A Viewpoint for the Future Markets Consultation

As part of the Future Markets Consultation, individuals and organizations are invited to submit a viewpoint on any topic that is of relevance for creating a more just and sustainable market economy in Europe. This is a viewpoint submitted by Jacob van der Duijn Schouten and Jacoline de Kruijf on behalf of the Dutch NGO Woord and Daad.

Transparency in the chain, for some companies this is their mission, but for many companies it is a complicated matter. While in developing countries, where many raw materials and/or products come from, there is a high risk of human rights violations. Understanding the chain is an important step towards transparency. To achieve this, we believe legislation is necessary.

Transparency in the value chain

In order to gain insight into what all links in the chain are doing, a change of mindset is needed. Many Dutch companies do not know where and how their international partners extract or produce raw materials and whether they pay their suppliers a fair price. Every now and then, there are reports in the media of examples of child labor or other degrading working conditions. And to think that these examples are just the tip of the iceberg. Many companies settle for an anonymous market. There is then a strong risk of human rights violations or environmental pollution somewhere in the chain. And we can’t close our eyes to that, can we?

ICSR covenants

If an internationally operating company want to gain insight into the way of working within the supply chain, time, money and personnel needs to be made available for this. Because the Dutch government wants to support and stimulate front runners, it has established covenants for International Corporate Social Responsibility (ICSR). With the ICSR covenants, the government facilitates voluntary cooperation to let companies do business in a socially responsible way. Together with the government, development organizations and trade unions, the food sector will tackle risks in international production chains. Dutch NGO Woord en Daad participates in the Food Covenant and we notice that real steps are being taken, but unfortunately, we also have to conclude that things are not going fast enough. Despite growing awareness among companies of the need to make risks transparent in the supply chain, it is still far too little applied in practice and is not a priority for many companies. There are certainly companies that give ICSR a place in the organization, but these are exceptions and the differences are large.

Legislation

In order to get more transparency in the chain and promote sustainable trade, more is needed than a voluntary framework. All companies must assess the risks of their business activities on issues such as human rights, working conditions, environment and corruption throughout the supply chain. This so-called ‘due diligence’ identifies the risks in the chain and possible abuses. Legislation can ensure that companies do not run away from these abuses. That is why it is now up to the government, in addition to voluntary cooperation within the covenants, to switch to legislation and to the obligation to identify risks and possible abuses.

System change

System change is necessary to prevent abuses in the chain. The government should play a major role in this. But system change will not work if not all parties are involved. It is an ongoing process in which commitment is expected from all parties. It is needed to make a step towards an economy where transparency in the chain is a matter of course. Inclusive, sustainable chains should be the ‘new normal’. It is our strong conviction that every human being has the right to decent work and a living, fair wage. In the projects of Woord en Daad we work together with farmers to grow their products in a sustainable way, so that the first step towards sustainability can be taken here. If, in addition, companies take their responsibility and identify possible abuses and risks and make efforts to stop them, the next battle can be made. As part of system change, government regulation by means of legislation is also an important step in making the chain more sustainable. If there is transparency in the chain and we identify risks and potential abuses, we can work together to find solutions.

In practice

A good example in which Woord en Daad works together with companies is the Dutch company Nuts2, a company that focuses on local socio-economic development. The raw cashew nuts are bought from the farmers and processed in local factories, and then the peeled cashew nuts are sold to the global food industry. That’s in a nutshell how this company works to make the chain more sustainable. Driven to improve the standard of living of farmers and factory workers, this company offers farmers in Africa access to the global market at a fair price. This contributes to local economic development, through both locally created jobs and local processing companies in Africa. Despite all these efforts by Nuts2, this chain is not yet 100% sustainable, but progress is certainly being made. With Incluvest as co-investor in local processing plants and Woord en Daad as trainer of the farmers, we are working hard on transparency and sustainability. This applies to about 2% of the cashew chain, so there is still a long way to go in this chain.

A second example. Fair Fruit, a company that imports beans, pulses and Brussels sprouts from Central American and African farmers, has been working with Woord en Daad for a number of years now on IMVO projects for which the National Office for Entrepreneurship in the Netherlands (RVO) provides subsidies. Such as the Every Bean Has Its Black project, which helps small farmers in Guatemala to make their production process more sustainable and to get a fair compensation for their cultivation. The switch to organic cultivation required some adjustments. The adaptations were successful. In the same season, the part of the field where the farmers worked organically produced 30% more beans than the part where they farmed in the traditional way. A significant improvement in the harvest that also paid off to the farmer. The project focuses not only on the contracted farmers, but also on raising awareness about sustainable production among the larger exporters in Guatemala and customers in Europe. That is why the NGOs in the consortium (including Woord en Daad) support the project to improve the quality and quantity of the targeted vegetables.

Finally, Woord en Daad is also committed to poverty alleviation in other countries, such as Sierra Leone. Together with investors, they are working on local food production and processing to make Sierra Leone self-sufficient in rice production again. This will improve the living conditions of the rice farmers and the factory will provide dozens of jobs to local residents. With these factories, which allow farmers to earn an honest living, it is possible to build a future for the farmers, their families and the village.

Time for action

You cannot be successful as a company without being aware of the world around you. The reason that human rights are violated and a lot of environmental damage is done, has everything to do with profit maximization for many companies. That is why we believe that, as part of system change, the government should come up with legislation. Not because legislation is the only solution. But because legislation is a stick behind the door to encourage all companies to take a step towards a sustainable and transparent chain. That is why Woord en Daad – with years of knowledge of how trade and poverty reduction go hand-in-hand – is committed to influencing policy and lobbying to convince politicians and civil servants to continue to invest in development cooperation and sustainable development worldwide. In addition, Woord en Daad pleads for the spending of funds through civil society in developing countries, because these organizations can be of great added value and can fulfill a key position for people in their environment.

We see that there is an increasingly broad support base for legislation and that there are several political parties moving in that direction. It’s time for action now!