“A nail in the coffin for the international competitiveness of European industry” – critics of the new EU supply chain law vent their frustration with harsh words. Human rights activists, on the other hand, welcome the agreement reached at the trilogue in Brussels. It took years of wrangling over who could be held accountable for human rights violations and environmental damage, and to what extent. Leonie Duengefeld analyzes.
Forced labor cases in Xinjiang prove why a supply chain law is relevant. The United States has prohibited the import of products from the province since 2022. Volkswagen has also had to put up with critical inquiries about its plant in Xinjiang for years. An independent audit was supposed to clear the air for the company. The result of the investigation: no evidence of forced labor. As a result, the US financial services provider MSCI adjusted its sustainability rating for the German car manufacturer earlier this week from a red flag to an orange one.
However, there are considerable doubts about the audit, and not just because of the involvement of the Chinese Ministry of Commerce: Employees of the German consultancy firm that carried out the audit at the Xinjiang plant have also publicly distanced themselves from the results of the investigation. More on this from Marcel Grzanna and Fabian Kretschmer.
Our third analysis by Finn Mayer-Kuckuk and Felix Lee also deals with supply chains. It looks at the interdependence of the global economy and Germany’s dependence on China. A simulation by the Kiel Institute for the World Economy analyzed just how high this dependency is. Various scenarios have been analyzed, from a sudden decoupling (“cold turkey”) to a gentler de-risking. The result: the German economy is much more resilient than some might think.
Severing trade relations with China would be painful and very expensive for Germany. And yet, the German economy would not collapse – even in the event of a complete decoupling from China. This is the result of a simulation run by the Kiel Institute for the World Economy (IfW Kiel).
In the event of an abrupt trade stop, Germany’s economy would slump by around five percent; in the medium to long term, the decline would stabilize at about 1.5 percent. “This scenario is manageable,” says Moritz Schularick, President of the Kiel Institute, summarizing the results. “Our country has enough resilience to manage even such an extreme scenario.” It would be comparable to the global financial crisis in 2009 or the Covid crisis in 2020, which Germany is also known to have overcome.
Economists speak of a “cold turkey scenario.” In other words, they use a drug addiction metaphor. Methodologically, the research group assumes a scenario in which the global economy disintegrates into two hostile trading blocs. Schularick calls this “Cold War 2.0”: the United States, the European Union, Canada and Japan on one side, and China and its allies, including Russia, on the other.
The scenario assumes all direct trade relations between the two blocs are severed. It also factors in that a group of more or less neutral countries such as Brazil, Indonesia or Turkey would continue trading with both blocs.
Despite the supposed all-clear from the researchers, Germany could face considerable challenges in this scenario. “Trade with China brings us prosperity and is practically irreplaceable in the short term,” says Schularick. Ultimately, economic output will always be lower than in scenarios with functioning trade with China.
The IfW researchers also looked at the alternatives to the sudden termination of trade relations. De-risking, i.e., the proactive reduction of trade risks, is also a topic of the study. According to political scientist Janka Oertel from the European Council on Foreign Relations (ECFR), the results speak for pursuing a consistent course of de-risking.
If Germany strategically maneuvers itself out of dependency on China, economic output will decline, but settle at half a percent below the scenario of maximum trade with China. In other words, the damage is much lighter. The German government currently advocates this scenario in its China strategy. The economy would, therefore, reduce the risk of a major crash by making targeted losses.
The question remains as to what conclusions can be drawn from the IfW’s verdict that even a hard decoupling would be bearable. Oertel warns against seeing the study’s results as a license for inaction. She summarizes that decoupling may not be impossible, but it is not desirable either. The considerable detriments to prosperity speak in favor of avoiding such a chain of events as far as possible. This should be the priority of policy-makers.
The IfW also advises against pre-emptive decoupling. If Germany deliberately decided to gradually reduce trade relations (gradual decoupling scenario), this would also result in a loss of prosperity of 1.5 percent of economic output compared to the baseline scenario with intact trade with China. The only difference is that the sharp economic slump would be avoided in the first few months and years.
The IfW economists have considered the major difference from other past crises. Unlike the effects of the pandemic, where a quick recovery was possible, decoupling from China would still result in a loss of prosperity in the medium and long term, i.e., after four to five years. And the prerequisite for this would be that the German economy had adjusted to the new reality and established alternative trade relations.
These figures generally refer to the reference value for the respective year in a scenario with unaffected trade with China. Only the sharp economic slump in the first few months and years would be avoided. In this case, the loss of prosperity would materialize gradually.
