CNV Internationaal’s vision on responsible value chains

This article can also be found in our recent publication Towards a responsible value chain – The role of investors and the CSDDD.

Insight into the value chains

Company products should respect people and nature. To support this, CNV Internationaal works to strengthen local unions and improve working conditions by promoting social dialogue at the local level.

Local unions, for example in the mining sector, have the deepest understanding of working conditions and know best which issues should be prioritised. We support these local unions in their negotiations for collective bargaining agreements (CBAs). However, freedom of association is not self-evident and can pose issues in countries such as Indonesia. Union busting is a common issue, with union leaders facing dismissal or intimidation when they recruit new members or speak out on important issues.

Progress on these value chain issues varies widely across sectors but should become more visible. Meanwhile, multi-stakeholder initiatives must raise the bar; progress stalls if organisations remain in the discussion phase. Collaboration is essential, first to gain supply chain insights, and second to increase leverage with suppliers. This encourages suppliers to negotiate high-quality collective bargaining agreements that align with International Labour Organization (ILO) conventions.

The textile industry seems a step ahead. Transparency on suppliers has increased through initiatives such as the Open Supply Hub, an open-source supply chain mapping platform. And they are showing gradual progress on issues such as living wage. In contrast, living wage remains an unaddressed topic within the Roundtable on Sustainable Palm Oil (RSPO) and within the palm oil industry in general. More structural approaches are needed to advance living wages and drive systemic change in value chains.

Furthermore, to address issues in the value chain, you should not operate in silos. Environmental and social impacts are closely intertwined. In the nickel sector, particularly in Morowali (Indonesia), living conditions are especially dire. In a short period, 80,000 people have moved to the fishing villages to work at new mining smelters. Living conditions are terrible, airborne dust poses health risks, and waste of the smelters is being dumped into the sea. Additionally, workers face unsafe working conditions. We encourage unions to collaborate with the international community, as well as local and national government, to consider these social and environmental perspectives simultaneously and work on integrated solutions.

The CSDDD will require action

We already had the OECD Guidelines, but the voluntary nature has led to limited progress. Many companies were hesitant to address value chain issues. They are reluctant about the potential short-term investments, because they are afraid it undermines their competitiveness. For many, a level playing field is essential – something the CSDDD aims to establish.

The CSDDD will require companies in scope to identify and address negative human rights and environmental impacts of their actions inside and outside Europe, which may prove challenging, especially initially. One of the challenges, in the case of palm oil plantations, is that companies often source from suppliers in remote regions. Therefore, collaboration is essential. On top of that, consultations in producing countries will support accurate implementation of CSDDD requirements so the right measures are taken. Companies need to support suppliers so they do not end up with the (financial) burden.

What companies can address

While this is not an exhaustive overview, there are several practical steps companies can take to start contributing to more responsible value chains.

1. Use certification as a tool and do not make it the end goal. Certifications are a great place to start, but company responsibility does not end there. Many certification schemes, such as RSPO, still need to drastically raise the bar before positive impact can be made. Certifications are an instrument in the due diligence process, but keep looking for what you can do beyond certification schemes.
2. Collaboration in obtaining data is fundamental to change. In many cases, companies rely on audits to gather data for risk assessments. However, audits alone are often insufficient for capturing social aspects such as working conditions in factories or on plantations. Audits are often announced visits, and we have observed that management will take measures specifically for the audit. Additionally, auditors are not (yet) always trained or equipped to grasp the sensitivities that take place. Interviewing union representatives on-site can hinder open dialogue due to management presence and potential repercussions for union leaders once the auditors have left. CNV Internationaal has developed the Fair Work Monitor, which allows local unions to gather data directly from workers for a more honest perspective. Companies can also contribute to the beforementioned Open Supply Hub, which enhances transparency by mapping supplier relationships and fosters collaboration on improving working conditions.
3. Make structural change. Short-term projects lack the capacity to drive structural change. To achieve systemic progress, we must work towards ensuring every worker earns a living wage. A way to do this is by establishing a robust procurement policy. This policy should be signed off by the CEO and supported and complied to by the entire organisation. Each department – purchasing, HR, sustainability, and finance – has a critical role in this integrated approach.
4. Improve stakeholder engagement. Stakeholder engagement is a key pillar in the CSDDD. Labour unions – which represent workers’ voices – can be a valuable source of information for companies throughout each step of the due diligence process, particularly in risk identification and prevention, mitigation, and remediation of negative impact. Because, to make real impact, companies need to address the right issues in the right way.

The role of the investor

Investors can also contribute to improvements of RBC. By understanding where companies can do better, investors can provide support, for example in setting standards. We conducted a project in the palm oil sector, where we collected all CBAs in a particular region. This required visiting plantations in person to assess whether each CBA met ILO standards. Since each plantation with a CBA has a union, we were able to create an overview for investors and companies, highlighting which supplier adhered to which labour rights.

If investors and companies express interest in this, it will signal to suppliers the importance of strong CBAs and encourage improvements. While more data is needed to reach that level, there is a real opportunity here.