Supply chains are under the sustainability spotlight with the upcoming Corporate Sustainability Due Diligence Directive (CSDDD). Non-profit Solidaridad explains how to prepare.
“Ingredient companies […] are going to have to partner up and take a proactive approach to due diligence,” says Solidaridad.
Read part one of this article, here.
The European Union’s Corporate Sustainability Due Diligence Directive (CSDDD) will require companies in the food and nutraceutical industries to identify and assess adverse human rights and environmental risks in their supply chains.
The CSDDD establishes obligations for companies to identify, assess, prevent, mitigate, address and remedy actual and potential impacts on people and planet in their upstream supply chain and downstream activities. It places a particular emphasis on disclosures related to pollution and emissions, deforestation and damage to ecosystems and human rights issues such as child labour and forced labour. It also introduces a legally mandated standard for how companies conduct supply chain due diligence.
For many food and nutraceutical companies, this phased enforcement means it will be a while before the legislation is legally binding, but in some ways this is irrelevant, as it requires coordinated supply chain effort.
“There might be ingredient companies who don’t have any legal obligations now, but whose buyers do. Therefore, they are going to have to partner up and take a proactive approach to due diligence,” explained Catarina Vieira, EU policy advisor for Solidaridad, told this publication.
This works both ways in the supply chain, and, addressing food and nutraceutical manufacturers, she said: “The issue might be in your supply chain but the solution might be closer to home. You can’t expect your suppliers to carry the burden of responsibility for fixing any problems that are identified.”
She added: “Companies are going to have to look in the mirror and change their own practices too, whether that means rethinking business models or adopting more responsible purchasing practices.”
On a practical level, Vieira said the good news is that there is plenty of guidance available as this directive has been aligned with international standards that have been around for decades.
“We’re talking here about the UN Guiding Principles on Business and Human Rights and the OECD Principles of Corporate Governance. Both of these instruments are out there already and provide companies with a starting point,” she said.
For many companies, she said the first step would be to look internally and make any changes necessary to enable a shift from a mentality of risk avoidance to one of risk assessment and mitigation.
“Companies should get all teams - sustainability, compliance, procurement, management, etc - on board with what is expected and how things should change. You also need to review your own practices for how they might be driving risks in your supply chains,” she advised.
She said this might include ensuring that business models are not squeezing suppliers on pricing, which could lead to a greater risk of human rights or environmental issues.
Companies also need to drill down into their supply chains, she said.
“I am sure the majority of food and nutraceutical companies are already doing this, but you need to map your supply chains - figure out where you are sourcing from and what kind of risks are there. Talk to your suppliers and to rightsholders to ensure meaningful stakeholder engagement,” she advised.
She added: “You can’t just do this as a desk exercise in Europe - you need to go out there and speak to those who are affected by human rights and environmental impacts and get their input on what the risks are, how you should prioritise as a company, and what kind of solutions you can work on together.”