Oertel also rejects the widespread mindset in the industry: Ignoring decoupling scenarios because they are associated with the catastrophic scenario of a Chinese invasion of Taiwan. The need to prepare for decoupling is often brushed aside by claiming that the military impact of such a war would be so far-reaching that the world would be completely different anyway.
At the IfW event, experts certainly presented future scenarios where practical decoupling takes place without the whole world sinking into war. Oertel advocates realistically calculating such scenarios and including them in risk models.
Despite different methodologies, the calculations are largely in line with studies conducted by the ifo Institute in Munich in 2022, which found that a mutual decoupling between the EU and China would result in a 0.81 percent drop in Germany’s GDP.
The ifo Institute additionally calculated the cost of relocating industrial production back to Germany or neighboring countries in the wake of decoupling from China. In such a case, the German GDP would fall by almost ten percent.
However, the ifo Institute took a much more focused look at individual sectors. The biggest loser would be Germany’s automotive industry. Here, there would be a loss in value added of around 8.5 percent or 8.3 billion US dollars. Companies manufacturing transport equipment (down 1.5 billion US dollars) and mechanical engineering companies (down 5.2 billion US dollars) would also be severely hit.
The researchers of the current IfW analysis also emphasize that any kind of decoupling would harm China: “In all simulated scenarios, the costs for China in relation to its size of the economy are significantly higher than for Germany, namely by around 60 percent.”
During the discussion, Merics Director Mikko Huotari pointed out that the political course of the US will be crucial for trade relations with China. And the signs are pointing to more conflict with Beijing.
Germany and Europe are unable to elude this, warns Huotari. Goods rejected by the United States flow to Europe all the more cheaply. This reignites the discussion about trade and imbalances in the exchange of goods in the EU. “We are approaching a phase of trade policy disputes with China,” fears the China expert.
The controversy surrounding Xinjiang has once again caught up with Volkswagen. Most recently, employees of the German consulting firm that conducted the audit at the VW plant in Urumqi have publicly distanced themselves from the technical audit. In a statement on the online platform LinkedIn, they declared that no one apart from two members of the board had “participated in, supported or backed this project.” Several of the 20 employees also issued individual statements stating: “I have not supported the acceptance of this project, nor have I been involved in it in any capacity.”
About two weeks ago, Volkswagen announced that a special audit had found no evidence of labor rights problems at its plant in Urumqi. The accusation that the car manufacturer could be profiting from the Chinese government’s human rights crimes against the Uyghurs was off the table – at least that was the hope. However, problems with inspections in a non-transparent system are now catching up with the company. Thursday’s agreement by the EU on a strict supply chain law shows just how important effective screening of supply chains will be in the future.
The consultancy firm Loening – Human Rights and Responsible Business was founded by the former Human Rights Commissioner of the German government, Markus Loening. In response to the rebellion of his employees, Loening said: “As you can see, we are a lively and committed team with a broad spectrum of views. He continues to stand by the results of the study, which found no evidence of forced labor at VW.
But the dilemma is obvious. In an interview with the Financial Times, Loening admitted that it is practically impossible for the Uyghurs in Xinjiang to report human rights violations: “Even if they would be aware of something, they cannot say that in an interview,” adding that the risk of being targeted by the security police is too great.
On the day the audit was published, Loening was already visibly uneasy about the perception of the project. He pointed out that his staff were only able to investigate the factory premises. They did not investigate suppliers or the political and social environment in Xinjiang.
The nature of the inspection itself had already left many questions unanswered. “The validity of the audit cannot be verified at all,” says Tilman Massa from the umbrella organization of the Association of Ethical Shareholders. After all, the auditing firm had admitted to “problems with the data collection”, but did not specify them. “Volkswagen cannot simply pretend that these problems are well known, but must clearly name them. We cannot recognize an audit as an effective measure with such deficits,” says Massa, who will ask Volkswagen for further comments this week.
What interests the Ethical Shareholders and other investors are the circumstances under which the auditors came to their conclusions. Loening was certainly unable to prepare and conduct the review independently but had to rely on the assistance of a law firm from Shenzhen. The Chinese Ministry of Commerce was also involved in the process, as a company spokesperson confirmed to Table.Media.
The decision on whether the plant audit was actually carried out ultimately lay with Volkswagen’s partner company SAIC. The state-owned car manufacturer has the final say in the joint venture. This has been laid down in the contracts between the two manufacturers for decades.
The company says it is aware of the “circumstances” in Xinjiang. But it can only feel responsible where it has influence – at least at its own plant in Xinjiang. The company firmly believes that it cannot be expected to achieve something that global politics is not capable of – to convince China to see reason. That is why Volkswagen sees itself more as a projection screen of non-governmental organizations that focus their agenda on companies like Volkswagen because it generates a lot of attention.
