A well-functioning agricultural sector is a crucial component for any successful and sustainable economy, given its core role in the production of food and raw materials. Supply chains of many sectors rely on crops, fibers and fuels, linking them to agriculture and its impacts.
Given the multiple sustainability themes associated with agriculture – nutrition and health, employment, soil or water contamination, competing demands for land use and food prices – it’s no surprise that the sector is highly regulated. As the global drive towards more sustainable agricultural production intensifies, scrutiny will only further increase.
European countries, in particular, have been actively adopting strategies for more sustainable food systems under the European Green Deal. Consequently, countries who export agriculture commodities to the EU will also need to adapt to these developments.
It can be a significant ask for companies with global supply chains to comply with developing sustainability requirements, as they affect almost every operational aspect – how production is managed; employment terms and conditions; use of natural resources, etc. There are a number of emerging developments, described below, that companies with agricultural products in their supply chain need to be ready to respond to.
Human rights due diligence
Over 2.5 billion people work in agriculture, which is the single biggest source of employment around the world. Agriculture value chains are frequently associated with human rights impacts, which often relate to informal contractual relations and a lack of protections for workers. Insufficient income is a persistent issue, while risk of child labor and forced labor are also high.
This is why due diligence laws, enacted and in the making, are now a major consideration for any business with agricultural supply chains. These include the EU Corporate Sustainability Due Diligence directive, the Modern Slavery Act in Australia, the Duty of Vigilance law in France, and the UK’s Modern Slavery Act, among others.
What these policies have in common is that they focus on ensuring organizations communicate how their human rights impacts are identified and addressed. This requires companies to set-up qualitative and quantitative data collection and governance to enable compliance. In addition, products need to be traceable, given they can be aggregated from multiple sources with different production conditions.
Deforestation
In December, the European Council and the European Parliament reached a provisional agreement on the regulation for deforestation-free products, proposed by the European Commission. The regulation outlines mandatory due diligence rules for deforestation, with an ambition to “reduce the EU’s contribution to greenhouse gas emissions and global biodiversity loss by minimizing the consumption of products coming from supply chains associated with deforestation or forest degradation.” It will cover products in or exported from the EU market, including palm oil, cattle, soy, coffee, cocoa, timber and rubber.
At the international policy level, OECD and FAO are currently developing a Handbook on deforestation, covering forestry degradation and due diligence in supply chains. This means that many businesses will face more disclosure requirements, on how they assess and monitor deforestation risks – in their own activities, supply chains and even sourcing locations in general.
Pesticides use
The EC has set 2030 targets to reduce by 50% the use and risks of chemical pesticides, and cut by half the use of more hazardous pesticides. Meanwhile, a proposal for a regulation on the sustainable use of plant protection products was adopted by the EC in June 2022, which will make the targets legally binding. In line with the proposal, EU states can be expected to bring in their own national reduction targets, requiring reporting by companies.
This aligns with policy objectives at the international level. The FAO Guidelines on Highly Hazardous Pesticides set expectations on minimizing negative impacts from pesticides, while promoting integrated pest management. Assessing progress towards the reduction targets can’t be achieved without transparency at the corporate level.
Animal welfare
The UK Animal Welfare (Sentience) Act entered into law this year with a core purpose to scrutinize the definition of ‘sentient animals’, which now includes aquatic animals, such as octopus and squid. Recognizing animals as complex beings with the capacity to feel emotions has far-reaching consequences for the agriculture sector and raises the bar for animal welfare, both in the wild and farmed.
The precedent set by the UK can also be expected to lead to more protections for animals, in other jurisdictions. If not already doing so, the corporate sector and any business with agricultural supply chains needs to pay attention to this topic.
Growth in reporting
Increases in sustainability and due diligence policies are prompting companies to do more to disclose their outward impacts, including mechanisms to mitigate and reduce them. With this purpose in mind, EU legislation already requires certain large companies to report information on their socio-environmental impacts, including on human rights. This is being significantly strengthened and expanded through the Corporate Sustainability Reporting Directive, which received final approval on Nov. 28, and from 2024, sets mandatory disclosure requirements for some 50,000 companies, with Global Reporting Initiative (GRI) contributing to the development of new European standards.
The push for transparency is transversal. Capital markets actors, including banks, stock exchanges, rankers and raters, are also developing evaluation and reporting criteria that encompass agriculture – while retailers are moving towards more stringent sustainability requirements for the products they sell, asking for more information from producers.
Momentum for globally consistent disclosure
As new sustainability policies for crop and animal production continue to emerge, the corporate sector needs to be ready. Demonstrating sustainable agricultural production is becoming critical to preserve access to local and global markets.
GRI 13: Agriculture, Aquaculture and Fishing Sectors, released in June, is a dedicated standard for agriculture companies. It is an extension of the GRI Standards, the most widely used sustainability reporting standards across global regions, which incorporate general due diligence requirements as well as key sectoral topics. While GRI’s standards are voluntary, they build on emerging policies and adopt requirements in line with international law, often exceeding jurisdictional regulations. GRI 13 integrates sustainability expectations across 26 topics, including those highlighted above, making it all-encompassing.
With more and more imperative to report on sustainability issues, companies would do well to stay on top of emerging requirements and expectations for transparency – by proactively adopting credible reporting standards and meeting or pre-empting information demands from their stakeholders in the process.
