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Opinion and Comment

We Must Take Action Before the Situation Makes That Impossible

Interview: Caspar Dohmen, Journalist

In global supply chains, human rights violations continue to occur. Nina Elomaa, who is responsible for CSR at the Finnish Fazer Group, and Filip Gregor, Chair of the European Coalition for Corporate Justice, both advocate binding EU due diligence standards to improve the situation in producing countries.

BIO

Why are there still modern slavery, child labour, starvation wages and other human rights violations in the supply chains of European companies?

Gregor: Supply chains have become longer, making companies more susceptible to such risks.

Elomaa: This has much to do with systemic problems in the countries where European companies buy raw materials or produce products. But companies may also be focussing too much on monitoring rather than on addressing causes of the problems. It goes without saying that you have to check whether child labour is being used. But we will only eliminate child labour if we end the poverty that forces parents to make their children work.

Gregor: Some companies are genuinely trying to address these problems on a voluntary basis, while others are content to benefit from lax environmental and social standards by locating production far away from Europe. As long as this is the case, problems such as child labour, forced labour or deforestation will remain unsolved as a whole.

Many globally active companies have long acknowledged their responsibility to practice business in a sustainable fashion. What have voluntary approaches done for the people who produce our cocoa, textiles and smartphones for us?

Gregor: Nobody knows exactly because nobody keeps track of the results systematically. In some cases, companies have improved the situation with their local activities. There is also more discussion of the problems in the countries where production takes place, which is positive. But on the whole, voluntary approaches have not solved the problems. Look at deforestation in Southeast Asia due to the cultivation of palm oil. Despite various programmes, we aren’t seeing any improvement – quite the contrary.

According to a survey by Germany’s Federal Government, only one in five companies in Germany complies with its obligations of human rights due diligence in the supply chain. Ms Elomaa, do you, too, think that the voluntary approach has failed? Do we need binding regulations?

Elomaa: Yes, experience to date shows that far too few companies implement voluntary initiatives or follow the UN Guiding Principles on Business and Human Rights. That has to change. We therefore advocate binding regulations. Managing our supply chains would also be easier if the same rules applied to everyone.

What are the main obstacles to binding regulations?

Elomaa: Such rules must be practicable, and they have to work – we must not create a bureaucratic monster. How this can be done, I myself don’t know. All stakeholders must discuss this openly.

Ms Elomaa, your industry is often in the headlines, for example because of child labour in cocoa production in West Africa. Why are these problems so persistent? Is it because of the inter­national cocoa processing companies or the governments in the producing countries?

Elomaa: Both sides are responsible. But companies alone cannot eliminate abuses such as child labour; they must work together with the governments in the countries where production is located.

Are European companies responsible for child labour and the deforestation of the rainforest in cocoa producing regions?

Gregor: It is really more complicated than that, and we should rely on the UN Guiding Principles on Business and Human Rights, where the responsibility of companies is clearly laid out. By their guidance, every company bears responsibility both for and beyond its own actions. That means it is responsible for abuses of human rights that result from its activities. However, a company is also responsible for seeking to prevent and mitigate adverse human rights impacts that are linked to it even if it has not contributed to those impacts directly.

Do you think that the industry’s focus with regard to improving the situation of small farmers has been too long on increasing productivity?

Elomaa: When I travelled through West Africa and asked small farmers what they needed, I expected them to ask for higher prices. Instead, they most often asked for training to be able to grow cocoa better. They want to be able to read, write and do maths and to save money for their children. We have forgotten how to listen to the small farmers about what they want and need. We have to change that.

In the UK, there is the Modern Slavery Act, in France there is due diligence legislation, in the Netherlands they are working on legislation to combat child labour and other countries are pursuing similar legislative projects. What does this mean for you as a company that operates internationally? Are you worried about a patchwork of regulations?

Elomaa: This is a central question for us because it is difficult and costly for us as a company to comply with every single law. The problem is not limited to human rights – it can also be seen in other areas of sustainability. I would therefore welcome uniform European regulations.

What expectations do you have of the Euro­­pean Commission with regard to supply chain legislation?

Gregor: EU standards should take three elements into account: first, a multilateral regime should bring together the various national stan­dards. Second, rules should apply to all sectors, all kinds of raw materials and all human rights. Third, the standards should include liability and enable injured parties to access remedy. It would then be the task of the member countries to monitor and enforce human rights due diligence.

Should EU legislation also prescribe living wages in supply chains?

Gregor: I am all for it and morally it is as important as the abolition of forced labour and child labour in the supply chain, but the devil is in the details.

What is so difficult?

Gregor: I’m not talking about practical implementation, but about the legal enforcement – legislation with extraterritorial impact can be applied insofar as similar rules are applicable domestically. Moreover, it raises many questions that need to be answered: what is a living wage? Which method is used to determine what that is? Who defines it? Nevertheless, a general human rights due diligence law by definition encompasses all human rights, including living wage. The enforcement caveats aside, this is important because it gives companies guidance to include it in their due diligence.

Would it be possible at a practical level for your company to pay a living wage?

Elomaa: A living wage is important. On moral grounds alone, we cannot take money from the pockets of farmers. But with long supply chains, companies cannot guarantee that the paid higher price reaches all farmers.

When it comes to living wages, we usually look at workers or farmers in Africa or Asia and Latin America – but there are also problems in Europe, for example in the textile industry in Eastern Europe.