Massa, whose association represents investors holding shares in the company, believes this accusation is unjustified. Volkswagen’s decision to approve the construction of the plant in Xinjiang is suspected of being a “political decision.” “Nobody expects the impossible from Volkswagen. But the company must at least live up to its own statements and announcements,” demands Massa.
One of these is that human rights are not negotiable for Volkswagen. Chief Legal Counsel Manfred Doess emphasized that Volkswagen would continue to investigate reports of human rights violations. “If there are any suspicions or indications, we will investigate them,” he said. However, while the company acknowledges the circumstances in Xinjiang as part of the audit, Doess apparently feels that his information demands have already been satisfied by a superficially clean audit. The Ethical Shareholders see this as a contradiction.
Hallam University in Sheffield also noted this last year, which startled various supplier segments in the automotive industry, partly because the sustainability of foreign companies’ supply chains cannot be reliably verified. Nothing has happened since. No manufacturer seemed to feel responsible, not even Volkswagen. They felt that it only concerned companies with which they had no contractual relationship.
Behind the scenes, VW employees are now openly expressing their moral concerns. However, they also say that the plant cannot be closed before the contract expires in 2029. In fact, Volkswagen’s fear of the Chinese government will most likely gain the upper hand: After all, VW’s withdrawal from Xinjiang would represent a major loss of face for Beijing. And this would certainly result in economic retaliation. Marcel Grzanna/Fabian Kretschmer
The EU Parliament, Council, and Commission have reached a provisional agreement in the negotiations on the EU Due Diligence and Duty of Care Act (CSDDD). At another long trilogue meeting on Wednesday night, they were able to find compromises on the last contentious issues: Under pressure from the Council, the financial sector will initially be exempted from the obligations; the Parliament was again able to assert itself with regard to liability and the obligation to implement climate plans.
“This law is a historic breakthrough”, said EP rapporteur Lara Wolters on Thursday morning. She recalled the collapse of the Rana Plaza textile factory in Bangladesh in 2013: Ten years later, companies are now responsible for possible abuses in their value chain. “May this agreement be a tribute to the victims of this disaster and a starting point for shaping the economy of the future – an economy that puts the well-being of people and the planet above profits and short-sightedness“.
The CSDDD is similar in structure to the German Supply Chain Duty of Care Act (LkSG), but goes significantly further: while around 3,000 companies in Germany must report under the LkSG, there will be around 15,000 under the CSDDD. The CSDDD also focuses not only on direct suppliers like the LkSG, but also covers both the upstream value chain (such as the extraction of raw materials) and, in some cases, the downstream chain (use, recycling, disposal).
The most important results of the negotiations:
Several industry associations called on the Council and Parliament to reject the law in the upcoming votes. Thilo Brodtmann, Managing Director of the German Engineering Federation (VDMA), used drastic words: “With today’s agreement in the trilogue for a European supply chain law, the EU is delivering the next nail in the coffin for the international competitiveness of European industry“. The law is one in a long line of bureaucratic excesses from Brussels that will have to be shouldered by medium-sized industrial companies. There is no trace of the announcement that European companies would be relieved of 25 percent of bureaucratic obligations.
Tanja Gönner, Managing Director of the Federation of German Industries (BDI), expressed a similar view: the final text of the law threatens the competitiveness, security of supply, and diversification of the European economy, “as companies could withdraw from important third countries due to legally uncertain provisions and the resulting threat of sanctions and liability risks”. This would not benefit human rights and the environment, but harm them.
Researchers and experts from the academic world see things differently: “German companies that make a serious and conscientious effort to implement their obligations under the Supply Chain Act (…) have little to fear,” commented Markus Krajewski, Professor of Public Law and International Law at the University of Erlangen-Nuremberg. “On the contrary, the directive only has advantages for them: they have already adapted to the new rules and will no longer experience any distortions of competition“.
It will now be important for companies to take a strategic view of due diligence, explained Julia Hartmann, Professor of Management and Sustainability at EBS University in Oestrich-Winkel: “The protection of human rights is of increasing importance for corporate reputation worldwide”. In addition, companies that maintain close relationships with suppliers and transparent supply chains are much more resilient to crises. This could become a decisive factor.
Civil society sharply criticized the exception for the financial sector. The reactions were otherwise very positive: The “Supply Chain Act Initiative” spoke of a “milestone for the protection of people and the environment in global supply chains“. For example, the position of those affected in court would be improved, explained coordinator Johanna Kusch: “Unlike the German Supply Chain Act, it provides for civil liability if companies violate their due diligence obligations”.
