the wake of the shift to electric mobility, the risk of human rights violations in the supply chain for the required raw materials is growing (for example, in connection with the extraction of lithium and cobalt). Furthermore, precarious working conditions, inadequate health and safety standards, and damage to the health of workers, for example, have been documented in the automotive industry’s own international value chain in the past.
Situational analysis of industry activities
Characteristic from an institutional point of view is the large number of players and issues that are related to the automotive industry. Besides the two main industry-specific initiatives – the European Drive Sustainability Initiative and the Automotive Industry Action Group (AIAG), which was founded in the USA – many automobile manufacturers and automotive suppliers participate in cross-industry initiatives. These initiatives look into a number of issues, particularly raw materials, but also specific automotive components such as tyres and batteries. This has led to an extensive, highly complex network of initiatives that are relevant to the industry. Also striking is the strong international orientation of initiatives in the automotive industry. This corresponds to the industry’s high degree of international integration.
As part of this study, concrete starting points for conceivable sectoral dialogues and other activities were formulated for each of the 11 focus industries, largely on the basis of the assignment of the identified industry activities to the five core elements of due diligence in the field of human rights as set forth in the German NAP. The study findings suggest that it would be fundamentally advisable for the German government to provide assistance for all five of the NAP7 core elements.
With regard to the design and structure of the dialogue formats, it is important to focus directly on the individual sectors’ needs and to take current initiatives into account. Moreover, in addition to dialogues at industry level in Germany, consideration should be given to thematic and cross-sectoral dialogues (such as on challenges arising in connection with the extraction of raw materials) or to expanding existing formats and supporting activities at European and/or international level, as the case may be. Taking a multi-stakeholder approach is essential not only to ensure a collaborative exchange between key players, but also in order to take particular account of the standpoints of civil society. European players should be integrated into dialogues when they are relevant for German industries. The profiles of the 11 focus industries indicate that the key players in a number of these industries are European. Looking ahead, dialogues could be established at European level as well. Using multi-stakeholder dialogues, national and European players could share views and information about activities where collective action at European level can produce the greatest leverage for implementing human rights due diligence and which should be expanded. In addition to having to take a multi-stakeholder approach as outlined above, all sectoral dialogues should be subject to minimum requirements regarding content and procedures: industry studies which cover sector-specific human rights risks and existing activities should serve as the empirical starting point in this regard. Furthermore, existing OECD and EU guidelines relating to the subject should be taken into account in order to develop an understanding for what human rights due diligence means in a particular industry or at industry level, which human rights challenges exist and which activities could be undertaken to address them. Moreover, sectoral dialogues should build on the UN Guiding Principles on Business and Human Rights (and the core elements of human rights due diligence as outlined in the German NAP).