Wageningen Economic Research studied the impact of the new EU sustainability directive CSDD on Dutch agri-food companies. Conclusion: the sector has to work hard to reduce environmental and human rights impacts in the chain. The Due Diligence Dashboard supports companies in this.
Since the end of April, the Corporate Sustainability Due Diligence Directive (CSDDD) has been in force. According to this directive, companies must conduct ongoing research into the social and environmental impact of their own operations, subsidiaries, and direct and indirect business partners. They must also demonstrably take measures to prevent and reduce negative impacts.
Due Diligence Directive
The Corporate Sustainability Due Diligence Directive obliges companies to identify their impact on people, the environment, and society. Companies should be looking not only at their own activities but also at the activities of their chain partners.
Companies at scope must conduct a thorough investigation to identify and tackle risks in the field of human rights, working conditions, environment, and corruption. They must ensure transparency and accountability in their business operations and actively strive for sustainable and responsible practices. As companies also become responsible for impact in the value chain, partners in the chain must also be actively involved in investigating and addressing negative impacts.
Commissioned by the Ministry of LVVN, Wageningen Economic Research investigated the scope and potential impact of this directive on the Dutch agri-food sector. "According to the criteria, 54 Dutch agri-food companies have a reporting obligation, but a much larger group of companies will certainly also have to deal with the directive," says Miriam Vreman, researcher at Wageningen Economic Research. At the European level, the directive applies to nearly 7,000 companies. A much larger group of companies does get indirectly affected by the directive because of their relationship with companies in scope.
Information needed from the chain
Because the directive explicitly assumes chain responsibility, companies without obligation to commit also have to deal with CSDDD, argues Miriam Vreman, a researcher at Wageningen Economic Research: 'The 54 Dutch companies covered by CSDDD need information from companies in their chain. They want to know whether specific operations or specific business partners pose a risk to their sustainable operations.'
As a result, companies outside the scope of CSDDD still have to provide insight into their social and environmental performance. Vreman stresses that it only applies to companies prioritized on the basis of their risk: 'Not all business partners of companies under scope face this obligation.'
For example, will individual farmers be affected? Vreman: 'They certainly could be if there are big social or environmental risks associated with this farmer's operations. Think of carbon emissions, biodiversity loss, or child labor. Then the company in scope may want to address this risk. The idea is that companies under the scope of CSDDD work with other actors to reduce or stop risks. An undesirable outcome would be. An undesirable outcome would be if contracts with chain partners in a risk category are not renewed, without working together to reduce or eliminate risk. In extreme cases, a company in scope can be fined heavily."
'Don't reverse responsibility'
She notes that the CSDD does still leave room for interpretation. An important question, for example, is what is the responsibility of a company that is not itself covered by the directive: 'You can imagine that it would be tempting for a large Dutch agri-food company to place the burden of the directive on subcontractors that are not themselves covered by the legal obligation. That would mean that small and medium-sized entrepreneurs in Africa and Asia, for example, would have to be able to contractually guarantee that there are no human rights issues or environmental impact.'
According to Vreman, this would reverse the responsibility and burden of the law, with far-reaching consequences for large groups of producers around the world. 'While the idea of the law is that precisely the large European companies will take responsibility for impact in their chain. Cooperation with and support for these small entrepreneurs is central in preventing that impact. It would be good if, in the explanatory memorandum to the directive, attention is also given to how companies will be guided in this in the implementation.'
Incidentally, companies are given time. Vreman: 'Once the impact in the chain has been identified, they are allowed to focus on the biggest risks and then show that they are taking steps. There is room to make progress step by step. But companies do need to get started.'
Source: Wageningen University & Research