The next steps are for the Council and Parliament to formally adopt the agreement. The law will then enter into force. As this is a directive, it is only binding once it has been transposed into national law. According to information from Table.Media, it is expected to take around two years for implementation in Parliament. The LkSG will therefore continue to apply in Germany, but adjustments will be necessary.
For her latest photo project, Julia Hofmann took photos with her analog camera in Berlin and then rolled up the films again. She then exposed the films a second time in Beijing. This double exposure creates a superimposition – an abstract image with different levels of meaning. For example, the roof of an old Beijing house merges with the train tracks of a Berlin metro station. In another photo, the facades of old buildings in Berlin blend into the gray stone walls of Beijing’s hutongs. Photography is a way of reflecting and expressing feelings and moods, says Hofman. Her life also has these two layers: China and Germany.
Even as a child, Hofmann felt strangely drawn to China. Books and films made her believe that the Chinese were very quiet, introverted and reserved, just like her. Although this is not entirely true, China has still become her second home. Julia Hofmann founded one of Beijing’s best-known cafés, Café Zarah.
After graduating, Hofmann decided against studying photography and opted for sinology and tibetology in Leipzig. After the fourth semester, she traveled to the People’s Republic for the first time, studying in Lanzhou and then in Nanning. Once she had finished her studies in Germany, she went straight back to China, but this time, it was a one-way ticket. She planned to stay for good.
In Beijing, she had secured an internship in the then-still-unknown artists’ quarter of Dashanzi at an art gallery owned by a German. That was in 2005, the year she met her partner Zhanglin. He was active as a DJ in Beijing’s fledgling music scene.
It was a time of upheaval in China, which could be felt particularly among the country’s youth. Hofmann felt reminded of Leipzig: She enjoyed the unfinished aspect of Beijing, everything here was not as settled and entrenched as she was used to from her home in southern Germany. Beijing felt as if everyone just wanted to move on and create something new. Art galleries were being opened, small bands were playing in scruffy clubs, young people were setting up small, cozy cafés and boutiques.
Hofmann often went out for coffee with Zhanglin, the DJ. But good coffee was still hard to come by in Beijing then. The pair quickly came up with an idea that had been on Hofmann’s mind since her university days: opening her own café. Café Zarah had no concept, let alone a business plan. The two rented a vacant beauty salon across from their apartment and got started. That was just the way it was in Beijing back then, says Hofmann. Just starting something without giving it much thought.
They quickly found workers in the neighborhood to renovate the rooms. The couple bought furniture at furniture markets and Ikea. In the meantime, Julia Hofmann started studying graphic design and was able to live out her passion for design to the full. Finally, all they needed was the most important thing: a large, red Italian coffee machine, which neither of them knew how to use. The person who sold the machine gave them a quick crash course, and Café Zarah was ready to open.
Café Zarah is now more than 15 years old and was expanded a few years ago. It is still cozy, with its old wooden struts, the large, red-framed front window facing the street and the wooden furniture. Guests spend their mornings here enjoying a coffee, working for a few hours or sitting with friends in front of the café on the street. However, Café Zarah is particularly popular at breakfast time.
In China, breakfast tends to be something you take to go. But Hofmann wanted to offer a cozy German breakfast and became a hotspot for the German community – word quickly spread about the new breakfast spot and the Café was packed on weekends.
Café Zarah also offered music, with Zhanglin playing regularly. Two communities quickly came together here: the – predominantly German – expat community and the Chinese music and DJ scene. Parties were also held, many of them in the café, some of them “Ciqi parties,” as Julia and Zhanglin called them. In the Beijing dialect, ciqi means close friendship. Café Zarah guests traveled together to a beach in the north, where they celebrated and camped out.
Hofmann now lives in Germany with her partner and daughter, where they continue to run the café. She also works as a graphic designer for German and international clients, including Chinese clients, and as a photographer.
She and her partner Zhanglin try to spend a long time in China every year and often spend time in their café. Hofmann says she needs to be able to look at Germany from the outside every now and then because it always puts everything in a new perspective and keeps her flexible. She likes the peace and quiet that Germany provides. But she also misses the little alleyways of the hutongs, where the elderly sit on the street chatting and life flows by. It is like in her photos: They are only complete on both layers. Julia Fiedler
Packing the bags… with lots of bamboo! In January, two-year-old panda Lele will head to China, but first, he has to go into quarantine for a few weeks. That is why Lele has now made his last public appearance at Singapore’s River Wonders Park. More than 1,000 visitors said goodbye to the photogenic bear. Lele is the first panda to be born in Singapore. For him, the trip to China also means being separated from his parents, who are expected to follow in 2027. This is when their 15-year stay as part of panda diplomacy ends.
