Human Rights Due Diligence (HRDD)

The European Union has proposed new legislation, the Sustainable Development Due Diligence Directive, to ensure that European companies and non-European companies operating in the EU respect human rights and environmental standards.

At the national level, France adopted in 2017 the law on the duty of vigilance of companies, which obliges large companies to carry out due diligence in terms of human rights and the environment. Germany's Supply Chain Due Diligence Act, which came into force at the start of 2023, obliges large companies to carry out supply chain risk analyses. The Netherlands, Norway, Austria, but also the United Kingdom, with the Modern Slavery Act, have all adopted different types of regulations to guarantee the protection of the rights of human workers. Canada, with the Forced Labor Act, and the United States, with the Uyghur Forced Labor Prevention Act, has committed to enacting corporate accountability legislation as part of their national business and human rights plans.

The UN Guiding Principles on Business and Human Rights and the OECD Due Diligence Guidelines were the first regulations requiring companies to carry out due diligence in order to identify and mitigate any human rights abuses they may cause.

How can companies effectively identify and mitigate potential human rights risks in their international operations? To learn more, click here.

Green Claims Directive

With a plethora of environmental claims being made by companies today, it's hard for consumers to know which ones to trust. Some of these claims can be misleading and lead to a significant lack of trust among consumers.

On 22 March 2023, the Commission adopted a proposal for a Directive on Green Claims. This proposed law aims to make green claims more reliable, traceable, and verifiable across the EU and bring clarity and order to the environmental claims marketplace.

It is an effort from the EU to address growing concerns about greenwashing practices and provide more clarity to consumers to make better-informed purchasing decisions.

The directive requires companies to verify and substantiate their environmentally-friendly claims using scientific evidence before making them public. EU member states will establish the verification process and be overseen by independent bodies. The directive would also apply to companies outside the EU making eco-friendly claims aimed at the bloc's consumers.

The Green Claims Directive is intended to complement the Commission's March 2022 proposal to amend the EU Unfair Commercial Practices Directive ("UCPD") and the Consumer Rights Directive.

Deforestation-Free Products

The European Union (EU) Regulation on deforestation-free products (EUDR) aims to prevent commodity-driven deforestation and degradation of forests in selected supply chains of the European Union. It is a part of the European Green Deal, which aims to protect and restore the world's forests.

The new regulation is expected to replace the EU Timber Regulation, which was part of the 2003 European Union's policy under the Forest Law Enforcement Governance and Trade (FLEGT) Action Plan to fight illegal logging and associated trade.

Before the EU's proposal on deforestation, several countries implemented other significant national deforestation regulations. The French strategy in 2019 put significant pressure on Brussels to set an EU-wide action plan.

Norway as a pioneer in curbing global deforestation, implemented in 2020 a law that requires companies to ensure their supply chains are free from deforestation, while the UK has introduced the UK Environment Act, which provides a significant new set of measures to combat imported deforestation.

Meanwhile, in the US, the FOREST Act aims to punish bad actors and fine offending countries in an effort to discourage deforestation.

Policy Development

We recommend that companies selling products in the EU go through Annex 1 of the regulation to understand which products are Relevant Products and identify their roles (Operator, Downstream Operator, Trader) for each Relevant Product. Purchasing policies and contracts will need to be updated to incorporate supplier compliance. Earthworm can support Members in updating their responsible sourcing policies to include a due diligence approach that is in line with the regulation and proactively addresses potential adverse impacts of the regulation (for instance, smallholder exclusion.)

Risk Assessment

With a global presence and decades of experience in supply chains, we have in-depth knowledge of the social and environmental risks across raw material production areas. We can identify risk hotspots using supply chain traceability data and suggest where supplier engagement and local interventions would mitigate risks.

We see an opportunity to support companies now by identifying areas of their current supply chain that:

• Meet the requirements of the regulation,
• Don't meet the requirements but could with short-term targeted intervention (for instance, building smallholder traceability).
• Will not be able to comply with the regulation (for example, if there has been deforestation since December 31, 2020).

We believe it is paramount for companies to assess their current supply chain to identify actions that can be taken to prepare for the enforcement of the regulation. Once the regulation comes into force, Earthworm is confident in our local knowledge of risks and the datasets we maintain to support companies implementing risk assessment as part of their due diligence system.

