Business shifts responsibility to Government on Sustainable Development Due Diligence – why?

‘We, the undersigned, as leading businesses, investors, business associations and initiatives operating in the UK, encourage the government to play a positive role in building a more resilient and sustainable post-pandemic economy that works for all.’

Business these days is keen to show its environmental credentials, and many companies are keen to show that they are ahead of the pack when it comes to sustainability. This recent call from a number of signatories for the government to mandate companies to carry out human rights and environmental due diligence could be viewed as a big step forward. 

As the signatories to this call say, more companies need to assess, act and report on their potential and actual impacts on human rights and the environment. And government legislation could shape standards expected of businesses. 

But several of the companies named on the document have been criticised for a lack of transparency in their supply chains. And, perhaps, could not be described as exemplars when it comes to human rights, environmentalism, or reporting. 

Ever-vigilant to greenwashing, we must not only look at what businesses may be saying, and the documents to which they put their names, but also at what they are actually doing, and have done. 

Stakeholders – be they employees, investors, regulators, and more importantly ‘advisors’ to these firms, have to call out how our clients are being seen in the market. Progress is being made, no doubt about that, but an understanding on why firms reach for Government intervention is also an interesting topic for discussion. Nothing what I say in this article, is outside the public domain, these are my thoughts and my thoughts alone.

Human Rights 

Nestle is one of the signatories of this document. But they are also the subject of a very long running boycott due to numerous ethical concerns. Conflicts and infringements of human rights over water use are just one key issue Nestle are keen to address due to stakeholder pressure.

In 2019 Nestlé was also named one of the top 3 plastic polluters in the world, alongside PepsiCo and Coca-Cola. And plastic pollution poses huge threats both to the human race, and primarily to the environment. Let’s be clear, if we have no decent environment in which to live, then as a race we are done. 

Unilever is another signatory, ‘implicated’ in human rights abuses. Amnesty International has reported serious human rights abuses within the palm oil supply chain at Wilmar – one of two companies from where Unilever sources palm oil, which are implicated in human rights abuses and deforestation. 

Conflict Palm Oil and Deforestation

In 2016, Mondelez also came under scrutiny because of palm oil – a common ingredient in chocolate bars. The company sourced this from the secretive palm oil trading company Olam – a company that has been linked to deforestation in Southeast Asia and Africa. Olam is one of two trading companies, along with Wilmar, also associated with Unilever.

Though Unilever states that it is “committed to sourcing palm oil sustainably and eradicating deforestation and human rights violations in the palm oil supply” this issue drags on. In 2020 the company was again criticised over the issue, with civil society organisations saying that it still had not addressed the problem of ‘conflict palm oil’ in its supply chains.

Palm oil is still an issue for many other signatories on this list, including Mars, Nestle and Unilever – all companies with NDPE (No deforestation, no peat, no exploitation) policies. 

According to research from 2020, Mondelez, Nestle, Unilever, Mars – all had links to the top ten deforesters in Indonesia, Sarawak (Malaysia) and Papua New Guinea in 2019. 

Unsustainable Soya and Deforestation

Tesco is another company keen to sign their name to this call to government. Tesco say that they are doing all they can on sustainability. But Ethical Consumer research has highlighted a number of ethical issues for the company, relating to climate change, palm oil, environmental reporting, habitats and resources, pollution and use of toxic substances, human rights, worker rights, animal welfare, factory farming, political activities… the list goes on. 

One key concern, highlighted and explained by Greenpeace here, is that Tesco are subject to a confusing supply chain, and failing to actually delve deeper to truly decouple from deforestation in the Amazon. 

Unilever are keen to highlight their work in regenerative farming in the US side of their supply chains. But still source soy beans from Brazil as well as from the US. And the difficulties of accurately determining the origin of soy products mean that global supply chains, including those of signatories to this document, are implicated in continuing deforestation. 

Delving into the complex supply chains of large companies always poses a challenge – both for the companies themselves in trying to undertake due diligence – and for investors, consumers and anyone trying to find the truth behind the headlines. 

But we must not mistake a desire of these companies, and others on the list of signatories to move in the right direction, with a complacency in thinking that true due diligence is already taking place.

The points made above, as well as many other stories of issues with human rights and environmental problems in supply chains, just serve to show just how much work remains to be done. 

It will be vital to ensure that big businesses, with the ear of governments and authorities, are not allowed to paper over any of the cracks. ‘Due diligence’ must not be allowed to stop in a hazy mist somewhere further back in supply chains.

It is up to business leaders and investors, as well as government, to delve deeper and truly tackle the issues in their supply chains, and do the right thing for people and our planet. Advisors to these firms will be an important feature, in not only holding their feet to the fire, but supporting these firms in meeting their sustainable development goals. Make no mistake, risks prevail – physical risk, transition risk, existential risk, and reputation risk. To say the least.