BERLIN: Germany on Wednesday took a step towards forcing companies to take responsibility for any labour or environmental abuses in their global supply chain, with a new law that allows for fines worth millions of euros.

The law was spurred on by a deadly fire in a textile factory in Pakistan and a devastating dam collapse at a Brazilian iron ore mine that killed more than 250 people — both of which had links to German companies.

In a bid to prevent repeats of such workplace disasters, Chancellor Angela Merkel’s cabinet agreed on the new rule which provides for companies with annual revenues of 400 million euros ($484 million) or more to be fined up to two percent of that amount if their contractors abroad are found to breach human rights or environmental rules.

Companies could also be excluded from public procurement processes in case of violations, the government agreed, at a time when allegations are also ratcheting up over Uighur forced labour in China.

“This law protects workers from exploitation across sprawling supply chains and protects human rights across the world,” Finance Minister Olaf Scholz said Wednesday. “In future, it will be clear that ‘Made in Germany’ also means respect for human rights,” he added.

The so-called Lieferkettengesetz — meaning “supply chain law” — obliges companies to track workers’ rights and environmental standards, not just in their own structures but also at their sub-contractors or suppliers at home and abroad. Companies will have to verify possible standards violations in their supply chain and take corrective measures. “If you make profits globally, you should also take responsibility for global human rights,” said Labour Minister Hubertus Heil on Wednesday.

Though businesses will not be made systematically liable for any shortcomings, NGOs and trade unions will be able to bring lawsuits against German companies on behalf of foreign workers. This would give workers “in Bangladesh or the Congo a fair chance to defend their rights”, said Heil.