Faked in Germany

‘Lieferkettengesetz’: How workers don’t profit and consultants do

On June 11, 2021, German Parliament voted in favour of a law that demands importers of consumer goods to secure human rights in their supply chains. The law comes on top of existing voluntary agreements and ‘soft law’, which apparently were too weak to to the job. Will this be remembered as a major achievement? Let’s start with a phantasy.

11th of June: Supply Chain Justice Day
Imagine: in the not too distant future, the 11th of June will be a national holiday in Vietnam, Bangladesh and a few other countries. Why? Because on this date in 2021, the German Bundestag passed the ‘Lieferkettengesetz’, a law that forcers importer of consumer goods to take care of human rights in their supply chain. It was a milestone on the road to respecting human rights in these exporting countries.

Sorry to say that this is extremely unlikely to happen, for one simple reason. It is based on a great number of wrong assumptions about the real world. Therefore the law is not going to improve anything substantial for these workers,

The road to hell is paved with good intentions

The only good thing about this law is its intention: improving human rights. Unfortunately the road to hell is paved with good intentions. The law rests on three very weak pillars: poor understanding of how supply chains work, ridiculous ideas on how real companies in the real world tick, and, last but not least, blindness to the lessons learned since the 1990s.

Clueless and blind

Clueless about supply chains

The law is apparently written by people who don’t have a clue about the real nature of supply chains and their complexity in the real world: not only are the company’s supply chains composed of hundreds or more suppliers. These suppliers engage many sub-suppliers or parallel suppliers. Supply chains may change with the speed of light. The way the word ‘Lieferkette’ as used in the legal text suggests a false impression of stability and simplicity that only occurs as an exception. The makers of the law have avoided the fundamental question whether controlling human rights issues from the importers side is a good idea at all. Of course it is not: if a producer has say 200 customers and all these 200 customers have to deal with human rights at a distance of 5000 km through their 200 supply chain management systems, it’s a waste of time. Production issues should ideally be dealt with at the production site, not at the 200 customers’ offices. It cannot be a model for the future.

Clueless about real companies

The law is written by people who seem to be even more clueless about how real companies work real time in the real world. The image the law text evokes is that of an old-fashioned slow working hierarchically organized government department, rather than the real type of nervous animal that operates on the interface of rapidly fluctuating consumer markets and volatile export markets for consumer goods. This lack of understanding can have seriously negative consequences. The law, for example, demands companies to create additional staff functions, management and information systems. Everybody with a bit of understanding of how real companies work, knows that the creation of staff functions for sustainability or human rights is a good model to side-track these issues and to de-couple them from real business. The ‘Lieferkettengesetz’ contains a lot of reporting obligations on different issues. Interestingly, they are all on an annual basis and should be kept for many years, similarly to financial records for tax purposes. It is questionable how helpful annual reports are in a business that ticks in time-scales of weeks, days and hours.

Blind to lessons learned

The law appears to be blind to the lessons learned since the 1990s, when companies were forced by NGOs and consumer organizations to take influence on their suppliers. Many large retailers and brand owners have built up considerable experience since then, in cooperation with standard owners, certification organisation and auditors (SA 8000, BSCI/Amfori, ETI, etc.). On the basis of strong efforts, modest results have been reached, but the fundamental flaws of the model – in the 1990s the only option available – are becoming increasingly visible. Too many suppliers appear to be in endless processes of continuous improvement without actually improving, too many players in the supply chain manage to remain invisible. Real supply chains change more rapidly than auditing reports manage to report. Audits can easily be circumvented and results falsified. Beautiful audit reports are at best an indication of the company’s interest in the issue, rather than a hard proof that their suppliers are OK. More than often, the reports fake responsibility for the companies.

Because of these deficiencies, there is a urgent need for a different model: which assists producers to manage themselves on the basis of local self-interest, local expertise and local management systems and to reduce the importers’ role. Increasing the dose of a medicine that does not work well is not always a good idea. That is what the German law suggests, however.

The resulting mess

On the basis of this collection of unbelievable stupidities, the Germans have passed a law:

  • that is written by people who care more about popular prejudice and politically attractive slogans than about the real world;
  • that creates tons of paper/gigabytes without creating sufficient incentives for real pragmatic action on the working floor;
  • that most likely will not bring any noticeable improvement to workers in exporting countries;
  • that effectively blocks progress towards more effective ways to improve human rights in the producing countries;
  • that helps institutionalize a model that has already reached its practical limits and is overdue to be replaced by more effective ways of securing human rights;
  • that is so problematic in its enforcement that it will lead to an endless agenda of updates, corrections, the creation of new management tasks, management information systems and the like;
  • that is a goldmine for all those consultants who are not interested in real improvements in human rights in the real world but like to create instruments to gather terabytes of data on parameters nobody really understands.