“A nail in the coffin for the international competitiveness of European industry” – critics of the new EU supply chain law vent their frustration with harsh words. Human rights activists, on the other hand, welcome the agreement reached at the trilogue in Brussels. It took years of wrangling over who could be held accountable for human rights violations and environmental damage, and to what extent. Leonie Duengefeld analyzes.
Forced labor cases in Xinjiang prove why a supply chain law is relevant. The United States has prohibited the import of products from the province since 2022. Volkswagen has also had to put up with critical inquiries about its plant in Xinjiang for years. An independent audit was supposed to clear the air for the company. The result of the investigation: no evidence of forced labor. As a result, the US financial services provider MSCI adjusted its sustainability rating for the German car manufacturer earlier this week from a red flag to an orange one.
However, there are considerable doubts about the audit, and not just because of the involvement of the Chinese Ministry of Commerce: Employees of the German consultancy firm that carried out the audit at the Xinjiang plant have also publicly distanced themselves from the results of the investigation. More on this from Marcel Grzanna and Fabian Kretschmer.
Our third analysis by Finn Mayer-Kuckuk and Felix Lee also deals with supply chains. It looks at the interdependence of the global economy and Germany’s dependence on China. A simulation by the Kiel Institute for the World Economy analyzed just how high this dependency is. Various scenarios have been analyzed, from a sudden decoupling (“cold turkey”) to a gentler de-risking. The result: the German economy is much more resilient than some might think.
Severing trade relations with China would be painful and very expensive for Germany. And yet, the German economy would not collapse – even in the event of a complete decoupling from China. This is the result of a simulation run by the Kiel Institute for the World Economy (IfW Kiel).
In the event of an abrupt trade stop, Germany’s economy would slump by around five percent; in the medium to long term, the decline would stabilize at about 1.5 percent. “This scenario is manageable,” says Moritz Schularick, President of the Kiel Institute, summarizing the results. “Our country has enough resilience to manage even such an extreme scenario.” It would be comparable to the global financial crisis in 2009 or the Covid crisis in 2020, which Germany is also known to have overcome.
Economists speak of a “cold turkey scenario.” In other words, they use a drug addiction metaphor. Methodologically, the research group assumes a scenario in which the global economy disintegrates into two hostile trading blocs. Schularick calls this “Cold War 2.0”: the United States, the European Union, Canada and Japan on one side, and China and its allies, including Russia, on the other.
The scenario assumes all direct trade relations between the two blocs are severed. It also factors in that a group of more or less neutral countries such as Brazil, Indonesia or Turkey would continue trading with both blocs.
Despite the supposed all-clear from the researchers, Germany could face considerable challenges in this scenario. “Trade with China brings us prosperity and is practically irreplaceable in the short term,” says Schularick. Ultimately, economic output will always be lower than in scenarios with functioning trade with China.
The IfW researchers also looked at the alternatives to the sudden termination of trade relations. De-risking, i.e., the proactive reduction of trade risks, is also a topic of the study. According to political scientist Janka Oertel from the European Council on Foreign Relations (ECFR), the results speak for pursuing a consistent course of de-risking.
If Germany strategically maneuvers itself out of dependency on China, economic output will decline, but settle at half a percent below the scenario of maximum trade with China. In other words, the damage is much lighter. The German government currently advocates this scenario in its China strategy. The economy would, therefore, reduce the risk of a major crash by making targeted losses.
The question remains as to what conclusions can be drawn from the IfW’s verdict that even a hard decoupling would be bearable. Oertel warns against seeing the study’s results as a license for inaction. She summarizes that decoupling may not be impossible, but it is not desirable either. The considerable detriments to prosperity speak in favor of avoiding such a chain of events as far as possible. This should be the priority of policy-makers.
The IfW also advises against pre-emptive decoupling. If Germany deliberately decided to gradually reduce trade relations (gradual decoupling scenario), this would also result in a loss of prosperity of 1.5 percent of economic output compared to the baseline scenario with intact trade with China. The only difference is that the sharp economic slump would be avoided in the first few months and years.
The IfW economists have considered the major difference from other past crises. Unlike the effects of the pandemic, where a quick recovery was possible, decoupling from China would still result in a loss of prosperity in the medium and long term, i.e., after four to five years. And the prerequisite for this would be that the German economy had adjusted to the new reality and established alternative trade relations.
These figures generally refer to the reference value for the respective year in a scenario with unaffected trade with China. Only the sharp economic slump in the first few months and years would be avoided. In this case, the loss of prosperity would materialize gradually.
