Where Is Business and Human Rights in Germany?

Submitted by Joanne Bauer

By Joanne Bauer

Where is Germany – the world’s fourth largest economy and Europe’s economic engine – on business and human rights? I came to Berlin this fall with that question, since in the landscape of business and human rights activity, Germany has been a curiously quiet front.

The perceived quiet, I have come to understand, stems from German “exceptionalism,” cousin to American exceptionalism: while there’s a pervasive American belief that its founding values based on freedom and rights mean that it need not be subjected to international human rights rules, there is an equally pervasive belief in Germany that its social market values, which promote harmonious labor relations and high environmental standards, exempt Germany from acceding to the emerging rules on business and human rights. In their minds, Germany is already doing what’s required.

Falling Silent on Human Rights Issues

Besides the economic bent of German exceptionalism, there’s a salient difference to the American version: whereas the US has led the charge for international human rights law, the German government has resisted international human rights standards when it comes to applying them to business.

There are several signs of this resistance. At the UN Human Rights Council meeting in June 2011 when the UN Guiding Principles on business and human rights were considered and unanimously adopted, the German government remained silent while 36 other countries, including France, Norway, Denmark, Sweden, Switzerland, the UK and the US, made statements of support. In October 2011 a European Commission communication called upon EU member states to put in place a National Action Plan (NAP) for implementing the UN Guiding Principles. This September the UK was the first country to release its NAP, and at last week’s UN Forum on business and human rights, a number of governments, European and non-European, reported out on the concrete progress they have made in developing their plans. Germany was again silent - it has yet to begin the process of developing its own plan.

Dodging Duty of Care?

Moreover, the German government has steadfastly opposed undertaking an extra-territorial obligation to ensure that German companies exercise their “duty of care” with respect to human rights harms involving their subsidiaries abroad. While the Guiding Principles shied away from asserting that states are legally required to exercise this obligation – indeed, this assertion is where the Guiding Principles have been most vulnerable to criticism – then UN Special Representative for business and human rights, John Ruggie, did assert that there are sound policy reasons for doing so and that it is legally permissible. Nonetheless in a response to a series of questions about the matter posed by parliamentarians of the center-left Social Democratic Party (SDP) in March, the State Secretary of the Foreign Office responded that:

…the Federal Government has always rejected extraterritorial measures and will continue to do so… The international legal obligation to protect and implement human rights obligations rests primarily with the State on whose territory the respective company is doing business…a third state may not impermissibly interfere with the jurisdiction of another state. (Unofficial translation.)

Yet just last year the UN Human Rights Committee issued its Concluding Observations from its periodic review of Germany, where it found measures to provide remedies in instances of human rights violations by German companies abroad to be “insufficient.” It encouraged Germany to “take appropriate measures to strengthen the remedies provided to protect people who have been victims of activities of such business enterprises operating abroad.”

Although the German NCP has received the third largest number of complaints of any NCP after the UK and the US

Besides courts, a mechanism for providing remedy is the German National Contact Point (NCP) – the state-based mechanism mandated by the OECD Guidelines for Multinational Enterprises for accepting complaints of violations by Germany companies. Although the German NCP has received the third most complaints of any NCP after the UK and the US, its effectiveness is weak. In a paper comparing four NCPs, the Berlin-based European Center for Constitutional and Human Rights identified deficiencies of the German NCP, including lack of impartiality, transparency and procedural predictability and called for an external peer review committee, like the one the UK NCP adopted in 2007.

At the level of European policy making, the German government together with German industry is said to be blocking the EU effort to develop a conflict minerals transparency law.  Similar to the provision within the US Dodd Frank law that requires companies to disclose whether conflict minerals are used in their products, the EU proposal had gained widespread support and momentum until last month, when the provision was delayed for unexplained reasons.   Observers claim it was due to the German business lobby.

Similarly, a powerful German-led contingent of large corporations reportedly “spearheaded the opposition” to “undermine” a European Commission initiative to require businesses to report on their social and environmental impacts. The role of the lobby in watering down the proposal to the point of exempting major businesses from the rules is the subject of a detailed report released in April by the Corporate Europe Observatory.

Mittelstand: “Made in Germany”

What drives this resistance is a strong interest in protecting Germany’s Mittelstand, or small- and medium-sized enterprises, from the burden to comply with international standards. Considered the “backbone of the German economy,” the Mittelstand account for more than 99 percent of all German companies and 70 percent of German employment. German defenders of the status quo claim that these companies don’t need international standards. Not only do they operate within the gold standard of German domestic regulation, but as predominantly family-owned, privately held companies with deep roots in German society, a long-term perspective is already embedded in the corporate culture.

The major publicly listed German multinationals also have a history of opposition to regulation. David Kinderman of the University of Delaware has analyzed the story of CSR in EU politics since the early nineties, noting the influence of German industry in pushing for a purely voluntary approach. In his book, Just Business, John Ruggie, singles out German industry as making trouble in his efforts to build a consensus around the UN Protect, Respect, Remedy Framework:

Some [business representatives] tried to be outright spoilers. The German business association, BDA, more conservative-leaning than others, was a case in point, though most of the time were pulled along by others in the end. (p 144)

EU CSR Influence

While German industry may have had a singular influence on EU CSR initiatives, German CSR policy appears to have been not so much a function of the “regulatory capture” of government by industry – a major concern of business and human rights advocates – but of a symbiosis of neo-liberal values across government and industry.

The logic of German exceptionalism exposes a fundamental contradiction: Why would a business community subject to stringent domestic regulatory standards be so resistant to international rules that could level the playing field – not to mention protect their company from reputational harm and related financial loss?

One answer lies in a fear of being bogged down by international rules that not all countries abide by – and here it is China that is commonly cited as a worry. Such is the nature of the debate over Germany’s implementation of the OECD Common Approaches to providing state export credit guarantees, an effort to ensure that OECD member governments don’t facilitate international investment projects that lead to social and environmental harms abroad. Germany has staff and procedures in place to apply the standards. But critics say the process lacks transparency, making it impossible to know the true extent to which human rights concerns have been accounted for. It also lacks an effective grievance mechanism.

A second answer is that German exceptionalism is not reserved for business and human rights. Instead, it reflects a general pattern of conduct that can also be seen in its opposition to being subject to the European Union rules on the common market that it helped to create, and its failure to ratify the UN Convention on Corruption, which even German businesses would like to see.

Transformation on the Horizon: From Laggard to Leader?

But the ground could be shifting. In 2012 the chemical giant BASF became the first German company to join the Global Business Initiative on Human Rights, a group of businesses committed to leading on the issue. In July of this year the Ministry of Labor and Social Affairs published a report on the implementation of the UN Guiding Principles, which included recommendations for the establishment of an inter-ministerial working group that coordinates the implementation of the UN Guiding Principles and a reformed NCP. The Ministry for Economic Cooperation and Development (BMZ), together with the Dutch government, have started leading on the thorny topic of living wage, having just produced an Action Plan borne out of a multi-stakeholder process. In September, the general elections dealt a blow to the Free Democratic Party, the center right party that has promoted the neo-liberal agenda. In the 180-page draft coalition treaty negotiated at the end of November between the SDP and Angela Merkel’s Christian Democratic Union (CDU) and its sister party, the Christian Social Union (CSU), a one-line reference was made to the intention to implement the UN Guiding Principles at the national level.

These developments are the result of relentless prodding by German advocates as well as ongoing efforts of the European Commission and Council of Europe to move the business and human rights agenda forward. Whether they lead to a Germany moving from laggard to leader remains to be seen.