How will Germany’s new supply chain law transform trade ties with Türkiye?

by Anadolu Agency

KOCAELI, Türkiye

Starting next year, Türkiye’s trade ties with its key partner Germany are set to enter a new, possibly more challenging, phase.

The reason? A new supply chain law that could catch out Turkish firms when it comes into force in Germany on Jan. 1.​​​​​​​

Under the German Supply Chain Law, companies with at least 3,000 workers in Germany have to make sure that their suppliers are complying with labor rights and environmental standards requirements, failing which they could face penalties of up to €8 million ($7.8 million) or 2% of their annual turnover.

According to Thilo Pahl, head of the German-Turkish Chamber of Commerce and Industry, the new law could transform trade ties between the countries in their entirety.

“I would say this is a new challenge,” he told Anadolu Agency in an exclusive interview.

“In Germany, they will stick to this new law and German companies will ask their supplier in Türkiye whether they are meeting the new requirements.”

Bilateral trade between Germany and Türkiye stands at around €40 billion, and there are more than 7,800 German companies or Turkish ones with German equity operating in Türkiye.

“This is where our chamber comes in. Our task is to raise awareness among the Turkish companies. To many, it seems it is still far away, but it’s very close. German companies are preparing for it and they will ask for it,” he said.

For German companies, Pahl explained, suppliers in the Far East are “far away,” which could cause supply chain issues.

“And that is a chance for Türkiye,” he said.

If German or European companies are looking to minimize risks in the supply chain, Türkiye “can play a new role with very good infrastructure, good logistics and industrial bases,” he added.

“But, if you will take part in the supply chain, you have to prepare now. This is very important, and this is the reason why we have conducted several seminars and webinars on this topic.”

Pahl said most Turkish companies follow global best practices, maintain top quality in all matters, and fulfill all requirements.

“There are no worries about this, but we also have some companies that we all know are lagging behind,” he said.

“If you would like to take part in international trade, you have to prepare yourself. Otherwise, you won’t have any chances anymore for trade with Germany and the entire European Union, because all the countries in Europe are preparing something like this.”

As Pahl pointed out, the EU is also expected to come up with similar laws that would require businesses with more than 500 employees to ensure that environmental and human rights standards are met across their supply chains.

New obligations

The new German law will make it mandatory for Turkish firms doing business with German companies to meet its requirements, set up complaint mechanisms, and report on their due diligence activities at regular intervals.

According to some experts, around 30,000 Turkish companies could be affected by the move.

The law requires firms to have a clear policy statement on their labor rights strategy and makes it compulsory for them to appoint a human rights ombudsperson.

Risks related to human rights are, for example, employing a child who is 15 years old or younger. The German law prohibits the use of forced labor and all forms of slavery or similar oppressive practices.

Employment and wage discrimination, as well as actions against basic freedom of association, will also be considered violations.

Turkish firms must also adhere to environmental due diligence obligations, particularly the prevention of hazardous chemical usage in production processes.

A ban on the use of mercury and mercury-added products in manufacturing processes, for instance, is expected, which would force firms to explore and implement other production methods.

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