Supply chain mapping and traceability

With over 20 years of experience in supporting companies with building supply chain transparency, Earthworm is well placed to support companies in collecting traceability data in line with the requirements of the regulation. Currently, Earthworm supports a range of companies collecting traceability data, including field-level data (e.g. GPS points and polygons of plantation/farm boundaries).

Our traceability solution is available for all raw materials in the scope of the regulation except for cattle. Earthworm can configure its traceability data collection process according to the company's needs. For example, we can support annual, biannual, or quarterly data collection and reporting and, where suitable, with forward mapping of the supply chain as purchase agreements are made with suppliers.

Satellite monitoring of deforestation and conversion

Alongside Airbus, we've developed Starling, an innovative satellite monitoring tool to provide up-to-date and accurate data on where the forest is present in supply chains, where forest change is occurring and where that change is categorised as deforestation or degradation. Using this data, Earthworm supports many companies in implementing a process to verify commitments to eliminate deforestation and degradation in their supply chains.

Starling and Earthworm are currently providing this solution for all raw materials in the scope of the regulation except for soy and cattle. In the case of soy from Brazil, Earthworm has developed the Zero Deforestation and Conversion (ZDC) solution, which is a methodology similar to those used for palm oil, cocoa, etc., that uses supply chain data with best-in-class land cover and land cover change data to assess and verify where deforestation and degradation requirements are being met. Importantly, the Zero Deforestation and Conversion (ZDC) solution includes natural land cover that the regulation doesn't currently cover (e.g. the Brazilian Cerrado), but which is expected to be incorporated into the regulation during the next review.

Risk mitigation

Downstream Operators and Traders must rely on their suppliers’ traceability and monitoring systems to implement the regulation. Still, part of a robust due diligence system is doing checks alongside the assurances provided by suppliers, especially where non-compliance risks are high.

Earthworm proactively monitors known cases of deforestation and human rights violations through our Grievance service and our satellite monitoring tools. We then drive collective action to fill in information gaps and invest in remediation on the ground.

Our T4T (Tools for Transformation) and EPI (Engagement for Policy Implementation) tools help palm oil mills and refiners identify where their traceability and sourcing policies might not comply with the regulation and point them to resources to help them improve.

Collective action in the field to address root causes and systemic risks

Often companies will not have sufficient leverage to mitigate risks in their supply chains fully. Earthworm offers many ways for our members to collaborate to address root-cause issues in the field and systemic risks in the sector. Our landscapes programme uses participatory land use planning to address the risk of land rights abuses and works with farmers and communities to actively protect forests. Building smallholder resilience and compliance with responsible sourcing policies are an essential part of our work in landscapes, addressing the potential unintended consequence of the regulation of excluding smallholders from supply chains.

We also create training programmes for groups of supply chain actors to help them address common risks found in their production systems and regions. For instance, our Center of Social Excellence in Brazil has trained 60 managers from the Brazilian pulp and paper sector on best practices for stakeholder consultation, consent, and mediation to reduce social conflict.

Staying engaged in high-risk sourcing areas

Responsible sourcing strategies should address salient environmental and social challenges in key sourcing regions. This includes understanding the root causes of deforestation, exploitation and conflict in areas identified as high risk and addressing them through a well-defined action plan. Reliable data and insights to evaluate and mitigate risks and a series of on-the-ground interventions can bring about the needed transformation in areas where raw materials are being sourced.

In addition to staying engaged in high-risk sourcing areas, it is crucial to consider sourcing regions from a multi-raw material perspective. This means being aware of any raw materials that may be sourced from high-risk regions and finding ways to contribute to support transformation in these places positively. It is important not to get siloed in commercial decisions with a single raw material mindset, as this can hinder achieving business and company goals. By taking a holistic approach to responsible sourcing, companies can address key sourcing regions' environmental and social challenges and promote sustainable practices across their supply chains.

Engaging and empowering suppliers

To meet their responsible sourcing commitments, businesses must engage and empower suppliers through the co-creation of action plans, capacity building, training programs, incentives, and more.

At Earthworm, we believe there is no pre-defined approach to doing this. A number of tools and mechanisms exist that could help companies identify gaps with respect to their NDPE policies and help find ways to address them. Engagement for Policy Implementation (EPI) and Tools For Transformation (T4T) are online systems that allow companies to know where their suppliers stand on NDPE (No-Deforestation Peat nor Exploitation) requirements. Once gaps are identified, strategies can be co-created to close identified gaps.

