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The dark side of e-cars

Over the last five years, various countries in the EU have been trying to make the entire value chain of a production compatible with human rights and environmental protection. In March 2021, the European Parliament agreed to a report to require due diligence also for companies with less than 1000 employees. This is seen as an invitation to the EU Commission to draft a corresponding law.

The aim is to ban goods from the European market that have been produced with forced labour. Goods and raw materials from China and Africa are particularly affected. The raw material cobalt, which is found in the vast majority of lithium batteries, is also affected. Half of the raw material is found in Congo's soil, where it is often extracted using child labour. And so it is easy to calculate that there are many electric cars on our roads that are only running thanks to child labour.

In the middle of the year, a supply chain law was passed in the Bundestag. From 1 January 2023, every company with more than 1000 workers must comply with this law. One year later, those with fewer workers must also apply the law.

But the consequences do not seem to have really penetrated to the companies. The law firm GvW has calculated that about 46 per cent will have problems with their supply chain because their suppliers do not comply with human rights or environmental standards. But only a few are aware of this. More than 70 per cent assume that there is only a low to medium risk for them. This is astonishing, because every third company has more than 100 suppliers, many even up to 1000. In the garment industry, the average number of suppliers is 146.

Enforcement and auditing of the law is not easy either. Almost 60 per cent of companies do business with China and it is questionable whether Chinese companies will allow themselves to be put under so much pressure by a law in Europe that they suddenly concede human rights to their employees. Penalties for companies that do not keep an eye on their supply chains can go as high as two percent of turnover.

However, the biggest challenge is yet to come, in 2024, when the European Commission adopts a directive providing for civil liability for due diligence violations. It will also be exciting to see how much people are actually willing to pay much more for a product. After all, it is consistently more expensive to comply with human rights and environmental standards. The market for e-cars could also change, especially since the question is whether the targeted goal of phasing out the combustion engine and promoting the sale of e-cars can still be met.