Smallholders from global south take the stage for inclusive CSDDD

In its current form, the EU’s Corporate Sustainability Due Diligence Directive fails to consider the issues experienced by millions of smallholder farmers at the beginning of agricultural value chains worldwide. How can this potentially ground-breaking directive better equip companies in Europe to support smallholders to become part of a more sustainable value chain?

Written by Catarina Vieira (Solidaridad), Elena Lunder (Fair Trade Advocacy Office), Fanny Gauttier (Rainforest Alliance), Meri Hyrske-Fischer (Fairtrade International).

The EU is currently developing its potentially ground-breaking Corporate Sustainability Due Diligence Directive (CSDDD). The CSDDD sets out requirements for companies operating in the EU market to conduct human rights and environmental due diligence in their value chains. This ambitious directive has the potential to improve the working conditions and livelihoods of millions of workers and smallholder farmers, and their families. 

However, in its current form, the directive fails to take into account the needs of the huge and essential group of smallholders found at the beginning of agricultural value chains worldwide. Smallholder farmers face daily human rights violations while being scapegoats for numerous environmental issues. So how can the CSDDD better equip European companies to work with smallholders to tackle these issues? 

In collaboration with Solidaridad, Fairtrade International, the Fair Trade Advocacy Office and Rainforest Alliance, the Responsible Business Conduct working group recently organised an event at the European Parliament. We invited five smallholder farmers from around the globe to share their experiences and help to answer this question. The invitation to the European Parliament was extended by MEPs Heidi Hautala and Christophe Hansen. 

As the Parliament finalises its position on this crucial file, it’s important to re-emphasise the coalition’s key proposals, illustrated by the smallholder farmers present at the European Parliament event. 

An inclusive and just CSDDD must ensure:

Companies engage with all stakeholders in addressing systemic sustainability issues

“If there is child labour, farmers are blamed. If there is forced labour, the farmers did it. Deforestation? It’s the farmers.” Daniel Amponsah (pictured), a cocoa farmer from Ghana, shared his frustration. 

And he’s right. Smallholders often have the least agency: fewer resources to invest, a lack of technical support, and limited access to credit. They are blamed for issues that are often not the result of their own choice, but a lack of alternatives. And they are expected to take on the heavy burden of solving them. 

We can’t let the CSDDD’s additional sustainability requirements for companies put smallholder farmers in an even more vulnerable position. Instead, companies must step up and fully take responsibility in the process. 

It’s likely that the CSDDD will lead companies to uncover systemic issues, such as deforestation and child labour, while conducting their due diligence. The crucial point is that due diligence exists precisely to increase transparency and drive continuous and step-by-step improvements to address those issues in partnership, and not to disengage from “risky” suppliers and shift sourcing to “safer” areas. 

In accordance with key international voluntary standards on due diligence, the CSDDD needs to clarify that companies are expected to continue to source from and support producers in making improvements on the adverse impacts they find. For example, by providing adequate technical and financial assistance. 

Disengaging with suppliers must be done responsibly and only as a last resort, after all attempts to address negative impacts have failed. A cut-and-run approach will not solve sustainability issues – it will only exacerbate them.

Review of purchasing practices and business models is a part of companies’ due diligence process

Kpomin Edi, a cocoa farmer from Côte d’Ivoire, spoke at the European Parliament of her experience of unfair purchasing practices. She recounted how the farmers in her cooperative were left with large volumes of unsold cocoa when traders didn’t respect the contract they’d signed to buy sustainably-produced cocoa, which is more costly to produce. This left them with no option but to sell their product as conventional cocoa, at a lower price. These, and similar unfair practices, are common in many sectors characterised by uneven power relations across the value chain. 

Companies must address their negative impacts by looking at how their business models and purchasing practices influence the entire value chain. Importantly, it’s not just NGOs that advocate for this. Major cocoa companies, including Nestle and Mars Wrigley, agree that the legislation should require companies to review their purchasing models. 

Living income is included as a human right that companies must respect

Pison Kukundakwe, a coffee farmer cooperative representative from Uganda, shared the reality of millions of smallholder farmers around the world: incomes for producers are too low. Many coffee farmers in Uganda and other producing countries continue to live in poverty due to low and unstable prices. This is often the result of imbalanced power relations that makes it impossible for farmers to negotiate a better price. The negative impact of climate change and, more recently, increased living and farming costs, have added further fuel to the fire. Farmers may see a reduction in their yields and even end up producing below cost of production. 

While the EU cannot set a price for coffee and other commodities, the CSDDD must acknowledge that companies can influence income through pricing and purchasing practices. The Commission’s proposed text considers a living wage (which applies to workers) as a human right that companies in Europe must respect. Additionally, it must ensure that a living income (for farmers) is given the same status. This is key to meaningfully tackle systemic poverty in agriculture.

All companies, regardless of size, must conduct due diligence across the entire value chain 

According to Pedro Marenja, representing the Mozambique National Cotton Producers Forum, 250,000 families depend on cotton as a source of income in his country. However, low incomes have meant that farmers and their families, particularly girls and women, are trapped in a cycle of poverty. Beyond gender issues, cotton production is associated with various social challenges as well as negative environmental impacts

Two things are crucial for the CSDDD to be impactful in the cotton sector:

  1. Full value chain scope: some decision-makers – and many lobby groups – believe that due diligence should be conducted only on European companies’ direct operations, or on the first tier of suppliers. Yet, there are serious human rights violations and environmental risks throughout the whole chain. The lack of proximity or limited leverage cannot be a reason for companies to wash their hands of responsibility. 
  1. Inclusion of SMEs: in the current proposal, only agricultural and textile companies with 250+ employees will be required to conduct due diligence. The fashion industry, however, is dominated by small and medium enterprises. If this threshold isn’t revised, up to 95% of textile companies would be exempt from these obligations. 

All companies in Europe, regardless of size, should be working to improve human rights and environmental conditions across the entirety of their value chains. 

Partnerships are built with third countries, and farmers producing for the European market are supported

Napolean Ningkos, a palm oil farmer and president of an organisation of indigenous smallholders in Malaysia, highlighted the intense scrutiny the palm oil sector has been under due to its links with deforestation, land rights, and working conditions. For smallholders of the Dayak indigenous group, however, the steady market demand for palm oil combined with its frequent yields has been a way out of poverty. They want to cooperate with governments and companies that will support them in achieving decent livelihoods while also producing in balance with nature. 

But that’s easier said than done. In the CSDDD’s design and implementation, the EU must: 

  1. Ensure that companies conducting due diligence are obliged to meaningfully engage with rightsholders, including smallholders, and to respect the free, prior and informed consent of indigenous peoples and local communities.
  2. Engage directly with stakeholders to bring clarity and support in sustainable and inclusive implementation, including encouraging government-to-government dialogue and partnerships with producing countries. 

What’s next?

All eyes are now on the European Parliament’s JURI Committee, which is expected to vote on its draft report in March. This vote will be crucial in defining the Parliament’s position on the file. And it’s imperative that the Parliament takes a solid and ambitious position to the trialogue discussions later this year. One that can be used to tackle the currently debilitating environmental and human rights issues in global agriculture value chains. 

By taking on board the key adjustments we propose above, we believe that the CSDDD will not only have the opportunity to work in practice, but could allow millions of smallholder farmers around the world to step out of poverty and thrive as part of a more sustainable value chain.

This article was originally published on Euractiv in February 2023.