24 Feb 2022

Making sense of the EU’s HREDD proposal - a conversation with Fairtrade’s Dr. Tytti Nahi

On 23 February, the European Commission presented its proposal for a European Union-wide regulation on Human Rights and Environmental Due Diligence (HREDD) urging large companies placing products on the EU market to reduce and remediate any serious negative impacts they or their supply chains have on people or the environment.

This regulation can greatly advance the livelihoods and other human rights of farmers and workers operating in global supply chains. But many Fairtrade-certified farmer groups fear the opposite: a poorly defined regulation that could exclude vulnerable farmers and workers from supply chains.

Like many social justice organizations around the world, Fairtrade has followed the preparations of this proposal for several years. But what does the proposal say?

We spoke to Dr. Tytti Nahi, Fairtrade Lead on Business and Human Rights, about how she views the European Commission’s HREDD proposal and what impact she expects it to have in delivering fairness to European consumers and farmers around the world.

Thank you, Tytti, for chatting with us today. Right off the bat, how important is the European Commission’s HREDD proposal?

This is nothing short of a ground-breaking proposal. The proposal for an EU-wide HREDD obligation is a big, first step towards a business environment that takes people’s wellbeing and environmental sustainability seriously.

The proposal has been a long time in the making. In fact, it is based on a global agreement, forged at the United Nations in 2008, that urges businesses to respect human rights and establish a robust due diligence process that identifies, addresses, and accounts for the impacts operations and value chains have on people and the environment. The concept has been so successful that France, Germany, and Switzerland, for example, have already enshrined this responsibility in binding national laws.

But more than anything, the EU’s proposal simply makes common sense. Just like companies must guarantee their products are safe for consumers to use, they should also bear the responsibility for ensuring that production is safe for workers, farmers, and the environment.

So, it’s up to companies to resolve their human rights problems.

Well, if that were the extent of the issue, then it would be rather straightforward. But the problem is much more complex than at first glance. When dangers – to the safety and rights of consumers or producers – lie within supply chains, the challenge of addressing them becomes more layered. In short, companies cannot fix them unaided: they need the support and collaboration of their entire supply chain.

But the actors in the earliest stages of the supply chain often struggle of their own accord to cease, prevent and remediate violations altogether. And it is not for lack of trying. Many of them, including millions of smallholder farmers, are simply resource strapped – economic power and value is very unevenly distributed in many global supply chains. That’s why it is imperative that companies operating in EU markets also support their suppliers – especially those at the beginning of the supply chain – through fair prices, other fair purchasing practices and concrete development projects.

How does the European Commission’s proposal fit into this dynamic?

The European Commission’s proposal is good for companies that take sustainability seriously. Indeed, it levels the playing field so that all companies on EU markets must invest in sustainability for both people and the environment. That is why over 100 companies, investors, business associations, and initiatives signed a joint statement earlier this month urging the EU to adopt this regulation swiftly.

However, for this regulation to truly help businesses become more responsible and sustainable Europe-wide, three points remain crucial: due diligence obligations need to extend across the full supply chain; they must be based on meaningful stakeholder engagement; and they must include an ongoing review and reform of irresponsible trading and purchasing practices.

Taken together, these three elements can spur the necessary meaningful dialogue and collaboration between companies upstream and downstream in supply chains, which remains crucial to tackling a full range of complex problems in global supply chains spanning from child labour and deforestation to gender-based violence.

How good is the current proposal from the European Commission then?

From our perspective, the current proposal is a decent start for the ensuing negotiations, as the commission recognizes the need to involve whole supply chains, engage stakeholders, and reform purchasing practice.

Nevertheless, there’s much room for improvement in the scope of the proposal. The proposal only covers very large companies – with around 99 percent of companies excluded.

In addition, the current proposal would fail to spur concrete collaboration within supply chains. It only covers “established business relationships”. This means companies that avoid long-term relations and maintain rosters of short-term suppliers could continue to ignore human rights and environmental issues in supply chains.

The proposal also suggests that European buyers could terminate a business relationship whenever the buyer sees that a supplier is struggling with serious human rights or environmental issues that will likely not cease or be significantly mitigated in the short run. This, frankly, defeats the purpose. Short run solutions are few because serious problems like child labour, forced labour and deforestation are fueled by many societal and economic factors.

What we need is meaningful dialogue and enduring collaboration among all supply chain actors: that’s what it takes to make real progress in preventing, ceasing, and remediating human rights violations and environmental damage in global supply chains.

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