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Agri-food enterprises are facing multiple environmental and social challenges across their operations and supply chains, as well as a growing number of due diligence-related measures. The OECD-FAO Guidance helps businesses navigate and address these challenges while preparing them for emerging policy and regulatory expectations on responsible business conduct.
The race is on for business to take action in agricultural supply chains. Not only are enterprises faced with multiple challenges related to delivering food security and ensuring a living income for workers, all while mitigating and adapting to climate change, but they also need to comply with important policy and regulatory developments. Marjoleine Hennis, Chair of the OECD-FAO Advisory Group on Responsible Agricultural Supply Chains, highlights how the OECD-FAO Guidance for Responsible Agricultural Supply Chains can help business meet these challenges, and how governments can support them, against the background of the recent update of the MNE Guidelines for RBC.
The triple challenge for food systems
“Global food systems are broken, and billions of people are paying the price” commented UN Secretary-General António Guterres at the UN Food Systems Summit Stocktaking Moment earlier this year. His address highlighted that more than 780 million people experience hunger while almost one-third of all food produced is lost or wasted, at the same time over 3 billion cannot afford healthy diets, 462 million are underweight, and 2 billion are overweight or obese.
Food systems are facing a daunting triple challenge. They must ensure food security, providing sufficient, safe, and nutritious food to a growing and increasingly affluent global population. They must deliver living incomes to more than 500 million farmers as well as others in the food chain to support rural development. Finally, they must do this in an environmentally and socially sustainable manner, achieving net-zero GHG emissions, halting and reversing biodiversity loss, adapting to climate change, and ensuring decent work.
More on the Forum Network: Rising to the agriculture challenge: Increasing food production while limiting environmental impacts by Edith Laget, Agricultural Policy Analyst, Trade and Agriculture Directorate of the OECD
This year, the OECD-FAO Agricultural Outlook's prospective analysis comes at a time of marked economic risks, uncertainty and high energy prices, whilst sustainable productivity growth remains indispensable to increase production without harming the environment.
FAO and OECD research shows that the agricultural sector is responsible for a significant share of global environmental pressures – including roughly a third of global GHG emissions, 70% of freshwater use, up to 73% of tropical deforestation and is the most significant driver of terrestrial biodiversity loss, as well as phosphorous and nitrogen pollution. This means that transforming food systems will be essential to meeting commitments under the Paris Agreement and the Sustainable Development Goals. Sticking to those commitments will be crucial for our food security in the long term.
An evolving regulatory and policy landscape for business
The important role of food systems addressing global challenges, is increasingly reflected in the international climate and environmental agenda. Last year’s Conference of the Parties, COP 27, was the first of the climate conferences to put a focus on food systems, including in the final COP27 cover text. This year, food systems transformation will be a top priority at COP28, where the Food and Agriculture Organization is expected to release its 1.5-degree Celsius roadmap for the food system.
Against this background, governments are taking action to promote greater business engagement and accountability on environmental and social issues, resulting in a rapid proliferation of government-led international agreements, strategies, and due diligence legislation aimed at business. In the EU for example, a number of due diligence-related initiatives have been adopted or are under discussion, including the Corporate Sustainability Reporting Directive (CSRD); the (pending) Corporate Sustainability Due Diligence Directive (CSDDD); and the EU regulation to ensure that only deforestation-free products are placed on the European Union market.
In addition to due diligence legislation, countries are also promoting responsible business conduct through voluntary means
At the national level, while France and Germany have adopted general due diligence legislation, both the UK and Australia have put in place Modern Slavery Acts, which are highly relevant for agriculture. Similarly, Canada and the US have adopted legislation to address goods made with child or forced labour, and the Norwegian Transparency Act requires large companies selling products and services in Norway to carry out human rights due diligence in line with the OECD Guidelines.