Accepted and rejected for the wrong reasons

Why the hell was this law, if it is so problematic, accepted at all? The answer is not too difficult: because major stakeholders profit more than they lose.

Against for the wrong reasons

Of course, there was huge resistance in the business world, but not all companies were against. On the one hand, the traditional conservative German associations BDI and BDA were strongly against, but clearly for the wrong reasons. Their main complaint was about costs for industry, especially in the post-Covid era. This is a bullshit argument. Human rights are important and may cost a Euro. If you are against this law, you can be only for one reason: it does not contribute too much to human rights.

In favour for the wrong reasons

Another part of German industry, especially the companies that had implemented compliance standards like BSCI/Amfori in their supply chains were (of course) in favour of the law. The law demands them to do what they have been doing for the last 20 years, not too much more. It creates a business advantage vis-à-vis companies that haven’t started yet. So they agree on the law, but for the wrong reasons. They do not agree because it helps secure human rights in the producing countries. They agree because it makes them stronger competitors.

There is no need to explain why the usual suspects such as the NGOs and consumer organisations were and are in favour. The do not have any interest in questioning the idea that retailers and brands in Germany can and should made responsible for crimes against human rights in third world countries. But again, it is the wrong reason to agree. Independently of the interests one serves, the only valid reason to honestly agree on this law can be that is furthers human rights in the exporting world. This stupid law most likely will not.

What next?

It will take some time before relevant people and organizations discover that this law won’t do what it is intended to do: helping workers in countries that produce mass consumer goods for us. There is a real risk that, before that,  this nonsense will be exported to the EU level. Good  news for IT consultants and those who want to sell needlessly complex systems for solving badly defined problems. But sooner or later we will be able to remove the thick layers of impenetrable words and see the reality on the work floor. But long before this time, importers of mass consumer goods and their governments should re-think their strategies for securing human rights in the exporting countries.



Corruption and Transparency: my stories

Fighting Corruption: a project with Russian wood suppliers

Traveling along supply chains

Much of my work since the early 1990s has been travelling along supply chains: from cotton field to T-shirt, from platinum mine to automobile, from palm tree to margarine, or from tree to newspaper. Actually I enjoyed very much walking through African villages in cotton producing regions, visiting Indonesian palm oil plantations or working on ecologically responsible sourcing for a Norwegian paper mill.

The responsible sourcing agenda has been continuously changing over time. In the beginning, it was all about ecological impacts, but gradually labour safety and human rights issues were moving to the foreground.

Including social  issues, labour safety and …. corruption

After doing some ground breaking work for Axel Springer and Norske Skog on responsible forestry and supply chain traceability in Norway, my next contributions were much more related to social issues, including labour safety. Axel Springer took the lead here, not on the basis of huge complex projects but through strategically important small and quick projects –Axel Springer’s sustainability officer, called them “fast horses” – to communicate a simple message and to invite others to follow in the same direction.

Interviewing forest operators in Tikhvin: “Is this wood legal and corruption-free?” (from Florian Nehm’s presentation at IACC Athens 2008)

We made some attempts to work on labour safety with the Volga paper mill near Nizhniy Novgorod, but for some reasons we then increasingly concentrated on anti-corruption issues in close cooperation with the Finnish-Swedish paper company Stora Enso and their wood suppliers in Tikhvin. The leading global anti-corruption organisation Transparency International eventually joined as a critical and independent project partner.


The Tikhvin project: from Russia with Transparency

Kick-off meeting

On March 4, 2004, we met in the St. Petersburg office of Stora Enso: the Russian director, Axel Springer’s sustainability officer, three ladies from Helsinki, some other managers and experts and myself. In close cooperation with the participants, I had prepared the agenda and a presentation.

After agreeing on a project outline and a basic idea of the project budget, we had dinner together. The following morning we drove to Tikhvin, a small town (60.000 inhabitants) somewhat more than 200 km East of St. Petersburg.

On the road to Tikhvin

We arrived at the forest company’s office (Lespromkhoz) around 10 am.

