The Chamber of Agribusiness Ghana Pushes for Capacity Building of Suppliers on the New EU Supply Chain Law

Shea nut fruit picking in Ghana. Image: media@agricinafrica.com

Similar to other regions of the world, addressing sustainability challenges (SCs) along global supply chains (GSCs) is a pressing concern for the European Union (EU). Voluntary measures such as certification standards and codes of conduct to address SCs in GSCs have proliferated in the last decades among various EU companies. However, voluntary measures have not been effective in addressing SCs owing to a number of reasons, in particular, the absence of a binding mechanism to ensure their implementation.

In recent years, a number of supply chain legislations or binding treaties towards addressing SCs across some EU member states have emerged due to the non-binding character of voluntary measures. For example, France approved the ‘Law on the duty of vigilance in 2017’, the Netherlands approved the ‘Child labor due diligence law in 2020’ and Germany approved the ‘Mandatory human rights due diligence law in 2021’. On February 2022, the EU Commission adopted the proposed ‘Mandatory corporate environmental and human rights due diligence law’ known as the EU Supply Chain Law (EUSCL) in order to harmonize and align the various member state laws.

The aim of this new EUSCL is to “foster sustainable and responsible corporate behavior and to anchor human rights and environmental considerations in companies’ operations and corporate governance”. Regarding the next steps, the new EUSCL is expected to be approved by the EU Parliament and the Council. Once approved, various nations are anticipated to ratify the law and communicate relevant content back to the commission in two years. In the new EUSCL, EU companies as well as non-EU companies operating in the EU with more than 500 employees and more than €150 million turnover—and their directors are required to establish a corporate due diligence duty. However, in high-risk sectors including agriculture, textiles and extraction of minerals, companies with more than 250 employees and more than €40 million turnover are required to establish a corporate due diligence duty.

The core elements of ‘corporate due diligence duty’ for companies are “Identifying, bringing to an end, preventing, mitigating and accounting for negative human rights and environmental impacts in the company’s own operations, their subsidiaries and their value chains. In addition, certain large companies need to have a plan to ensure that their business strategy is compatible with limiting global warming to 1.5 °C in line with the Paris Agreement”. In addition, the core  elements of ‘due diligence duty’ for directors of the companies covered are “Setting up and overseeing the implementation of the due diligence processes and integrating due diligence into the corporate strategy. In addition, when fulfilling their duty to act in the best interest of the company, directors must take into account the human rights, climate change and environmental consequences of their decisions”.

 The new EUSCL will be enforced through ‘administrative supervision’ and ‘civil liability’. This means that companies that do not comply with the law will be fined by national authorities while victims whose human and environmental rights have been violated by companies can seek legal remedies. The new EUSCL is a key step to improving corporate responsibility and sustainability in global supply chains. A major gap identified in the new law is the non-inclusion of SMEs and micro companies. This raises concerns about addressing SCs in GSCs as the extent of human rights abuse and environmental degradation is not limited to the size and annual turnover of companies.

However, the Chamber of Agribusiness Ghana (CAG) believes that a more pressing concern is to build the capacity of suppliers from the Global South, in particular, smallholder producers to understand this new law. A better understanding of the law by agricultural suppliers is critical for the effective implementation of the law as well as for the continuous export of products from the Global South to the EU market. The EU remains a major destination for a number of agricultural export commodities from the Global South classified as prone to environmental and human rights abuse. These commodities include beef, oil palm, cocoa, soy, wood and coffee.

In line with the principle to address environmental and human rights challenges as well as to avoid the risk of Ghanaian commodities, especially, cocoa, oil palm and coffee being banned on the EU market, CAG is calling for the strengthening of the capacity of suppliers in Ghana. CAG believes that building the capability of smallholder suppliers in the cocoa, oil palm and coffee sector to understand this new law is important for three reasons: (1) to help  EU corporations who source these products in Ghana to better identify potential human rights and environmental risks as it applies to suppliers; (2) to help cocoa, oil palm and coffee suppliers in Ghana hold EU corporations accountable for their environmental and social impacts; and (3) to help cocoa, oil palm and coffee suppliers seek the right remedy when their social rights and their environment are affected by EU corporations.

First, CAG argues that suppliers must be included in the identification of potential human rights and environmental risks along the cocoa, oil palm and coffee supply chains. Corporations that source from Ghana alone should not be allowed to report on potential risks and measures to address them. Their report should demonstrate the inclusion of all relevant suppliers, in particular the vulnerable including smallholder farmers, women and children who are more prone to severe social and environmental abuses. This could help to avoid potential abuses of suppliers through appropriate due diligence measures. Second, CAG believes that including smallholders in the new EUSCL will empower smallholder producers to play a critical role, in particular holding EU corporations accountable for social and environmental impacts. Third, empowered suppliers in Ghana would be able to take legal actions for human rights and environmental violations stemming from EU corporations.

In conclusion, CAG believes that the effective protection of human rights and the environment is an important concern. CAG argues that building the capacity of suppliers to understand the new EUSCL will not only help to avoid Ghanaian products such as cocoa, coffee, or oil palm from potentially being banned on the EU market but help to achieve the three benefits listed above. Various stakeholders and actors in Ghana’s agricultural ecosystem need to take appropriate measures to help promote suppliers, especially, smallholder producers’ understanding of this new EUSCL.

Author:

Evans Appiah Kissi, Ph.D.

GIZ - Diaspora Expert Mission

Host Institution - Chamber of Agribusiness Ghana

 Email: policy@agribusinesschamber.org