Oertel also rejects the widespread mindset in the industry: Ignoring decoupling scenarios because they are associated with the catastrophic scenario of a Chinese invasion of Taiwan. The need to prepare for decoupling is often brushed aside by claiming that the military impact of such a war would be so far-reaching that the world would be completely different anyway.
At the IfW event, experts certainly presented future scenarios where practical decoupling takes place without the whole world sinking into war. Oertel advocates realistically calculating such scenarios and including them in risk models.
Despite different methodologies, the calculations are largely in line with studies conducted by the ifo Institute in Munich in 2022, which found that a mutual decoupling between the EU and China would result in a 0.81 percent drop in Germany’s GDP.
The ifo Institute additionally calculated the cost of relocating industrial production back to Germany or neighboring countries in the wake of decoupling from China. In such a case, the German GDP would fall by almost ten percent.
However, the ifo Institute took a much more focused look at individual sectors. The biggest loser would be Germany’s automotive industry. Here, there would be a loss in value added of around 8.5 percent or 8.3 billion US dollars. Companies manufacturing transport equipment (down 1.5 billion US dollars) and mechanical engineering companies (down 5.2 billion US dollars) would also be severely hit.
The researchers of the current IfW analysis also emphasize that any kind of decoupling would harm China: “In all simulated scenarios, the costs for China in relation to its size of the economy are significantly higher than for Germany, namely by around 60 percent.”
During the discussion, Merics Director Mikko Huotari pointed out that the political course of the US will be crucial for trade relations with China. And the signs are pointing to more conflict with Beijing.
Germany and Europe are unable to elude this, warns Huotari. Goods rejected by the United States flow to Europe all the more cheaply. This reignites the discussion about trade and imbalances in the exchange of goods in the EU. “We are approaching a phase of trade policy disputes with China,” fears the China expert.
The controversy surrounding Xinjiang has once again caught up with Volkswagen. Most recently, employees of the German consulting firm that conducted the audit at the VW plant in Urumqi have publicly distanced themselves from the technical audit. In a statement on the online platform LinkedIn, they declared that no one apart from two members of the board had “participated in, supported or backed this project.” Several of the 20 employees also issued individual statements stating: “I have not supported the acceptance of this project, nor have I been involved in it in any capacity.”
About two weeks ago, Volkswagen announced that a special audit had found no evidence of labor rights problems at its plant in Urumqi. The accusation that the car manufacturer could be profiting from the Chinese government’s human rights crimes against the Uyghurs was off the table – at least that was the hope. However, problems with inspections in a non-transparent system are now catching up with the company. Thursday’s agreement by the EU on a strict supply chain law shows just how important effective screening of supply chains will be in the future.
The consultancy firm Loening – Human Rights and Responsible Business was founded by the former Human Rights Commissioner of the German government, Markus Loening. In response to the rebellion of his employees, Loening said: “As you can see, we are a lively and committed team with a broad spectrum of views. He continues to stand by the results of the study, which found no evidence of forced labor at VW.
But the dilemma is obvious. In an interview with the Financial Times, Loening admitted that it is practically impossible for the Uyghurs in Xinjiang to report human rights violations: “Even if they would be aware of something, they cannot say that in an interview,” adding that the risk of being targeted by the security police is too great.
On the day the audit was published, Loening was already visibly uneasy about the perception of the project. He pointed out that his staff were only able to investigate the factory premises. They did not investigate suppliers or the political and social environment in Xinjiang.
The nature of the inspection itself had already left many questions unanswered. “The validity of the audit cannot be verified at all,” says Tilman Massa from the umbrella organization of the Association of Ethical Shareholders. After all, the auditing firm had admitted to “problems with the data collection”, but did not specify them. “Volkswagen cannot simply pretend that these problems are well known, but must clearly name them. We cannot recognize an audit as an effective measure with such deficits,” says Massa, who will ask Volkswagen for further comments this week.
What interests the Ethical Shareholders and other investors are the circumstances under which the auditors came to their conclusions. Loening was certainly unable to prepare and conduct the review independently but had to rely on the assistance of a law firm from Shenzhen. The Chinese Ministry of Commerce was also involved in the process, as a company spokesperson confirmed to Table.Media.
The decision on whether the plant audit was actually carried out ultimately lay with Volkswagen’s partner company SAIC. The state-owned car manufacturer has the final say in the joint venture. This has been laid down in the contracts between the two manufacturers for decades.
The company says it is aware of the “circumstances” in Xinjiang. But it can only feel responsible where it has influence – at least at its own plant in Xinjiang. The company firmly believes that it cannot be expected to achieve something that global politics is not capable of – to convince China to see reason. That is why Volkswagen sees itself more as a projection screen of non-governmental organizations that focus their agenda on companies like Volkswagen because it generates a lot of attention.