Elomaa: When we talk about human rights in Europe, we sometimes tend to say that the problems lie outside Europe. However, it would be a mistake to leave human rights-related issues such as living wages in the EU out of the discussion.

Gregor: We need to discuss both things. But the approach of binding obligations for human rights due diligence is about enforcing human rights in their entirety in the value chain, and not picking out a single aspect.

Would comprehensive legal regulations lead to a situation where companies would in future only orient themselves towards the minimum legal standards?

Gregor: Has that ever happened?

That is an argument put forward by companies.

Gregor: That’s nonsense. What would prevent companies from doing more? And even if that happens, it would be a massive improvement compared to the current situation. As the Federal Government’s survey shows, today there are still even large companies that are not doing anything at all.

I think what is really behind the question is the concern that corporate responsibility might extend to everything related to their supply chains. Such a debate is misleading, however, because that is not what human rights due diligence calls for.

Elomaa: Small and medium-sized enterprises, in particular, are worried about complicated regulations that would take up a lot of resources, which might leave them with no capacity for voluntary programmes. But I hope that the legislation will not be complicated.

Gregor: However, there is no alternative to binding regulations because voluntary pro­grammes do not solve major problems such as child labour, deforestation, climate change and poverty. We con-­tinue to destroy the foundations of our livelihoods and endanger the future of human civilisation.

Many supply chains are complex and dynamic. Would companies be overburdened if they had to take responsibility for their entire supply chain?

Elomaa: No company can monitor its entire supply chain. For example, our company has around 10,000 direct suppliers in the first tier and we draw cocoa from 15,000 to 20,000 farmers. So we cannot know what is happening at every moment everywhere.

But when I look at the UN Guiding Principles on Business and Human Rights, I have a sense of security. I am not worried that our company would be overburdened if we were bound to act according to those principles.

The Fazer Group is part of the Finnish “Ykkösketjuun” multi-stakeholder initiative. The stakeholders advocate mandatory human rights due diligence by companies at national level. The companies Mars and Mondelēz are among the world’s largest cocoa processing companies and are demanding EU-wide regulations on human rights due diligence. The manufacturers Barry Callebaut and Nestlé already supported the Dutch law on the prevention of child labour.

Should supply chain legislation apply to all companies?

Gregor: It should apply to all companies whose activities are affected. That is not a question of size, but a question of what you do as a company.

Elomaa: From the management perspective, it would be important to have all companies – regard­less of size – on board. All companies would then have to make every feasible effort, which would be in keeping with the spirit of the UN Guiding Principles on Business and Human Rights.

Would legislation have to provide for sanctions and if so, what kind of sanctions?

Gregor: Companies should be sanctioned if they do not comply with their reporting obligations. But it would be even more important for companies to be liable for damages.

Elomaa: That is the only way such legislation can be effective. However, in Finland we debated whether a softer solution might be possible in cases where there were no major damages or where there was no gross negligence.

„From the management perspective, it would be important to have all companies – regardless of size – on board. All companies would then have to make every feasible effort. “

Nina Elomaa

Perhaps, for example, there could be a forum which would organise that companies pay in­jured parties compensation before legal action is taken against companies. I think that such an arrangement is sensible.

Gregor: I think that would be difficult. It is important to have clear liability mechanisms for the areas that businesses can monitor. For example, with respect to a subsidiary that drills for oil and thus may have a negative impact on the groundwater of local communities or direct suppliers that may systematically abuse workers’ rights. While not limited to these, the conditions for liability will occur much more exceptionally in complicated supply chains. In any case, compa­nies should be able to identify such aspects and cease or prevent the impact, and if they do not do so, it must be clear how they can be held accountable.

Would such legislation distort competition for European companies vis-à-vis non-European companies importing manufactured goods into the EU?

Elomaa: Usually, as a company representative I don’t necessarily advocate for regulation, but in the case of supply chain legislation, I make an exception: human rights are so important that we must take action, even if that means some competitive disadvantages for us. Of course, international rules would be better. It’s not fair if we have to play by different rules. Europe should still lead the way.

Gregor: Already today, companies that are tackling the problems are competing with those that are not. This is also true in the competition between small and medium-sized companies with production in Europe and large European companies with production in high-risk countries. EU standards could also cover all companies exporting to the common market. And once we have standards in Europe, we can negotiate at UN level with other countries for them to establish similar regulation. But today Europe is paralysed in these debates.

Would child labour, modern slavery and starvation wages in the supply chains of European companies be eliminated if legislation were passed?

Elomaa: The problems would continue, but we would have taken an important step to re­duce them. Then problems such as child labour and poverty, for example in cocoa farming in West Africa, would probably decrease but not disappear.

Gregor: Right. There would still be companies from other parts of the world that would not respect human rights when buying raw materials and producing in areas where human rights are at risk. But Europe is the largest economy in the world. We should use that power to achieve a reduction of the problems and set a global standard. If the climate crisis continues, conflicts will increase, for example over scarce resources such as water. In such situations, there will be many more cases of child labour and forced labour. By using our positive influence, we can mitigate the consequences of such conflicts and strengthen the stability of the societies at risk. I would say that in future the risks will be greater than they are today, and we must therefore take action before the situation makes that impossible.

„It is important to have clear liability mechanisms for the areas that businesses can monitor.

Filip Gregor


Casper Dohmen’s conversation with Filip Gregor and Nina Elomaa via video-telephony. Photo: Scholz & Friends Berlin /Anneke Wulf

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