More and more citizens and NGOs are putting pressure on companies to enforce good environmental and social practice in their supply chain. The Rana Plaza tragedy, which caused more than 1000 deaths in a garment workshop building in Bangladesh in 2013, is regularly referred to in the discussions on corporate social responsibility legislation.
In France, Act No. 2017-399 of 27 March 2017 on the duty of care of parent companies and purchasing companies, intends to address these concerns and compels selected large companies (see criteria in the act) to establish and implement a Duty of Care Plan.
Extracts from the law
(…) The plan includes duty of reasonable care to identify risks and prevent serious violations of human rights and fundamental freedoms, of the health and safety of people and the environment resulting from activities of the company and those of the companies it controls (…), directly or indirectly, as well as the activities of subcontractors or suppliers with which an established business relationship is maintained, where such activities are related to this relationship.
The plan (…) includes the following measures:
1st Risk mapping for identification, analysis and prioritisation of risk;
2nd Procedures for the regular assessment of the situation of subsidiaries, subcontractors or suppliers with whom an established business relationship is maintained, with regard to risk mapping;
3rd Appropriate actions to mitigate risk or prevent serious injury;
4th An alert mechanism and alert monitoring process relating to the existence or manifestation of risks, drawn up in consultation with the representative trade union organisations in said company;
5th A monitoring scheme for the measures implemented and evaluation of their effectiveness.
Developed with all the best intentions, this law may not achieve its objectives, especially in developing countries. While the Rana Plaza tragedy has enabled the identification of the purchasing company, goods and services supply chains can be much more complex and add extra subcontracting stages. The above-mentioned legal provisions apply to the first level suppliers of the companies covered by the law, but not to the suppliers of the suppliers! In addition, it only covers companies whose head office is in France and not those based abroad.
In a different sector, imagine a cocoa farmer, who produces cocoa beans, which he then sells (farm gate sale) to a local travelling salesman, who sells to another larger trader, who then sells to a processing factory based outside the European Union, which produces the cocoa mass, which will then be bought and used by a French chocolate factory.
This chain seems complex, but it is typical, and completely unremarkable. The law will only apply, in the strictest sense, to the chocolate factory, if it is “of significant size” under the law. The French chocolatier may be concerned as to whether human rights are being respected at his cocoa mass supplier, and he may ask his supplier to check, for example, that child labour is not used at the small cocoa plantation, or that the plantation was not developed to the detriment of the virgin forest. But it will depend on his ethics and any commitments he voluntarily subscribes to, because he is not obliged to in law.
The small planter who has environmental or human rights standards imposed on him (such as not allowing his children to work during the cocoa pod harvest, or not using this “very effective” pesticide, etc.) will be tempted to sell his cocoa beans to another, less demanding, trader. Especially if the purchase price is the same… which is often set by the local State anyway.
If these laudable objectives are to be achieved, the prices for small planters should be adapted to these new requirements and they should be rewarded for their actions.
It is a good thing that the supply chain should be virtuous, transparent, stable, with well-identified levels, and include small planters who are loyal because they are well rewarded. If the supply chain is unstable and becomes subject to chance, it is possible that beans produced under unacceptable conditions will be included in the cocoa mass, and the aims will not be achieved.
Would you agree to pay more for your chocolates? Would you stop buying from “the cheapest” shop, that can offer you the best purchasing power? Will the French chocolate factory and the various levels of suppliers have the decency to reduce their margins so that the small African or Asian farmer earns a reasonable wage in the end, enough to be motivated to fulfil these new requirements?
And will the State imposing these new standards be minded helping train small farmers? If the follow-through right down to the small African or Asian farmer is not done effectively, the European consumer could still be branded an environmental and social neo-colonialist – dismissive of the realities of life in Africa and Asia, and the essential importance, no matter the cost, of encouraging the development of these populations.
It is easy to put pressure on companies to ensure that at the end of the supply chain a number of rules and standards are actually implemented by small producers in the primary sector (agricultural or mining), but what does Europe propose to do to stabilise global prices at a level which will enable each level of the chain to have a decent lifestyle? Socialist posturing beholden to the doctrine of the continual increase of purchasing power surely have a crushing responsibility for forcing prices down? Have ill-thought-out subsidies hidden the real price of goods and services, preventing everyone from being accountable?
This post is also available in: FR (FR)