Massa, whose association represents investors holding shares in the company, believes this accusation is unjustified. Volkswagen’s decision to approve the construction of the plant in Xinjiang is suspected of being a “political decision.” “Nobody expects the impossible from Volkswagen. But the company must at least live up to its own statements and announcements,” demands Massa.
One of these is that human rights are not negotiable for Volkswagen. Chief Legal Counsel Manfred Doess emphasized that Volkswagen would continue to investigate reports of human rights violations. “If there are any suspicions or indications, we will investigate them,” he said. However, while the company acknowledges the circumstances in Xinjiang as part of the audit, Doess apparently feels that his information demands have already been satisfied by a superficially clean audit. The Ethical Shareholders see this as a contradiction.
Hallam University in Sheffield also noted this last year, which startled various supplier segments in the automotive industry, partly because the sustainability of foreign companies’ supply chains cannot be reliably verified. Nothing has happened since. No manufacturer seemed to feel responsible, not even Volkswagen. They felt that it only concerned companies with which they had no contractual relationship.
Behind the scenes, VW employees are now openly expressing their moral concerns. However, they also say that the plant cannot be closed before the contract expires in 2029. In fact, Volkswagen’s fear of the Chinese government will most likely gain the upper hand: After all, VW’s withdrawal from Xinjiang would represent a major loss of face for Beijing. And this would certainly result in economic retaliation. Marcel Grzanna/Fabian Kretschmer
The EU Parliament, Council, and Commission have reached a provisional agreement in the negotiations on the EU Due Diligence and Duty of Care Act (CSDDD). At another long trilogue meeting on Wednesday night, they were able to find compromises on the last contentious issues: Under pressure from the Council, the financial sector will initially be exempted from the obligations; the Parliament was again able to assert itself with regard to liability and the obligation to implement climate plans.
“This law is a historic breakthrough”, said EP rapporteur Lara Wolters on Thursday morning. She recalled the collapse of the Rana Plaza textile factory in Bangladesh in 2013: Ten years later, companies are now responsible for possible abuses in their value chain. “May this agreement be a tribute to the victims of this disaster and a starting point for shaping the economy of the future – an economy that puts the well-being of people and the planet above profits and short-sightedness“.
The CSDDD is similar in structure to the German Supply Chain Duty of Care Act (LkSG), but goes significantly further: while around 3,000 companies in Germany must report under the LkSG, there will be around 15,000 under the CSDDD. The CSDDD also focuses not only on direct suppliers like the LkSG, but also covers both the upstream value chain (such as the extraction of raw materials) and, in some cases, the downstream chain (use, recycling, disposal).
The most important results of the negotiations:
Several industry associations called on the Council and Parliament to reject the law in the upcoming votes. Thilo Brodtmann, Managing Director of the German Engineering Federation (VDMA), used drastic words: “With today’s agreement in the trilogue for a European supply chain law, the EU is delivering the next nail in the coffin for the international competitiveness of European industry“. The law is one in a long line of bureaucratic excesses from Brussels that will have to be shouldered by medium-sized industrial companies. There is no trace of the announcement that European companies would be relieved of 25 percent of bureaucratic obligations.
Tanja Gönner, Managing Director of the Federation of German Industries (BDI), expressed a similar view: the final text of the law threatens the competitiveness, security of supply, and diversification of the European economy, “as companies could withdraw from important third countries due to legally uncertain provisions and the resulting threat of sanctions and liability risks”. This would not benefit human rights and the environment, but harm them.
Researchers and experts from the academic world see things differently: “German companies that make a serious and conscientious effort to implement their obligations under the Supply Chain Act (…) have little to fear,” commented Markus Krajewski, Professor of Public Law and International Law at the University of Erlangen-Nuremberg. “On the contrary, the directive only has advantages for them: they have already adapted to the new rules and will no longer experience any distortions of competition“.
It will now be important for companies to take a strategic view of due diligence, explained Julia Hartmann, Professor of Management and Sustainability at EBS University in Oestrich-Winkel: “The protection of human rights is of increasing importance for corporate reputation worldwide”. In addition, companies that maintain close relationships with suppliers and transparent supply chains are much more resilient to crises. This could become a decisive factor.
Civil society sharply criticized the exception for the financial sector. The reactions were otherwise very positive: The “Supply Chain Act Initiative” spoke of a “milestone for the protection of people and the environment in global supply chains“. For example, the position of those affected in court would be improved, explained coordinator Johanna Kusch: “Unlike the German Supply Chain Act, it provides for civil liability if companies violate their due diligence obligations”.