Unfortunately I had to go to the toilet and what I saw there I did not like at all. Apparently, the water flow was blocked and the toilet was filled to the brim with an indescribable brown stinking substance, to which I delivered my modest contribution. Welcome to Russia![1]

After the meeting with the forest people, and the representatives from Stora Enso and Axel Springer, we did some interesting sight-seeing.

Marian Tikhvin Assumption Monastery

We walked through the snow to the beautiful Marian Tikhvin Assumption Monastery and later on we paid a short visit to the house where the composer Rimskiy Korsakov was born in 1844, now a museum. After a visit to the local wood processing company, we concluded the day with a copious meal in a good Russian restaurant. From that moment on, the project was called “From Russia with Transparency”, a variation of the 1963 James Bond film title (from Russia with Love with Sean Connery).

A good restaurant

The next day we drove back to St. Petersburg. After these kick-off meetings, I was not very much involved until I facilitated a meeting at the IACC conference in 2008 in which the results were discussed (see below).

More on the project.

Corruption as a solution: a bribe at the airport

Smelly chairman

In September of the same year, I was participating in a study trip to the Russian forests near Novgorod, 195 km South of St. Petersburg. It was organised by the German Publishers Association VDZ. Representatives of paper companies and environmental NGOs (including WWF and Greenpeace) were among the participants. Before the trip to Novgorod, there was a meeting in St. Petersburg, which I had agreed to chair. I arrived five minutes before the meeting was scheduled to start. Actually, I should have arrived the evening before, but I had terrible problems in Moscow. First I lost my luggage, which had been deposited in a large lost-and-found storage hall (because I did not know that I was responsible myself to take the luggage to the airport where my flight to St. Petersburg would take off) and then the flight to St. Petersburg was cancelled.

Chairing the St. Petersburg meeting

I spent the entire night in the closed airport restaurant together with some Chinese travellers. Later on I discovered that there had been an announcement in Russian only in which a free night in a hotel near the airport was offered. But I don’t understand Russian. Neither did the Chinese. So when I finally arrived at our meeting venue, I had not had a shower, I had not brushed my teeth and I had not had an opportunity to shave. I was so happy that the little table, reserved for the chairman, was at least 2 meters away from the first person in the audience. Most probably, nobody in the audience could smell their chairman, I hoped.

Russian realities
Meeting with forest workers (1-9-2004)

After this memorable opening session, we left for Novgorod. It was a highly interesting trip, not only showing problems and solutions for environmentally responsible forest management, but also the absurdities of Russian forest law and its implementation.

Publishers in the forest (2-9-2004)

I wrote an earlier blog about this subject (Stories from Russia).

After visiting the Novgorod forest, we were invited by an Austrian company that had started some operations in the wood processing industry in the region.


Meeting at the Austrian company

We learned a lot about doing business in Russia and about the unavoidable risks. Our Austrian friend told us that there are many factories that employ far more people for security than for production.


He then asked whether anybody of us knew why the shops are all open day and night. Nobody knew. The answer was simple: unattended shops will be robbed immediately. As there should be somebody in the shop at all times, why not keep it open?

The next day I had an appointment in Moscow. My colleague from the World Resources Institute in Washington, his assistant and I would meet with Greenpeace people there.

I went to the St. Petersburg airport, but when I tried to check in, I was told that the flight was fully booked and that I had to wait for another flight several hours later. I did not like it at all. I was desperate to meet my Washington and Moscow friends for discussing a very interesting project on ecologically responsible forest management in the Kirov region and FSC certification.

Socialising in Russia: a bribe at the airport
Finally: a flight to Moscow

So I went to the check-in counter again and I only saw only one option to get on the reserved Moscow flight. I folded two € 20 banknotes into my passport and asked the guy in the check-in office whether he could organise a place for me. He did not look at me, but saw the Euro notes, which he immediately took from my passport. Two minutes later I had a boarding pass. I was well aware that someone else who had booked on this flight had now lost his or her place. So be it. After receiving my precious boarding pass, I quickly looked into the check-in office again. Behind the check-in guy’s computer, I saw a huge pile of banknotes. I suddenly realised how quickly I was socialising in Russian society. A little bribe here and there makes life bearable.

In the Greenpeace Moscow office

Almost two hours later, I arrived at the Greenpeace office in Moscow. I told my Greenpeace contact my story. He seemed to have mixed feelings. On the one hand, he was not surprised. This is the way it works in Russia. On the other hand, he did not entirely agree. The only thing he said was: “You should not have paid € 40. The current rate is € 20.” So even in bribery, there are transparent markets and fixed prices.

