The first pillar of the UN Guiding Principles underscores that the duty to protect human rights lies with the state. Under international law, states are obligated to respect, protect and fulfil human rights.
States must protect against human rights abuse within their territory and/or jurisdiction by third parties, including business enterprises. This requires taking appropriate steps to prevent, investigate punish and redress such abuse through effective policies, legislation, regulations and adjudication.
In practice this means that states have the obligation to take measures to ensure that enterprises respect human rights. Past abuses must be investigated, the responsible parties must be called to account and they must provide redress for the victims. In addition to the state's duty to protect human rights, the Guiding Principles explicitly emphasise the responsibility private enterprises have to respect human rights. The question of how this responsibility should be framed and how the Federal Government can help enterprises fulfil their responsibility is an essential part of the National Action Plan for Business and Human Rights.
Legal frameworks: basis for the protection of human rights
The cornerstone for the protection of human rights in Germany is the German constitution, the Basic Law, in which the state affirms "inviolable and inalienable human rights as the basis of every community" (Article 1(2)). Building on this foundation, Germany has ratified numerous international human rights conventions and transposed them into national legislation. These include the International Covenant on Civil and Political Rights, most of the conventions of the International Labour Organization, important European treaties on human rights protection such as the European Convention for the Protection of Human Rights and Fundamental Freedoms and the European Social Charter. As a member of the Council of Europe and the United Nations, Germany is also integrated into the international human rights system.
In its National Action Plan for Business and Human Rights, the Federal Government has implemented the UN Guiding Principles since 2016. The NAP is currently being revised in line with United Nations recommendations and to take account of significant developments at national and European level in recent years.
The NAP status report (in German) published in August 2021 describes what has been achieved so far. This includes improvements in domestic protection against exploitation and human trafficking, the enhancement of transparency in corporate reporting and greater equality in the business context. Methodological scientific monitoring of the NAP’s implementation showed that there were still deficits in the implementation of its recommendations by business enterprises. The NAP consequently laid the basis for adoption of the Act on Corporate Due Diligence Obligations in Supply Chains, which makes human rights due diligence mandatory for companies above a certain size from 2023.
Germany's federal, state and local authorities expend over €350 billion a year on products and external services. In light of this, they bear particular responsibility to discharge their state duty to protect human rights and ensure that the use of public funds does not cause or facilitate any adverse impacts on human rights. By placing greater emphasis on sustainability in their procurement transactions, public authorities not only fulfil their function as role models but can also wield significant leverage in increasing the demand for sustainable products. The 2030 Agenda also makes explicit reference to sustainable public procurement as an instrument for achieving sustainable development.
Assistance for public contracting authorities and enterprises
By establishing various institutions and bodies, the Federal Government supports both public contracting authorities and contractors in increasing the proportion and quality of sustainable products and services in public procurement. Under the 2010 Programme of Sustainability Measures and the 2015 and 2021 updates to that programme, the Competence Center for Sustainable Procurement (KNB) was established at the Procurement Office of the Federal Ministry of the Interior as the Federal Government’s central information and advice agency on sustainable procurement. The Competence Center provides advice, training, information and events in order to support public contracting authorities in incorporating sustainability and hence also human rights criteria in procurement activities and to help them make further progress in implementation. The KNB serves public procurement authorities at all levels, including the Federal Government, the Länder, local authorities and other organisations that come under public procurement law. To this end, it works closely with other institutions such as the Sustainability Compass, an information portal developed on behalf of the Federal Ministry for Economic Cooperation and Development. The Sustainability Compass provides practical support for public and private-sector procurement officers, offers comprehensive information on sustainable procurement and in particular helps identify suitable quality marks as proof of compliance with social and environmental requirements along the value chain for certain groups of products.
In a joint initiative, the Procurement Office of the Federal Ministry of the Interior, KNB and digital industry association Bitkom e.V. have updated the Declaration of Commitment to Compliance with Labour and Social Standards in Public ICT Procurement. This serves as a model declaration and, together with an associated handout, can be used by all procuring entities.
The Competence Center for Sustainable Procurement has also published a study on social audits as a tool for checking working conditions, with discussion and recommendations in the context of public procurement. The study aims to help disseminate basic knowledge and bring attention to specific implementation approaches in public procurement.
