What does the new EU supply chain law mean for food companies?

April 26, 2024

The European Parliament gave its stamp of approval to the final Corporate Sustainability Due Diligence Directive (CSDDD) on April 24th, 2024. But before food companies start to sweat, let's delve into why they should view this development not as a threat but as a golden opportunity to stay ahead of the curve.

Currently, the directive awaits the final nod from EU member states, following which it will be incorporated into national legislation. Essentially, the CSDDD aims to impose legal obligations on large corporations to conduct comprehensive human rights and environmental due diligence throughout their global supply chains. This means both EU-based companies and non-EU entities conducting a significant amount of business within the EU could be held responsible for the actions of their suppliers.

The rollout of compliance deadlines is staggered: major EU corporations with over 5,000 employees and €1.5 billion in turnover must adhere to the directive by 2027, followed by companies with 3,000 employees and €900 million turnover in 2028, and those with 1,000 employees and €450 million turnover in 2029.

Food companies have a unique chance to seize the initiative and kickstart their journey towards sustainable practices. By proactively addressing human rights and environmental issues within their supply chains, they can gain a competitive edge and establish themselves as industry leaders in corporate responsibility. We have already discussed the  business case behind environmental sustainability for food industry leaders.

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What does it mean for leading grocery retailers and food suppliers ?

So, what exactly does the CSDDD entail? It requires companies to embed due diligence into their corporate policies, which involves identifying and mitigating potential harm to human rights, the environment, and the climate. Additionally, companies must establish grievance mechanisms, monitor the effectiveness of their due diligence efforts, and publicly communicate their findings.

Furthermore, the directive mandates that companies align their business strategies with the goals of the Paris Agreement, striving to limit global warming to 1.5 degrees Celsius. These requirements apply to a wide range of companies based on factors such as size, turnover, and sector impact.

It's important to note that the transition to compliance won't happen overnight. There will be a phased implementation period, tailored to the size of each company, spanning at least three years from the enactment of the directive.

For food companies, the implications are significant. The food sector is deemed a "high-impact sector" under the CSDDD, meaning stricter regulations apply compared to other industries. Companies will be required to conduct a thorough review of their entire supply chains, addressing issues ranging from farming practices and manufacturing to packaging and labor conditions.

A window of opportunity for food companies

However, amidst these challenges lies a window of opportunity. Food companies can take proactive steps to enhance human rights, environmental protection, and climate resilience within their supply chains. Embracing regenerative agriculture, for instance, offers a sustainable solution to issues like soil degradation, pesticide use, and biodiversity loss.

In this evolving landscape, companies that prioritize sustainability will not only comply with legal requirements but also gain a competitive advantage and future-proof their businesses. At inoqo, we stand ready to support food retailers in their journey towards a more sustainable future. To learn how we can assist your business, reach out to us at hello@inoqo.com

April 26, 2024

by Laura

from inoqo

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