Corruption: an expression of intelligence

As mentioned, in the beginning of 2004, I played a role during the kick-off meetings of the Tikhvin project. Initially the project included many aspects of responsible sourcing. Gradually, especially after agreeing with Transparency International on their critical role, the emphasis shifted towards corruption and the private sector’s role in fighting it. Axel Springer’s sustainability officer started to frame the project in terms of ‘corruption free paper’. In 2008, Transparency International was planning their big international conference on Transparency and Corruption, which was going to take place in November of that year. The title was: “Global Transparency – Fighting corruption for a sustainable future.” In April, Transparency International’s EU Liaison office, with strong input from some German people, organised a discussion in Brussels to provide inputs into the November event.

I was invited as an expert on supply chains, private sector and sustainability. Half an hour before the meeting, I was asked to prepare a presentation about ‘sustainability’ and its potential links with Transparency International’s work, which perfectly made sense given the theme of the November conference.

The discussion at TI Brussels

At hindsight, I can say that I gave a pretty good presentation in which I stressed the utopian nature of the sustainability concept and made clear that there is no simple and obvious link between ‘sustainability’ and ‘anti-corruption’. The only linking pin I saw (and still see) is ‘good governance’. I don’t know how useful my contribution actually was at the time. I myself was deeply impressed by Albena Azmanova’s contribution. Professor Azmanova was (and still is) a professor in political science. She was strongly involved in the political transition in her home country (Bulgaria) and published her work, originally refused in Bulgaria, in the US and Europe.

The discussion at TI Brussels

Her presentation and her discussion contributions during our Brussels meeting were real eye-openers for me. In discussion the nature of corruption, she emphasised its intelligent nature. Corruption is of course a problem, but it only exists because it provides intelligent solutions to problems inherent to non-functioning social and political systems. My own translation: if you don’t know the problems for which corruption provides a solution, you won’t be able to effectively fight it. At least, my act of bribery had corrected my problem that was caused by the bad Russian booking and check-in system.

The need for transparency: the Athens conference


The International Anti Corruption Conference (IACC) is generally being held every two years. The 2008 conference, held in Athens, emphasised the need for good governance and building institutions that can be trusted. It explicitly formulated expectations to the private sector’s role.

“To restore peoples’ trust and rebuild the credibility of institutions, governments must move beyond expressions of political will to concrete action; private sector must put a check on bribery and fulfil their obligations as corporate citizens and civil society must demand accountability.” (from http://13iacc.org/ , my underlining).

During the conference, several workshops addressed the private sector’s responsibilities for fighting corruption. I happened to chair workshop 4.4: “The Private Sector’s Role in Fighting Corruption in the Wood Supply Chain: An Example from Russia”, which was entirely built around the experiences of the so-called Tikhvin project as mentioned above. After my introduction, Florian Nehm (Axel Springer) and Pirjetta Soikkeli (Stora Enso) were on the speakers list, followed by some critical remarks by Elena Panfilova from Transparancy International Moscow. In my introductory remarks, I stressed the business risk of weak governance in supply chains and optimistically said “fighting corruption is becoming part of supply chain management.”

From my presentation

Practical limits to transparency: getting things done in Athens

After my presentation, Florian Nehm wanted to show a video that was made in the context of the Tikhvin project. During our preparatory discussions, the conference management made clear that they were not in favour of showing the Tikhvin film. They thought it would not fit into the character of the conference. Maybe they suspected it to be too commercial or too superficial. In any case, the video proposal was declined and Florian Nehm was kindly asked to show a classical PowerPoint instead. In the morning before the presentation, the PowerPoint was delivered to the central conference desk, as agreed. However, one hour before the start of the workshop, Florian Nehm and I sneaked into the workshop room where we met the technical staff responsible for projecting slides and videos. We gave them a memory stick with the video and the instruction to disregard the material coming from the central conference desk.

After my introduction, Florian Nehm, much to the surprise of the conference management, showed his film. It proved to be a very good introduction into the subject, which was then further elaborated by the Stora Enso and Transparency International people. That particular day in 2008, we again discovered something everybody already knows. Sometimes, you cannot be too transparent about what you are doing or what you are planning to do. Even at the Transparency International Meeting, there were practical limits to transparency.


[1] I am not sure whether this experience was in the Tikhvin Lespromkhoz building or in Kovernino (Koverninskiy Leskoz, March 2003). Wherever it was, it was pretty awful.