2016 reform of procurement law
The reform of German procurement law in 2016 included the transposition of three new EU procurement directives into German law. The new Part IV of the Restraints of Competition Act places particular emphasis on compliance with the law, especially taxation, labour and social legislation (sections 97(3) and 128(1) of the Act). The new legal framework enables procurement bodies to make greater use of public contracting to advance strategic goals such as social standards, environmental protection and innovation.
As part of the NAP, the Federal Government undertook to examine whether, and to what extent, binding minimum requirements for corporate human rights due diligence can be enshrined in a future revision of procurement law. It committed to drawing up a phased plan indicating how this aim can be achieved. Among other things, in March 2021, the Federal Government introduced a draft supply chain due diligence act which then went through parliament and was passed by the Bundestag and the Bundesrat. Once it enters into force in 2023, the new act will also make it possible to exclude companies from procurement procedures in the event of a serious violation of the due diligence obligation. The expertise of the Competence Center for Sustainable Procurement on social standards (including on ILO core labour standards in procurement) and on implementation of the UN Guiding Principles is also to be used to provide further knowledge training for procurement officers.
Publicly owned enterprises
The National Action Plan uses the term "enterprises in public ownership" to denote business enterprises that are subject to private or public law and in which federal, state or local authorities hold a direct majority share. According to the United Nations Guiding Principles on Business and Human Rights, enterprises that are under state control have a particular responsibility to respect human rights. The "Public Corporate Governance Code of the Federation "PCGK Bund)" contains recommendations regarding good corporate governance for enterprises in which the Federal Government holds a majority stake. Several of Germany's federal states and municipalities also have such codes for their holdings.
Expanding human rights-related training courses and reporting requirements
Together with the German Council for Sustainable Development, the Federal Government is adding sustainability content to the training of Federal Government staff responsible for managing federal shareholdings in business enterprises, with a focus on the human rights responsibility of enterprises in which the Federal Government directly holds a majority share. The support under the federal training programme for entities managing such shareholdings has been incorporated in directives on the active management of federal holdings in the course of revising the Principles of Good Corporate Governance and Management of Federal Holdings. The sixteen German Länder are encouraged to adopted the same practice at annual meetings bringing together those entities with equivalent entities in the Länder. In addition, the Federal Government aims for more enterprises in which it holds a majority ownership interest to apply the German Sustainability Code. This provides a framework for standardised corporate sustainability reporting. To comply with the Code, companies must submit a declaration of conformity detailing how they implement 20 criteria covering social, environmental and economic sustainability. Since the 2018 financial year, the Federal Government’s annual report on federal holdings has separately listed, in the chapter on sustainability, all internationally operating enterprises with over 500 employees in which the Federal Government holds a majority ownership interest that apply or do not apply the Code or a similar framework with human rights reporting obligations.
Guarantee instruments for the promotion of external trade
Germany supports companies with risk hedging instruments for the promotion of external trade. These include export credit guarantees (known as Hermes guarantees) to insure export transactions, federal guarantees for direct investment, and untied loan guarantees as insurance for banks against the risk of default.
The action points formulated in the NAP for these external trade promotion instruments were implemented in a revision of the review process in July 2017. In a dedicated review of environmental, social and human rights risks (ESHR review) for all applications, human rights aspects are now given even greater emphasis in the review process and included in the preparation of mandataries (mandatory committee members) on the Federal Government’s Interministerial Committee for Export Credit Guarantees. Screening prior to actual project assessment makes it possible to identify project-specific human rights risks at an early stage and examine them in greater depth.
As before, projects are classified in the review process into ESHR risk categories and benchmarked for compliance with international standards. Those in the highest category, Category A, must also undergo external review for any shortfalls in terms of their ESHR aspects and ESHR management systems relative to World Bank and IFC benchmark standards, which are then remedied with targeted action plans. A new feature is that a dedicated human rights due diligence or human rights impact assessment can now be required for projects with a high risk of serious human rights violations (such as projects in conflict-affected areas).
The range of information available on human rights aspects has also been significantly expanded since 2017. Interested parties are thus provided with comprehensive information on the importance of human rights due diligence requirements in the pre-application phase.
A company’s constructive participation in grievance mechanisms of the National Contact Point for the OECD Guidelines is taken into account in the granting of external trade promotion instruments. The Federal Government reserves the right to exclude companies from the external trade promotion instruments mentioned above if they refuse to address alleged grievances.