In addition to due diligence legislation, countries are also promoting responsible business conduct through voluntary means. For example, Japan has adopted its Guidelines for Responsible Supply Chains; Chile has published Due Diligence Guidances for the food industry; the Netherlands has set up a national raw materials strategy which focuses, among other things, on the reduction of the environmental impact in those supply chains; and Croatia has published the Low Carbon Development Strategy, which pays attention to the reduction of the carbon footprint of enterprises.
While such voluntary and mandatory initiatives form a much needed framework for businesses in food systems to achieve greater sustainability, it will be important to ensure that businesses are not subject to conflicting or duplicative requirements. The recent OECD Ministerial Declaration on Promoting and Enabling Responsible Business Conduct in the Global Economy has called for strengthening cooperation and coordination on due diligence policies, using the OECD platform for dialogue and information sharing, engaging in capacity building and contributing to international policy and regulatory coherence in order to ensure effectiveness and avoid unnecessary cost and complexity.
A recipe for success: Responsible Business Conduct (RBC)
An important contribution to this international alignment arrived in June of this year when the OECD released its long-awaited update to the Guidelines for Multinational Enterprises on Responsible Business Conduct (the Guidelines).
The Guidelines provide a set of recommendations from 51 Governments to multinational enterprises that aim to minimise harm to people, the planet, and society. The Guidelines form a unique, government-backed framework, which covers all key areas of business responsibility, including human rights, labour rights, environment, bribery and corruption, consumer interests, disclosure, science and technology, competition, and taxation. The update of the Guidelines responds to urgent social, environmental, and technological priorities facing societies and businesses while making references to existing international agreements in those fields.
One of the most significant updates is the Environment Chapter. This Chapter is particularly interesting for actors in agricultural supply chains as it can help them rise to the challenge of transitioning to a green economy and preserving natural ecosystems. It provides recommendations for enterprises to align with internationally agreed goals on climate change and biodiversity. It furthermore clarifies business responsibility concerning land use, marine and freshwater ecosystems; deforestation; air, water and soil pollution; and waste, including hazardous substances – recommendations of critical importance when seeking to accelerate a transformation of global food systems.
The OECD Guidelines are complemented by due diligence guidance. For Agricultural Supply Chains, the OECD and FAO have developed the OECD-FAO Guidance for Responsible Agricultural Supply Chains. This guidance is a globally applicable standard, which provides a common framework for risk-based due diligence in the sector. With this guidance, enterprises in agri-food supply chains across a wide range of food and non-food commodities, no matter their size, can systematically identify, assess and mitigate potential negative impacts associated with their business’ operations and supply chains, while the OECD-FAO implementation programme provides support through research, tools and training.
The updated Guidelines, complemented by the OECD-FAO Guidance for Responsible Agricultural Supply Chains, offer a great starting point for addressing the triple challenge facing food systems and meeting emerging government measures.
What can policy makers and governments do to help?
In addition to strengthening cooperation and coordination, governments can support the effective implementation of RBC standards. They can do this by providing an enabling policy environment for these standards; contributing to the development of tools and resources such as the OECD-FAO Business Handbook on Deforestation; exemplifying RBC in their own commercial activities; developing supporting measures to facilitate businesses’ implementation of due diligence in agricultural supply chains; and actively participating in the multistakeholder OECD-FAO Advisory Group on Responsible Agricultural Supply Chains.
For more information, see the OECD Due Diligence Policy Hub
Governments are increasingly using legislation and regulation as a policy tool to promote more responsible business practices and sustainable financial flows. New legislation, in particular on human rights and environmental due diligence in global supply chains, has emerged across multiple jurisdictions in recent years. Many governments have sought to use OECD responsible business conduct (RBC) standards to support common approaches across companies’ operations, supply chains and business relationships.
And also check out OECD-FAO Guidance for Responsible Agricultural Supply Chains
Agricultural enterprises are a major source of growth and development. They bring expertise, technology, and financing capacities to provide safe and nutritious food to growing populations and meet our changing energy demands. Enterprises involved in the agricultural sector are critical for the fulfilment of the Sustainable Development Goals (SDGs). They play a key role in generating quality investment, decent employment, and supply chains that benefit producers and consumers.