Working with communities

Indigenous people and local communities (IPLC) own more than half the world's land but have ownership rights to only 10 %. Working closely with communities and Indigenous people to address land use and tenure rights issues and ensuring companies sourcing from these regions respect their rights is critical to the success of supply chains and landscapes.

As part of our work on landscapes and supply chains, we collaborate with many of the world's largest buyers of agricultural and forest products to promote human rights and secure land rights for local communities.

Our Center for Social Excellence (CSE) works with companies to secure their social license to operate by developing participatory land use plans, Free Prior Informed Consent (FPIC), High Carbon Stock Approach (HCS/HCSA), Social Impact Assessment (SIA), and community engagement plans.

Our team of social experts, with hands-on experience, train companies and works with them to build relationships with local communities.

In addition, Earthworm Foundation has staff and partners who live and work in the regions where IPLC communities are located. We collaborate with these communities to understand their priorities, struggles, and traditional work methods. We help them gain recognition of their rights by working alongside companies and government agencies that impact them.

Ensuring smallholder resilience

More than two billion people live and work on small family farms, which produce much of the world's food. Farmers' livelihoods are threatened by a diversity of factors, including harsh field conditions, limited training opportunities, and suboptimal yields. In addition, globalisation, disease, pest outbreaks, and climate change exacerbate the situation, jeopardising the future of farms, crops, and commodities. Supporting these farmers in their work and building their resilience should be at the heart of any company's work.

At Earthworm, we believe that targeted support can help them reach their full ecological, economic, and social potential. Our approach is to work with farmers, empower them and improve their resilience, and strengthen their links with buyers and their position in the supply chain. Building trust and understanding the realities of their lives is an integral part of our approach.

From No-Deforestation to Forest Positive

Looking at forest conservation and biodiversity - More and more businesses are adopting forest-positive strategies prioritising biodiversity and forest conservation and restoration. Focusing on these objectives can help protect and restore important forest ecosystems while ensuring the well-being of those who depend on them.

However, achieving these goals requires a comprehensive understanding of the drivers of deforestation in their supply chains and the broader landscape context in which forests exist.

A landscape approach is crucial for ensuring the long-term sustainability of our forest ecosystems. We recognise that forests do not exist in isolation but are connected to and influenced by the broader landscape, including land use, agricultural practices, and communities.

The Forest Conservation Fund, established by the Earthworm Foundation, is a great example of the Landscape approach in action. By partnering with local communities and Indigenous peoples, the Fund can protect and restore forests and promote biodiversity conservation while supporting responsible sourcing practices by companies.

Since its inception, the Forest Conservation Fund has partnered with Indigenous peoples and local communities to keep forests standing through 13 projects in 8 countries, conserving 114,598 hectares of tropical forests.

Human rights and worker rights in supply

Labour exploitation remains a significant issue in global value chains. From migrant workers being denied access to their passports to children working in dangerous conditions, labour issues can encompass a range of problems, such as family labour, forced labour, long hours, and very low wages. These systemic issues cannot be solved by one company or by working in a single supply chain.

We advocate for transparency and accountability. By mapping the entire value chain and identifying potential labour issues, companies can take the necessary steps to combat and prevent exploitation.

As many of these people work in the informal sector, many tiers down the supply chain, achieving this requires engaging many stakeholders with facts and tools to encourage them to buy into what we are doing.

Grievance management

Grievances are mechanisms that allow individuals or groups to raise issues related to labour, community, and environmental concerns safely and confidentially.

Dealing with grievances and complaints can be a daunting task, especially when it comes to supply chains. While most companies have a process in place for managing complaints, transparency can be a significant obstacle.

That is because it means that all stakeholders need to be upfront about what went wrong, how it happened, and what's being done to fix it. Unfortunately, there are still many barriers to identifying all the issues present in supply chains and determining who is responsible.

Companies without established mechanisms for dealing with grievances should recognise the risks associated with not having a robust mechanism, including reputational, legality, and security of supply risks. Companies should have effective processes for receiving and triaging grievances, taking action, and tracking cases to satisfactory conclusions.