The new German law on the obligation to evaluate companies in the supply chain was passed in July 2021 (valid from January 1, 2023). The subject of the application are German companies and direct suppliers are obliged to carry out due diligence.

The draft European Union directive on assessing the sustainability of companies is currently being discussed by the EU member states and will be approved for expected application from 2026.

CHALLENGES FOR VIETNAM SMALL BUSINESSES

Analyzing this law, Ms. Tran Thi Hong Lien, deputy director of the Bureau of Employer Equality at the Vietnam Trade and Industry Confederation (VCCI), said that in Vietnam, responsibility for evaluating human rights and business environment is a relatively new concept that has not been widely disseminated . The term is used synonymously with “compliance” and “social responsibility”.

The Supply Chain Assessment Act has been reviewed and enacted by countries with the aim of improving human rights protections in global supply chains and preventing violations such as child and forced labor. Work, ban on substances that are harmful to people and the environment, anti-discrimination, fair pay and reasonable working hours…

Supply chain due diligence differs from “responsible business practices” in that it covers all labour, social and environmental aspects that companies are required to comply with.

The responsibility for due diligence in the supply chain does not end with compliance and implementation in your company, but in a broader sense with your partners and suppliers.

“Assessing companies in the supply chain is not new, it is actually what we do and do. However, these regulations are designed for voluntary implementation by companies. When the European Union passed the draft, the directive, like the German law, did.” “Compliance is no longer voluntary, but mandatory in order to be able to participate in the supply chains of these countries,” emphasized Ms. Lien.

However, Ms. Lien said there are many challenges for Vietnamese companies. This is because most companies do not have sufficient information on supply chain assessment. Meanwhile, the Vietnamese companies involved in the German supply chain are mostly small companies (more than 90%).

When it comes to doing business responsibly, multinational companies have great potential but still face difficulties, not to mention small companies with limited resources that still need to fully comply with regulations like large corporations.

Report to Ms. Nguyen Thi and send to the Federal Ministry of Import and Export Management.

“Therefore, all companies involved in the German supply chain are responsible for providing information and data to the Federal Ministry for Import and Export Management. This means that German companies must also comply with this law. “There are risks that the supplier cannot solve alone, but must ask the buyer for help in assessing and mitigating the risk,” Ms. Thuy said.

COMPANY IS MORE PROFIT

Despite the challenges, according to the VCCI representative, companies must also see the law as an opportunity for growth. Because if German companies are responsible for this law, they will support the companies in the chain to ensure the requirements and regulations through education, training and cooperation in risk management support with financial resources. certain books…

On the other hand, this is also an opportunity for companies to improve their participation in the supply chain and strengthen their position by acting responsibly, thus improving their competitiveness.

Ms. Thuy agreed that this law does in fact create more responsibility for companies, including German ones. Both German and European consumers expect that consuming a product without violating workers’ rights will not harm the environment in the country where the product is manufactured.

This law regulates the entire supply chain, so that German companies are jointly responsible regardless of the supplier’s violation.

For this reason, the federal government developed the Global Solidarity Initiative project, which is implemented in four developing countries and exports many products to Germany, including Bangladesh, Vietnam, Cambodia and Serbia, and focuses on two areas: textiles and electronics. These are two sectors with high export sales from 4 countries to Germany and the EU.

The project promotes the sharing of responsibilities between buyers and sellers. “In the past companies only bought and were not responsible for the risks in the countries of sale. But no matter what risks Vietnamese companies face in the supply chain of German companies, German companies also share responsibility,” said Ms. Thuy.

In addition, the transparency between the figures is important. At the same time, by creating a mechanism within the company, employees have the right to raise their voice and engage in dialogue with the employer.

In addition, the project supports textile and electronics companies in handling chemicals and testing greenhouse gases. Help businesses ensure gender equality, anti-discrimination and responsible purchasing policies between buyers and sellers.

Ms. Thuy Huong added that not only will the company’s capacity be improved, but employees will be treated well, the environment will be treated well, and the company will develop sustainably. When workers are mentally and physically liberated, labor productivity increases.

“These are long-term and sustainable benefits for companies to implement rather than just reluctantly exist in the supply chain,” Ms. Huong pointed out.