Impunity for German car giants assured after ethical supply chain law gutted


The Grand Theft Chaco report found leather linked to illegal deforestation of indigenous lands in Paraguay was used for BMW cars. Credit: Shutterstock

  • German Cabinet set to approve “toothless” supply chain law next month which fails to protect world’s forests and indigenous peoples
  • Late last year, Earthsight’s Grand Theft Chaco report found leather from illegal deforestation in the lands of an “uncontacted” tribe in Paraguay had been used to make German luxury cars 
  • Narrow scope of new law means German car firms free to continue sourcing leather linked to tropical deforestation and environmental abuses
  • As EU set to discuss details of its own supply chain legislation this week, revision of German law crucial to push for stronger Europe-wide laws on due diligence

London, 23 February 2021 - The car industry’s use of leather linked to tropical deforestation and other abuses is likely to persist after the German government revealed plans for a new supply chain law that falls woefully short. Campaigners are now calling for the EU to take a firmer approach.

An Earthsight investigation last year exposed how leather from illegal deforestation on the protected lands of an “uncontacted” tribe in Paraguay was being used in the manufacture of BMW cars in Germany.

Grand Theft Chaco showed that other German automotive giants were similarly exposed to deforestation-risk in their supply chains, since they were unable to trace the leather used to fit out their vehicles and none had a zero-deforestation policy.

The report revealed how German trade groups linked to the automotive industry lobbied to water down the proposed German supply chain law which could have forced the industry to eliminate such cases through better due diligence standards.

It seems they have now succeeded. On 12 February, the German government published a draft supply chain law which has been widely criticised by environmental and human rights advocates as toothless.

Past studies have shown that Germany is the second largest European consumer of goods linked to illegal deforestation and associated human rights abuses overseas.

It was estimated to have imported over €800m of such beef, palm oil, soy and leather in 2012. Its imports of beef and leather from high-risk countries like Brazil and Paraguay have increased by 30 per cent since then.

It is evident that the proposed German law would not prevent a repeat of the case exposed in Grand Theft Chaco.

The law does not include environmental abuses, and only applies to ‘first tier’ suppliers of German companies. The abuses found in BMW’s leather supply chain were four or five steps removed.

The same is true of the origin of many other materials used by these firms. The law also only applies to the very largest German companies, which among other things excludes many domestic leather suppliers to the automotive industry.

Even if a firm is found guilty of complicity in abuses abroad, it can expect to walk away with a light punishment in the form of a fine as the new proposal has no provisions for civil liability.

The German coalition government, which includes the two largest political parties of right and left, has been trying to advertise the law as an “historic breakthrough”. In reality it is anything but.

There is still a small chance that German legislators will break ranks and force the government to strengthen its new law. What Germany does matters, because it often sets the tone for Europe, where multiple EU-wide efforts are under way to pass similar legislation.

In the event the German law passes in its current form, the hopes of the people and wildlife suffering for the profit of German firms will shift to Brussels. Fortunately, the early signs are that the bloc is taking a more meaningful approach. It remains to be seen whether this will continue once the industry lobby becomes fully engaged.

The German government’s willingness to enforce even a weak new law is also uncertain. Much stricter laws already exist in the EU specific to wood from illegal logging overseas. Yet a recent Earthsight exposé called into question Germany’s seriousness in enforcing it.

The Taiga King investigation found German companies had purchased timber worth millions of euros from a supplier at the centre of Russia’s largest illegal logging scandal this century.

German firms imported over 16,000 tonnes from the firm after its owner was arrested on bribery charges and his company formally accused of widespread illegal logging in bear and wolf habitat in the Russian Far East. The slow-growing timber was destined for sale as decking and cladding.

Rubens Carvalho, Earthsight’s Head of Deforestation Research, said: “The German government’s claims to be pioneering a powerful new approach to responsible business with this law are a joke.

“If it is serious about cleaning up its domestic industries of complicity in abuses overseas, the EU must take a different path.”

Editor's notes

  • Earthsight is a UK-based non-profit organisation that uses in-depth investigations to expose environmental and social crime, injustice and the links to global consumption.
  • The report, Grand Theft Chaco: The Luxury cars made with leather from the stolen lands of an uncontacted tribe, and company responses can be read here and in German here.
  • The proposed German Supply Chain Law, Lieferkettengesetz, was announced on 12 February 2021. It is due to be discussed by the cabinet in March and then pass to the Bundestag for amendment or approval by legislators
  • The European Commission and EU member states are due to discuss the bloc’s plans for regulation to address forest risk commodities at a conference on 25 February. It is expected to be the last such meeting before draft legislation is put forward by the Commission, which it has promised to do by June 2021.
  • Skins of 50-60 million cows are used every year to fit out cars for the world’s wealthiest, in an industry worth $29 billion. The leather used in cars each year could blanket Manhattan three times over.
  • Four-fifths of the world’s premium cars have German badges. The wider profits of the German car giants are highly reliant on their luxury brands, which are those most likely to use large quantities of leather.
  • The 30 per cent increase in German imports of beef and leather from high-risk countries like Brazil and Paraguay since 2012 is based on Earthsight analysis of UN Comtrade data.

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