giugno 16, 2020

Corporations due diligence in the agri-food chain

Last years have witnessed increasing regulation of responsible business conduct for the respect of the environment and human rights. This legal innovation involves opportunities and risks. This brief post addresses Last years have witnessed increasing regulation of responsible business conduct for the respect of the environment and human rights. This legal innovation involves opportunities and risks. This brief post addresses the potential effects of the introduction of corporate due diligence for the respect of human rights in the agri-food chains, by problematizing the consequences of the emerging discipline on the progressive realization of economic, social and cultural rights, including the right to adequate food.

Sustainable conduct in the agri-food sector within the EU

In the EU context, agri-food law is a well-developed body of norms and is permeated by social and environmental considerations. For instance, the agri-food chain has been recently touched by relevant normative interventions apt to curb unfair practices, and aimed at increasing the transparency, fairness and sustainability throughout the entire value chain (for instance, through the revision of the regulation on official controls and on organic agriculture). The Common Agricultural Policy itself is driven by the necessity to guarantee a positive social, economic and environmental impact in the agriculture sector, and the ongoing reform promises even more stress on this aspect.

Sustainable conduct for transnational corporations: the multiple meanings of due diligence

Less consideration though is given to the sustainable conduct of transnational corporations, especially for their extra-EU operations, although the subject is witnessing increasing attention. The EU has released a Green Book on social corporate responsibility in 2001, then updated it with the Renewed Strategy for corporate social responsibility 2011-14, and in 2014 it has adopted Directive 2014/95/UE on the disclosure of non-financial and diversity information by certain large undertakings and groups. According to the Directive, corporations have to set up a due diligence plan and describe their resulting performance “related to, as a minimum, environmental, social and employee matters, respect for human rights, anti-corruption and bribery matters”. The due diligence requirement features also in some EU regulations setting obligations for specific aspects of corporate responsible conduct: Regulation (EU) 995/2010 on the timber supply chain, Regulation (EU) 511/2015 on access to genetic resources and fair sharing of the benefits deriving from their utilisation, and Regulation (EU) 2017/821 on the supply of minerals and metals deriving from conflict zones.

Due diligence, however, has different meanings according to the instrument at stake. Some instruments adopt a formal, procedural approach to due diligence. The EU Directive on disclosure of non-financial information, and the Regulation on minerals and metals deriving from conflict zones, make due diligence coincide only with an obligation to publish their risk management strategies. For instance, Regulation on metals supply chain sets up a naming and shaming policy in order to lead, in the long term, to an overall more sustainable supply system. However, this strategy does not give rise to any liability for the company’s involvement in violations, for example, of human rights or environmental damage occurring in conflict areas. The sanction, which the regulation delegates to the Member States, concerns only the failure to comply with the obligation to adopt a due diligence regime, not for the responsibility for acting negligently. On the contrary, other Regulations (such as that on timber supply chain and that on benefit sharing for the access of genetic resources) have a substantive approach, and understand due diligence as a standard of conduct aimed at fulfilling an obligation not to violate human rights, or harm the environment. Differently from the first category, these two regulations set out a system of corporate liability.

Sustainable conduct for transnational corporation operating in the agri-food supply chain

The Directive on non-financial disclosure was followed by a Commission’s Communication, guiding corporations in the drafting of their non-financial report. In this, a reference was made to the FAO-OECD Guidance for Responsible Agricultural Supply Chains. The Guidance is interesting for a number of reasons: 1) it is an international reference document which unfolds responsible enterprises’ conduct in the agri-food supply chain; 2) it connects enterprises’ conduct with the respect of several economic, cultural and social rights; 3) it might exert increasing influence for corporations adopting due diligence plans in compliance with the EU Directive 2014/95; 4) its content might be incorporated in a sectorial regulation, as it was the case of Regulation (EU) 2017/821 on the supply of minerals and metals deriving from conflict zones, which is based on, and recalls directly the OECD Due Diligence Guidance for Responsible Mineral Supply Chains.

The document, developed jointly by the OECD and by FAO, presents a risk management system based on risk-based due diligence. The Guidance recalls internationally recognized human rights as the right to health, the right to adequate food, and the right to work. It also reflects the human rights due diligence introduced by the 2011 UN Guiding Principles on Business and Human Rights. Accordingly, the FAO-OCSE Guidance (p.36) spells out three different requirements in case of adverse impact: if the enterprise is causing adverse impacts, it should provide remedy; if the enterprise is contributing to adverse impacts, it should cease its contribution to adverse impacts and use its leverage to mitigate any remaining adverse impact; if the enterprise’s operations are directly linked with the adverse impact it should use its leverage to mitigate or prevent the adverse impact.

