That was the question posed by Rob Kooijmans – founder of AI-assisted documentation validation platform Valid8Food – as moderator of the ‘Successful sustainability strategies: CSDDD and beyond’ panel session at Fi Europe’s conference in Frankfurt this year.
Exploring the EU’s incoming Corporate Sustainability Due Diligence Directive (CSDDD) and how businesses within scope as well as suppliers along the supply chain can prepare, the panel discussion included Nicolas Carbonnelle, partner at law firm Bird & Bird, alongside Heleen Blesgraaf, corporate engagement and partnerships manager at international sustainability NGO Solidaridad.
Partnering to address supply chain challenges
Blesgraaf, whose organisation works in 50 countries to improve social and environmental conditions across various commodity supply chains, highlighted Netherlands-based Tony’s Chocolony as “an example of best practice” in cocoa – a sector beset with challenges, from deforestation, to child labour, and low wages. “Their sourcing principles play into everything that needs to happen for due diligence…paying a fair price, long-term contracts, supporting farmers, also looking at quality,” and giving farmers “additional premiums” for producing cocoa sustainably, she enthused.
The Solidaridad executive also praised the company’s openness and efforts to address persistent problems like child labour, in partnership with farming co-operatives. “It’s not about having a fully clean supply chain – it’s being transparent about the risk, having plans, and working in partnership to address those risks.”
Elsewhere, Blesgraaf highlighted Rabobank’s technology platform Acorn, which empowers smallholder farmers to turn the tide of climate change through advanced agroforestry, tracking technology, and carbon offsetting, while enabling them to increase their productivity and income, including through the cultivation of shade-grown coffee. “We see [Acorn] used for offsetting, but one of the best practices is to support farmers within your own supply chain, to implement agroforestry, and to connect with Acorn, because then it all comes together.”
The panel agreed it would be paramount for companies to take a proactive approach and collaborate with players throughout (and beyond) their supply chain when it came to fulfilling CSDDD requirements, while Bird & Bird’s Carbonnelle stressed that the European Commission’s “upcoming guidance” would be “of key importance” to translate the ambition of the new legislation as a ‘level playing field’ into the operations of businesses.
Risk of disengagement and pushing responsibility upstream
While the CSDDD is clearly a progressive legal framework for improving environmental and human rights conditions, there were potential risks for smallholder farmers, given their role both as “economic actors” (responsible for protecting human rights and producing in a sustainable way), and as “rights holders” (and thus, “a target group whose rights should be respected” under the new Directive), said Solidaridad’s Blesgraaf. To exemplify this duality, she pointed to the “severe poverty amongst producers of cocoa and coffee,” but also to “the challenges of deforestation and child labour within such supply chains”.
The “worst thing” companies can do within this context is to “disengage” with such actors, warned Blesgraaf. “There’s a risk that companies rearrange their value chains, and [non-compliant] suppliers are simply removed. You can imagine [the] consequences [on]… communities where this is the main source of income.”
Another major risk is that the onus to comply with CSDDD could simply be pushed up the supply chain, to smallholder farmers “working in an environment with a lack of access to finance, and with weak institutions,” said Blesgraaf. “It’s very hard to talk about sustainability without looking into prices and the effects of procurement practices: Can farmers count on selling to you for the longer term for a guaranteed price – or a minimum price – so they can invest in sustainability? These things need to be taken into account.”
She warned CSDDD risked becoming a box-ticking exercise: “Retailers and companies need to understand…it’s not about putting more requirements on farmers – it’s about…going through the whole supply chain and co-operating to improve the situation to mitigate those risks.”
Longer-term contracts = longer-term partnerships
The shift of corporate sustainability from voluntary to mandatory represents “a big opportunity” for smallholder farmers to see their human rights respected – if the spirit of the Directive shines through. “Companies will need to install grievance mechanisms, so that if things are going wrong smallholder farmers have the processes in place to make themselves heard,” advised the Solidaridad executive, adding she hoped the main positive outcome would be for the Directive to “lead to improved purchasing practices…It’s about price, but it’s also about longer-term contracts,” she stressed, adding this would enable smallholder farmers to “plan ahead” and “invest in sustainability”.
Longer-term contracts equal longer-term partnerships, which also makes sense from an operational perspective, asserted Blesgraaf: Rather than having to “carry out risk assessments time and time again” with new suppliers, “if you have a longer-term partnership, you will be able to build this together and mitigate risk together.”
CSDDD is not about mitigating all risks within your supply chain, and nor is that possible, she stated. “It’s about looking at the main risks, the most severe risks, and your sphere of influence”, being “transparent”, creating “action plans with measurable targets” and then co-operating on it.
The CSDDD must be enshrined in national law by all EU member states by July 2026, becoming applicable one year later for the largest organisations within scope (companies with €1.5bn+ turnover worldwide, and over 5,000 employees), tapering down to smaller entities in the years thereafter, until 2029 when firms with more than 1,000 employees and €450m+ turnover will see their obligations kick in. Approximately 6,000 companies within Europe, and around 900 outside of the bloc, will fall within scope of the new Directive, said Carbonnelle.