The recently passed Act on Corporate Due Diligence in Supply Chains (in short: Supply Chain Act) in Germany is considered to be a milestone in human rights and sustainability policy by politicians. From 2023, companies with more than 3,000 employees will be required to issue a policy statement on respect for human rights, to provide risk analysis and prevention management for these, and set up a complaints mechanism for any human rights violations. This applies to the company’s own business operations and direct suppliers. For indirect suppliers, the due diligence obligation is event-driven and includes the preparation of a risk analysis, the implementation of an avoidance and minimization concept as well as preventive measures. From 2024, this Supply Chain Law will also apply to companies that employ more than 1,000 people.
This new regulation presents companies with new tasks in an often little-known terrain. Human rights violations and environmental degradation, which are not present in the wider European public, are a global phenomenon and companies can be confronted with them unexpectedly. The potential conflicts are multifaceted and can manifest themselves in a wide variety of ways. The following article presents examples of conflicts from three African countries where companies are involved and which are related to human rights violations or environmental degradation: Togo, Tanzania and Mozambique. These examples will provide a first insight into the range of relevant cases.
The first analysis focuses on the West African state of Togo. Various German and international companies attracted attention for their activities in Togo when demonstrations by the Diaspora Togolaise Allemagne, an interest group representing Togolese living in Germany, took place in front of their headquarters in the winter of 2020. On the one hand, they protested against environmentally harmful business and production practices of the companies in the country. On the other hand, the support and legitimization of the authoritarian government through economic activities in Togo was criticized.
In context of the new Supply Chain Act, German companies are required to monitor and analyze human rights violations and environmental problems. For the aspect of environmental protection, Togo can be used as an example for other countries: Environmentalists and critics of the Togolese government complain that phosphate mining in Togo causes severe environmental damage along the coast. This includes, among other things, coastal pollution and a resulting death of the fish population. In addition, factory workers have been found to have health problems that are believed to stem from phosphate mining. These sustainability deficiencies, which are by no means limited to phosphate mining, may present new challenges for companies in light of the Supply Chain Act.
In addition to environmental and health aspects, the human rights violations of the Togolese government are relevant in regard to the new Supply Chain Act. The ruling Gnassingbé family follows an authoritarian style of government and is directly involved in phosphate mining through the state-owned Société Nouvelle des Phosphates du Togo and its monopoly. In recent years, the Gnassingbé government has also drawn attention to itself by suppressing the opposition and violently repressing protests. A further deterioration of the human rights situation in Togo is quite possible. For businesses, this creates the risk to actually enable or even actively support human rights violations and environmental destruction through cooperation with corresponding companies or through agreements with the government.
Another example of political conflicts with relevance to the new Supply Chain Act can be found in Tanzania. Although the East African state is characterized by political stability and high growth rates compared to other states in the region, its treatment of the LGBTQ+ community appears problematic to the rest of the world.
The Supply Chain Act stipulates that discrimination against individuals on the basis of a wide variety of characteristics has to be prevented. Therefore, the situation in Tanzania is problematic due to both social and political discrimination against the LGBTQ+ movement. In the past, the drastic approach against the LGBTQ+ community caused negative headlines internationally when high-ranking politicians initiated a public wave of arrests against homosexuals in 2018. The call for the public to provide names of alleged homosexuals caused widespread criticism among Western nations and, among other things, resulted in the suspension of development funding. In addition to the potential discrimination by political actors, this discrimination is also perpetuated in Tanzanian society.
What initially had no immediate consequences for international companies has to be reassessed as a result of the Supply Chain Act. Such or similar discriminatory measures could affect companies’ own employees and suppliers. This example illustrates how the new Supply Chain Law forces German companies in apparently stable and inconspicuous states to conduct a deeper analysis of political and social conflicts.
The last example deals with the Cabo Delgado region in Mozambique, which exemplifies the escalation of social conflicts. Former low-intensity conflicts resulted in a violent uprising by Islamist militias that necessitated international military support.
The basis of today’s conflict can be found in the population’s rejection of the state of Mozambique, which is based on the neglect of the region by state institutions and corruption. These conditions created the first favorable premises for political violence and religious extremism in the region, even before it became interesting for economic resource extraction. The region in northern Mozambique gained economic interest through ruby deposits and the discovery of large quantities of offshore natural gas. The raw material deposits have attracted foreign investors over the past decade. Since 2017, however, they have faced an increasingly serious security situation that has prevented economic activity in the region for the time being.
Due to widespread corruption, the ruby deposits have been exploited economically, but there was no significant economic progress or participation in the wealth of resources for the population of Cabo Delgado. A similar situation took place with the natural gas extraction project, which had to be interrupted during the construction phase because the Islamist attacks now also claimed victims among the companies operating there. The implementation of the projects also created potential for conflict with the culture of the local population, since on the one hand graves and on the other families had to be relocated for the extraction of raw materials. The lack of transparency in the decision-making processes and the authoritarian approach of the police in enforcing them are important factors in this multidimensional conflict, which escalated violently for the first time in 2017.
Years of attacks and territorial gains by the militias have plunged the region into deep instability, which an international military mission is now seeking to remedy. Neglect of Cabo Delgado’s civilian population, corruption and other factors are likely to prevent fully safe economic activity for the next few years.
The examples of Mozambique, Tanzania and Togo show in many different ways the relevance of the new Supply Chain Act and why a professional political risk analysis is becoming increasingly important for companies. Conflicts like the one in Mozambique, which are initially characterized by low intensity and then escalate violently, are important for international business and production processes, which could be disrupted as a result. The new Supply Chain Law also affects lower intensity conflicts, such as in Togo. Finally, environmental destruction and discrimination against individual population groups that are part of these conflicts should not be neglected either.
With MBI CONIAS Risk Intelligence, you are fully prepared for the challenges of the new Supply Chain Act. Our decades of experience in monitoring political conflicts below the threshold of war make the MBI CONIAS data unique. The large number of these conflicts and their complex modes of action require a great deal of knowledge in order to identify their impact early. Constant enhancements and additions continuously increase the benefits for our customers.
About the authors:
Etienne Limberger & Dr. Nicolas Schwank
CONIAS Risk Intelligence
Michael Bauer International GmbH