Shifting from risk to development - responsible business conduct is more important than ever for agriculture
Imagine an agricultural sector without child labour. A fair wage for farm workers and a fair income for farmers and food producers. Food grown with respect for the environment, and water pollution a distant memory. Reaching these goals is possible with the right business approach.
Responsible business conduct is a hot topic of global conversation, and FAO has been at the centre of this discourse in agriculture for several years. In 2016, FAO and the Organisation for Economic Co-operation and Development (OECD) launched the OECD-FAO Guidance for Responsible Agricultural Supply Chains, a global standard for addressing risk and development in the agricultural sector. A growing number of governments around the world have since been incorporating the OECD-FAO Guidance into their corporate sustainability policies, linking together investment, enterprise, agriculture and development.
Due diligence: a gateway to development?
The OECD-FAO Guidance recommends that businesses implement due diligence to address the most significant environmental and social risks associated with their agricultural supply chains. Due diligence is the process through which enterprises can identify, assess, mitigate, prevent and account for how they address the actual and potential adverse impacts of their activities as an integral part of business decision-making and risk management systems. In a rising number of countries, governments have introduced legislation that makes due diligence mandatory for companies. The due diligence process helps businesses identify issues and come up with solutions to the adverse impacts of their actions.
This is not just good for the planet but for businesses' bottom lines too. Doing business responsibly can improve workers' rights or livelihoods in sourcing communities, but it can also strengthen business processes. In recent years, there has been growing media scrutiny on and consumer interest in supply chains and working conditions. Obtaining more in-depth information on suppliers builds trust and reduces reputational risks from potential problems. By preventing negative impacts, a company will avoid bearing the costs of litigation and remedial actions. Likewise, actions that protect the environment can also bring financial benefits: for example, using renewable energy sources can actually be more economical in the long term and help hedge against the volatile markets of fossil fuels.
The OECD-FAO Guidance illustrates how conducting due diligence and addressing issues in supply chains has the power to boost businesses themselves and many key areas of development, including labour rights, animal welfare, land tenure rights, environmental protection and food security.
But how does it really work?
Let's start with a simple fact: over 70 percent of child labour takes place in the agricultural sector. By incorporating due diligence into their business models, large companies can contribute to eliminating child labour by conducting reviews to understand the probability of how and at what point in their supply chain this can occur.
Just carrying out audits is not enough to detect risks in supply chains, as audits can be faked or falsified on their own. However, by combining auditing with due diligence and working together with suppliers and outsourced partners along the supply chain, as well as with civil society organizations and other actors, structural problems like child labour can be addressed.
The OECD-FAO Guidance helps explain how companies can tackle issues like this by making them relevant to their operational environments. By doing this, companies not only improve their own supply chains but help contribute to the Sustainable Development Goals, creating change on a larger scale.
Better for the environment
Agriculture, forestry and other agricultural land use accounts for up to 25 percent of all greenhouse gas emissions. In most regions of the world, over 70 percent of freshwater is used for agriculture. Significant efforts are required to improve sustainability and reduce agriculture's impact on the planet.
Upon introducing due diligence, one company that participated in a pilot project testing the practical application of the OECD-FAO Guidance increased its awareness of its impact on the local environment by using satellite technology and Geographic Information System analysis to track land cover changes. By monitoring deforestation, the company could assess vulnerable areas and understand the effects it was having on them. The company realised that it needed to do more to tackle deforestation and engaged with suppliers to address this issue.
Boosting food security
In 2019, nearly 750 million people suffered from severe food insecurity. Agriculture can itself have a negative impact on food access for local communities. For example, when large amounts of land and time are devoted to farming 'cash crops', there is less space and fewer people available to grow nutritious food for the local community. One company taking part in the pilot carried out environmental and social impact assessments before starting new projects on previously unused land. With this issue in mind, the company reserved some land for food farming, giving space to the local community to grow crops that could then be sold or used for their own consumption.
FAO's World Banana Forum also promotes the key messages of the OECD-FAO Guidance to improve collaboration and boost sustainable production and trade in the banana sector. Another FAO project is working with stakeholders in the pineapple and avocado supply chains to introduce risk-based due diligence systems and encourage responsible sourcing of these fruits.
So how can the agriculture sector boost responsible business conduct going forward?
The short answer? By integrating the OECD-FAO recommendations on due diligence into regulatory frameworks, industry standards and policies. To create a more inclusive and sustainable agriculture sector for our future, governments, businesses and individuals need to take a look at the way they work. Due diligence processes can turn risks into development results, including greater food security, stronger labour rights and better environmental protection. To help companies perform due diligence systematically, the FAO-OECD Guidance proposes a model and five-step framework for companies to follow. By promoting it across the agricultural sector, we can support development and ensure that agriculture contributes to a sustainable future.