To Achieve Sustainability Due Diligence can’t Just be Mandatory

Following the webinar on inclusive due diligence, on March 10th, CSR Europe and Levin Sources have launched a joint blog series on how to pursue progressive, inclusive due diligence. This month’s installment is brought to us by Isaac Gyamfi, Regional Director of Solidaridad West Africa, and Gert van der Bijl, Senior EU Policy Advisor of Solidaridad, and focus on progressive inclusive due diligence as a pathway to sustainable supply chains.

The authors are part of the Solidaridad Network, an international civil society organization with offices across the developing world and over 50 years of experience in working across the globe to create sustainable and equitable supply chains.

**Isaac Gyamfi**

*Regional Director of Solidaridad West Africa*

**Gert van der Bijl**

*Senior EU Policy Advisor of Solidaridad*

The European Union’s move towards legislation on due diligence in supply chains is an important step towards the creation of sustainable international trade. However, as remarked by Paul Nemitz, Principal Advisor in the Directorate-General for Justice and Consumers of the European Commission, “law expresses the will, not all the nitty-gritty”. The EU’s role, in this sense, is to set an agenda, a vision, and not to fill in all the details of how a policy can work. That work is better left to those at the heart of the problem, he suggested during his presentation at CSR Europe’s webinar on Inclusive Due Diligence.

Presenting at a CSR Europe event on Inclusive Due Diligence, Nemitz’s statement related to the EU’s move towards legislation on due diligence in supply chains, an important step in creating sustainable international trade. Bringing together EU officials, experts from companies such as Volkswagen, Trafigura, and Levin Sources, as well as representatives from civil society, such as ourselves at Solidaridad, this event was geared towards the problem: how can you make new due diligence legislation effective.

We attended the event representing the Solidaridad Network, an international civil society organization with a history working across the globe to create sustainable and equitable supply chains. With offices across the developing world, and over 50 years of experience we also know that voluntary approaches are not enough and that the EU’s due diligence framework may provide an important corner piece to the puzzle of sustainable trade. But mandatory frameworks are nothing in isolation, and as Nemitz acknowledged, it will take the active participation of producers, national regulators, international market regulators, and a broad range of civic society to fill in the blanks. But therein lies the problem: not all partners needed are on equal footing. Producers, particularly smallholder farmers and workers, are often the weakest link in supply chains, and will not always be able to adapt quickly enough to reach ambitious new targets or standards set externally. As a result, they risk exclusion from the new frameworks. This will not only slow progress towards sustainability but will also deepen inequalities, leaving farmers and workers close to poverty around the globe, not to mention the potential for civil upheavals.

Nothing to lose, everything to gain.

This is not just a matter of leaving producers and workers behind. If producers are unable to keep up with a new regulation, they will, as said by James Nicholson, Head of Corporate Responsibility Trafigura, “have nothing to lose and everything to gain”. In essence, they will continue to rely on unsustainable practices, selling on the many available and unregulated markets. In practice, such a form of due diligence could make European supply chains clean, while in fact worsening the sustainability situation globally. Especially if companies take a blunt approach to cleansing their own supply chains.

The history of certification gives some insight into this real risk.

The Roundtable on Sustainable Palm Oil, a robust and important pathbreaker in voluntary certification, has been working on improving Smallholder Inclusivity. However, it has proven extremely difficult to be inclusive and provide assurance on a broad range of issues in production landscapes with many small farmers. This is not from a lack of trying. The thing is that the unique challenges of small producers, and a variety of locally specific issues, make it difficult to include smallholders. Certification was no silver bullet to solve sustainability problems in the palm oil sector, and regulatory frameworks won’t be for the other beasts of unsustainability.

If regulatory frameworks are to be effective and increase sustainability, they will have to pay attention to smallholder producers and the marginalized, those whose ability to meet new standards are most curtailed by their financial and social-cultural contexts.

The real risk of unintended consequences of this legislation begs the question: how can the EU’s regulatory framework be shaped to improve the livelihoods of the most vulnerable actors in the supply chain, while still achieving sustainability targets? How can we prevent excluding those most crucial to the solution? For that the EU will need a robust and agile piece of legislation, that is not just mandatory, but also inclusive and progressive.

Mandatory Progressive Inclusive Due Diligence: The Nitty-Gritty

What does it mean for a framework to be progressive and inclusive? At its heart, a progressive and inclusive framework will ensure that due diligence legislation does not shoulder producers with the costs of compliance or force those already in a weak position out of the supply chain altogether.

This is about setting a high bar but keeping producers and workers within the system by emphasizing continuous improvement towards this ultimate goal through a series of intermediary steps, agreed between the producers and local authorities as achievable within an agreed timeline. This is not a phased approach. Instead, it is a realistic, gradual approach that is ambitious and aimed towards a significant ultimate goal, while respecting the realities faced by each supply chain actor. This means that companies and organizations representing smallholders have to engage in a structured dialogue to co-develop common goals, to make sure that unattainable standards are not set for them, and the onus for change is shared amongst all those involved and jointly monitored.

For such an approach to work, the active participation of regulators at the national and international levels will be a necessity. Defining progressive levels and systems that allow for the fair monitoring of progress will also be essential. At the same time, capacities for such tasks will have to be developed in-house for regulators, corporations, and even producer organizations, to ensure that they can actually take part in this bold push towards sustainability. This is very much getting into the nitty-gritty, but it is exactly this nitty-gritty detail, and far more of it, that it will take to create a mandatory due diligence framework that is both inclusive and progressive.

So why the extra effort?

Because by creating a framework that adapts and specifies for local contexts and financial realities, the EU will not just be cleaning European supply chains. They will be helping producers around the world to produce in balance with nature, reducing the negative impacts of global trade and improving livelihoods, all the while supporting peace and stability.

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