Fortescue chair slams Germany for U-turn on EU supply chain rules

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Australian mining billionaire Andrew Forrest has slammed Germany for its U-turn against EU legislation that would punish companies for environmental and human rights abuses in their supply chains.

Germany withdrew its support for the landmark Corporate Sustainability Due Diligence Directive earlier this month at the insistence of the pro-business Free Democrats (FDP), the smallest party in the country’s coalition government.

In an interview with the Financial Times, Forrest, chair and largest shareholder of Fortescue Metals Group, said Germany had “a responsibility” to back the legislation, which had been due for approval until the country’s change of mind. Fortescue is the world’s fourth-largest iron ore producer and a big German trading partner.

“If you want to make sure that all your supply chains lead straight back to China, if you want to continue whingeing about it and wailing about it and doing nothing about it, then . . . don’t adopt the human rights corporate responsibility directive,” Forrest said, adding: “I could not be more stridently opposed to the view that [the directive] is bad for business.”

Many in Brussels believe the law is doomed without the support of the EU’s biggest industrial power.

The directive is intended to ensure that the largest EU companies report and take action on social, environmental and human rights abuses in their supply chains. It is one of the bloc’s most ambitious efforts to raise standards in countries outside the EU, as well as among its member states. 

But critics, including Germany’s biggest business lobby, say the proposed legislation places a huge burden on businesses and in many instances is unworkable.

Fortescue is one of the largest single companies at the end of many German groups’ supply chains. Forrest, Australia’s richest man, has also pledged to invest in Europe and Germany to back green technologies.

“I am a big supplier of raw materials and a backer of strategic changes [in European energy supply],” Forrest said. “If [Europe] adopts this law, then they’re going to stay competitive. What I do know is if they don’t adopt this law, then there’ll be a cloud of suspicion over industry.”

Tougher rules on corporate social responsibility in supply chains would also help Europe meet its geopolitical goals, Forrest added, because they would force businesses to diversify away from cheap supplies provided by politically unstable countries. 

“I want to supply green hydrogen, green metals, green iron, green technology, green everything. But I will do so with responsibility for the environment, for human rights and green energy,” Forrest said, adding that if the EU did not adopt tougher supply chain rules, it would be handing an advantage to less scrupulous businesses able to outcompete more responsible ones on price. 

Since Germany withdrew its support for the directive, a number of other countries, including Italy, Bulgaria and Austria, have signalled they would also abstain or vote against it. 

The directive is now in limbo. Multiple votes to try and push it through in the past fortnight have had to be postponed. Without a breakthrough, diplomats in Brussels say it is now unlikely to be passed until after EU-wide parliamentary elections in June.