The obligation to remedy for having caused a negative impact, regardless of whether or not the entreprise has acted with due diligence, seems to configure the responsibility of the entrepreneur of the agri-food chain for the respect of human rights, not just the obligation to implement a due diligence mechanism. In other words, the Guidance strengthens the element of liability, as well as responsibility and accountability. The FAO-OECD Guidance therefore reflects a substantial approach to due diligence. Furthermore, it promotes the respect of economic, social and cultural rights. At first glance, therefore, it seems desirable that the OECD Guidance comes to influence enterprises conducts and, to a certain extent, it indeed is, because it constitutes an entrance in the legal sphere of transnational corporate responsibility for the agri-food sector.

Due diligence and economic, social and cultural rights: open interrogatives

Interrogatives, however, remain. The economic, social, and cultural rights are characterized by the requirement of progressive states obligations: respect, protect and fulfill. The General Comment n. 24 of the Committee on economic, social, and cultural rights affirms that “[t]he obligation to fulfil [economic, social and cultural rights] requires States Parties to take necessary steps, to the maximum of their available resources, to facilitate and promote the enjoyment of Covenant rights, and, in certain cases, to directly provide goods and services essential to such enjoyment. […] It may require seeking business cooperation and support to implement the Covenant rights and comply with other human rights standards and principles. This obligation also requires directing the efforts of business entities towards the fulfilment of Covenant rights.” Due diligence is a concept characterized by a certain elasticity and abstractness, and in the absence of progressively more stringent parameters for corporations, set by legislation, due diligence would result in an exercise aimed perhaps at curbing the most serious behaviors, but not to contribute progressively to the fulfilment of economic, social and cultural rights.

Finally, the international human rights body of standards have recently been enriched by the UN General Assembly Declaration on the rights of peasants and other people working in rural areas. Among main innovations of the Declaration there is, firstly, the translation of human rights in the agri-food reality, and the recognition of peasants’ rights to access and control to natural resources. The second innovation is the direct involvement of associations for peasant agriculture that have been fighting for decades for the international recognition of a substantially antithetical agricultural production paradigm compared to the one currently dominant: that of industrial agriculture and global food chains. The risk is that, once corporations will have integrated human rights in their business language, the emancipatory potential of human rights, promoted by the Declaration on Peasants Rights, will be weakened.

This post is based on
M. Brunori, Impresa e diritti umani: riflessioni intorno alla Guida FAO-OCSE per una filiera agroalimentare responsabile, Rivista di Diritto agrario anno 2019 fascicolo 4
, by problematizing the consequences of the emerging discipline on the progressive realization of economic, social and cultural rights, including the right to adequate food.

Sustainable conduct in the agri-food sector within the EU

In the EU context, agri-food law is a well-developed body of norms and is permeated by social and environmental considerations. For instance, the agri-food chain has been recently touched by relevant normative interventions apt to curb unfair practices, and aimed at increasing the transparency, fairness and sustainability throughout the entire value chain (for instance, through the revision of the regulation on official controls and on organic agriculture). The Common Agricultural Policy itself is driven by the necessity to guarantee a positive social, economic and environmental impact in the agriculture sector, and the ongoing reform promises even more stress on this aspect.

Sustainable conduct for transnational corporations: the multiple meanings of due diligence

Less consideration though is given to the sustainable conduct of transnational corporations, especially for their extra-EU operations, although the subject is witnessing increasing attention. The EU has released a Green Book on social corporate responsibility in 2001, then updated it with the Renewed Strategy for corporate social responsibility 2011-14, and in 2014 it has adopted Directive 2014/95/UE on the disclosure of non-financial and diversity information by certain large undertakings and groups. According to the Directive, corporations have to set up a due diligence plan and describe their resulting performance “related to, as a minimum, environmental, social and employee matters, respect for human rights, anti-corruption and bribery matters”. The due diligence requirement features also in some EU regulations setting obligations for specific aspects of corporate responsible conduct: Regulation (EU) 995/2010 on the timber supply chain, Regulation (EU) 511/2015 on access to genetic resources and fair sharing of the benefits deriving from their utilisation, and Regulation (EU) 2017/821 on the supply of minerals and metals deriving from conflict zones.

Due diligence, however, has different meanings according to the instrument at stake. Some instruments adopt a formal, procedural approach to due diligence. The EU Directive on disclosure of non-financial information, and the Regulation on minerals and metals deriving from conflict zones, make due diligence coincide only with an obligation to publish their risk management strategies. For instance, Regulation on metals supply chain sets up a naming and shaming policy in order to lead, in the long term, to an overall more sustainable supply system. However, this strategy does not give rise to any liability for the company’s involvement in violations, for example, of human rights or environmental damage occurring in conflict areas. The sanction, which the regulation delegates to the Member States, concerns only the failure to comply with the obligation to adopt a due diligence regime, not for the responsibility for acting negligently. On the contrary, other Regulations (such as that on timber supply chain and that on benefit sharing for the access of genetic resources) have a substantive approach, and understand due diligence as a standard of conduct aimed at fulfilling an obligation not to violate human rights, or harm the environment. Differently from the first category, these two regulations set out a system of corporate liability.

