Adopted on 23 February 2022, the proposed Directive on Corporate Sustainability Due Diligence seeks primarily to require large companies to implement sustainable and responsible corporate practices, built around a shared understanding of and respect for human rights and environmental considerations.
The rules will ensure that businesses take responsibility for the consequences of their actions, both directly, and more broadly, across the entirety of the value chain.
We asked some nutraceutical industry stakeholders what they thought of the proposed regulation.
Maria Pavlidou, partner and senior strategy consultant at the Healthy Marketing Team (HMT):
How might this regulation impact consumer perception of the nutraceutical, supplement and healthy food industry?
“The first thing to consider is: will this Directive be meaningful for consumers and how? As an industry, of course it feels important and has many implications on the business side of things, but what will it really mean (if anything) to consumers? Is there an education component or is it just a legal [or] regulatory obligation that companies will have? It will depend so much on the execution.
“Ideally the new Directive should be implemented in a way that is meaningful to consumers. They will need to be explicitly told why it is important. If they don’t know about it, they will not get it.
“It can end up being a ‘silent’ change and really miss an opportunity to advance sustainability topics and bring them forward, closer to the mass market.”
Could there be any other potential impact of the regulation with regard to marketing?
“With the new Directive, sustainability will become a hygiene factor since all brands will be obligated to deliver on this front. It won’t be a differentiator anymore for those brands who decide to communicate about it.
“The opportunity is for the ones who decide to lead the front in education and authentically engage with their communities in a transparent way. Emotional and authentic connections from brands with a strong purpose, who are not simply fulfilling their regulatory obligations, will always be the winner.”
Len Monheit, CEO of the Industry Transparency Center and trade association, the Collagen Stewardship Alliance:
Does your association welcome this Directive?
“We certainly support this initiative in principle, and the premise behind this Directive - to gather data, to allow benchmarking, identify risks, build resilience, pressure supply chain partners and to ultimately change behaviour - these are all also pragmatic business decisions. We also support the fact that this will drive transparency, will call out greenwashing and drive better and broader accountability in this area.
“As with many Directives, it is the practical application that really counts. Some concerns we have are even expressed in the Directive and must be navigated, including treatment of SMEs as well as the global supply chain and treatment of companies and regions not part of the EU harmonisation process. In addition, while current standards, goals and benchmarks already exist (such as the UN [Sustainable Development Goals] SDGs), terminology and definitions have either been inconsistent, abstract or difficult to implement in unique business environments with unique starting points and challenges.”
What steps should companies be taking in response to this Directive?
“The first step is awareness, the next is benchmarking - no matter the size of the company. With the first, it would seem that a lexicon is needed, followed by an assessment of key staff understanding of role implications relating to the Directive.
“With the second, metrics (as standardised and harmonised across supply chains as possible) are required, followed by baseline analysis. As noted, many companies are well beyond this baseline, but still a common lexicon and a set of metrics needs to be built.”
Dilip Ghosh, director, Nutriconnect, food-nutrition and natural medicine consultant:
What are the implications of this Directive for the nutraceutical sector?
“Mostly large companies will get advantages in the short-term by deploying due diligence processes which are hugely expensive.
“The ramifications on energy use, supply chains, agriculture, packaging, product claims, ingredients, and labour are vast, and will be a huge financial and technological burden to small to medium industries.
“There should be option for small and medium size industries to be able to adhere to reporting standards on a voluntary basis
“[The Directive should bring about] better management of non-EU companies operating in the internal market and a higher level of financial and logistic support from local governments or the European Union.”
What steps should companies be taking in response to this Directive?
“Companies need a globally harmonised definition of environmental, social and governance (ESG), which is lacking at this stage. Oftentimes today, sustainability isn’t considered during the initial R&D phase of product development, but this has to be included now.
“Across the nutrition and dietary supplement industry, a rising number of consumers are making purchasing decisions based on products’ ethical and sustainable credentials. Companies should respect this consumer attitude and respond accordingly.”