The next steps are for the Council and Parliament to formally adopt the agreement. The law will then enter into force. As this is a directive, it is only binding once it has been transposed into national law. According to information from Table.Media, it is expected to take around two years for implementation in Parliament. The LkSG will therefore continue to apply in Germany, but adjustments will be necessary.
For her latest photo project, Julia Hofmann took photos with her analog camera in Berlin and then rolled up the films again. She then exposed the films a second time in Beijing. This double exposure creates a superimposition – an abstract image with different levels of meaning. For example, the roof of an old Beijing house merges with the train tracks of a Berlin metro station. In another photo, the facades of old buildings in Berlin blend into the gray stone walls of Beijing’s hutongs. Photography is a way of reflecting and expressing feelings and moods, says Hofman. Her life also has these two layers: China and Germany.
Even as a child, Hofmann felt strangely drawn to China. Books and films made her believe that the Chinese were very quiet, introverted and reserved, just like her. Although this is not entirely true, China has still become her second home. Julia Hofmann founded one of Beijing’s best-known cafés, Café Zarah.
After graduating, Hofmann decided against studying photography and opted for sinology and tibetology in Leipzig. After the fourth semester, she traveled to the People’s Republic for the first time, studying in Lanzhou and then in Nanning. Once she had finished her studies in Germany, she went straight back to China, but this time, it was a one-way ticket. She planned to stay for good.
In Beijing, she had secured an internship in the then-still-unknown artists’ quarter of Dashanzi at an art gallery owned by a German. That was in 2005, the year she met her partner Zhanglin. He was active as a DJ in Beijing’s fledgling music scene.
It was a time of upheaval in China, which could be felt particularly among the country’s youth. Hofmann felt reminded of Leipzig: She enjoyed the unfinished aspect of Beijing, everything here was not as settled and entrenched as she was used to from her home in southern Germany. Beijing felt as if everyone just wanted to move on and create something new. Art galleries were being opened, small bands were playing in scruffy clubs, young people were setting up small, cozy cafés and boutiques.
Hofmann often went out for coffee with Zhanglin, the DJ. But good coffee was still hard to come by in Beijing then. The pair quickly came up with an idea that had been on Hofmann’s mind since her university days: opening her own café. Café Zarah had no concept, let alone a business plan. The two rented a vacant beauty salon across from their apartment and got started. That was just the way it was in Beijing back then, says Hofmann. Just starting something without giving it much thought.
They quickly found workers in the neighborhood to renovate the rooms. The couple bought furniture at furniture markets and Ikea. In the meantime, Julia Hofmann started studying graphic design and was able to live out her passion for design to the full. Finally, all they needed was the most important thing: a large, red Italian coffee machine, which neither of them knew how to use. The person who sold the machine gave them a quick crash course, and Café Zarah was ready to open.
Café Zarah is now more than 15 years old and was expanded a few years ago. It is still cozy, with its old wooden struts, the large, red-framed front window facing the street and the wooden furniture. Guests spend their mornings here enjoying a coffee, working for a few hours or sitting with friends in front of the café on the street. However, Café Zarah is particularly popular at breakfast time.
In China, breakfast tends to be something you take to go. But Hofmann wanted to offer a cozy German breakfast and became a hotspot for the German community – word quickly spread about the new breakfast spot and the Café was packed on weekends.
Café Zarah also offered music, with Zhanglin playing regularly. Two communities quickly came together here: the – predominantly German – expat community and the Chinese music and DJ scene. Parties were also held, many of them in the café, some of them “Ciqi parties,” as Julia and Zhanglin called them. In the Beijing dialect, ciqi means close friendship. Café Zarah guests traveled together to a beach in the north, where they celebrated and camped out.
Hofmann now lives in Germany with her partner and daughter, where they continue to run the café. She also works as a graphic designer for German and international clients, including Chinese clients, and as a photographer.
She and her partner Zhanglin try to spend a long time in China every year and often spend time in their café. Hofmann says she needs to be able to look at Germany from the outside every now and then because it always puts everything in a new perspective and keeps her flexible. She likes the peace and quiet that Germany provides. But she also misses the little alleyways of the hutongs, where the elderly sit on the street chatting and life flows by. It is like in her photos: They are only complete on both layers. Julia Fiedler
Packing the bags… with lots of bamboo! In January, two-year-old panda Lele will head to China, but first, he has to go into quarantine for a few weeks. That is why Lele has now made his last public appearance at Singapore’s River Wonders Park. More than 1,000 visitors said goodbye to the photogenic bear. Lele is the first panda to be born in Singapore. For him, the trip to China also means being separated from his parents, who are expected to follow in 2027. This is when their 15-year stay as part of panda diplomacy ends.