Sustainable conduct for transnational corporation operating in the agri-food supply chain

The Directive on non-financial disclosure was followed by a Commission’s Communication, guiding corporations in the drafting of their non-financial report. In this, a reference was made to the FAO-OECD Guidance for Responsible Agricultural Supply Chains. The Guidance is interesting for a number of reasons: 1) it is an international reference document which unfolds responsible enterprises’ conduct in the agri-food supply chain; 2) it connects enterprises’ conduct with the respect of several economic, cultural and social rights; 3) it might exert increasing influence for corporations adopting due diligence plans in compliance with the EU Directive 2014/95; 4) its content might be incorporated in a sectorial regulation, as it was the case of Regulation (EU) 2017/821 on the supply of minerals and metals deriving from conflict zones, which is based on, and recalls directly the OECD Due Diligence Guidance for Responsible Mineral Supply Chains.

The document, developed jointly by the OECD and by FAO, presents a risk management system based on risk-based due diligence. The Guidance recalls internationally recognized human rights as the right to health, the right to adequate food, and the right to work. It also reflects the human rights due diligence introduced by the 2011 UN Guiding Principles on Business and Human Rights. Accordingly, the FAO-OCSE Guidance (p.36) spells out three different requirements in case of adverse impact: if the enterprise is causing adverse impacts, it should provide remedy; if the enterprise is contributing to adverse impacts, it should cease its contribution to adverse impacts and use its leverage to mitigate any remaining adverse impact; if the enterprise’s operations are directly linked with the adverse impact it should use its leverage to mitigate or prevent the adverse impact.

The obligation to remedy for having caused a negative impact, regardless of whether or not the entreprise has acted with due diligence, seems to configure the responsibility of the entrepreneur of the agri-food chain for the respect of human rights, not just the obligation to implement a due diligence mechanism. In other words, the Guidance strengthens the element of liability, as well as responsibility and accountability. The FAO-OECD Guidance therefore reflects a substantial approach to due diligence. Furthermore, it promotes the respect of economic, social and cultural rights. At first glance, therefore, it seems desirable that the OECD Guidance comes to influence enterprises conducts and, to a certain extent, it indeed is, because it constitutes an entrance in the legal sphere of transnational corporate responsibility for the agri-food sector.

Due diligence and economic, social and cultural rights: open interrogatives

Interrogatives, however, remain. The economic, social, and cultural rights are characterized by the requirement of progressive states obligations: respect, protect and fulfill. The General Comment n. 24 of the Committee on economic, social, and cultural rights affirms that “[t]he obligation to fulfil [economic, social and cultural rights] requires States Parties to take necessary steps, to the maximum of their available resources, to facilitate and promote the enjoyment of Covenant rights, and, in certain cases, to directly provide goods and services essential to such enjoyment. […] It may require seeking business cooperation and support to implement the Covenant rights and comply with other human rights standards and principles. This obligation also requires directing the efforts of business entities towards the fulfilment of Covenant rights.” Due diligence is a concept characterized by a certain elasticity and abstractness, and in the absence of progressively more stringent parameters for corporations, set by legislation, due diligence would result in an exercise aimed perhaps at curbing the most serious behaviors, but not to contribute progressively to the fulfilment of economic, social and cultural rights.

Finally, the international human rights body of standards have recently been enriched by the UN General Assembly Declaration on the rights of peasants and other people working in rural areas. Among main innovations of the Declaration there is, firstly, the translation of human rights in the agri-food reality, and the recognition of peasants’ rights to access and control to natural resources. The second innovation is the direct involvement of associations for peasant agriculture that have been fighting for decades for the international recognition of a substantially antithetical agricultural production paradigm compared to the one currently dominant: that of industrial agriculture and global food chains. The risk is that, once corporations will have integrated human rights in their business language, the emancipatory potential of human rights, promoted by the Declaration on Peasants Rights, will be weakened.

This post is based on
M. Brunori, Impresa e diritti umani: riflessioni intorno alla Guida FAO-OCSE per una filiera agroalimentare responsabile, Rivista di Diritto agrario anno 2019 fascicolo 4

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About Margherita Brunori

Margherita Brunori

Margherita Brunori is a Post-doc Research Fellow at the University of Trento, Sociology Department, and previously at the University of Milan, at the Department of International, Legal, Historical and Political studies. She is a specialist in International Governance of Natural Resources, Food and Agriculture law, International and Human Rights law, Sustainable Development. Her research focuses on international standards on food, natural resources and agriculture governance. She has expert knowledge on FAO CFS processes and products, and expertise on international economic, social and cultural rights standards, corporate responsibility and accountability. She has carried on short consultancies with FAO on the Voluntary Guidelines on the Governance of Tenure.

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