Responsible Business Conduct and the Indian Agrifood sector
The Netherlands Ministry of Foreign Affairs recently reformed its policy on Responsible Business Conduct. What does this mean for Dutch companies doing business in the Indian agrifood sector? Keep on reading for more information about the policy change, tools and inspirational examples.
Last year, the Ministry of Foreign Affairs of the Netherlands evaluated its policy on Responsible Business Conduct (RBC, in Dutch: Internationaal Maatschappelijk Verantwoord Ondernemen or IMVO), to see if it is working as intended. In spite of many positive steps taken by the businesses, evaluations concluded that the RBC policy was not effective enough.
The Dutch government wants to ensure that Dutch companies behave in a responsible manner when they do business abroad. This means companies should take account of people and the environment when producing goods or providing services. Companies are therefore expected to act in accordance with the OECD Guidelines for Multinational Enterprises and UN Guiding principles on Business and Human Rights, and to implement due diligence within their supply chains.
On 16th October 2020, the Dutch government therefore took a decision on the outline of a new policy on RBC. The government is proposing a smart policy mix, in line with the international frameworks, with mutually reinforcing measures. A general due diligence obligation is a key element which should preferably be established by the EU. A European due diligence obligation makes for a greater impact in the supply chain and safeguards a European level playing field. The European Commission has announced an initiative before the second quarter of 2021. Currently, the Netherlands government is working out building blocks for legislation in more detail and is focusing primarily on exerting influence on the EU proposal for a binding measure.
Diplomatic missions are expected to build relevant expertise on RBC tied to their local context; to address RBC where relevant in all activities of economic diplomacy in order to raise awareness and support the private sector. For example by promoting dialogue and cooperation between businesses, civil society and government authorities. Furthermore missions should take RBC into account when entering into a cooperation structure of sorts with the (Dutch) private sector. This article is a first step to inform Dutch entities doing business in the Indian agrifood sector.
The due diligence cycle begins with embedding responsible business conduct into policies and management system. The next step is to identify and assess adverse impacts in operations, supply chain and business relationship. The third step for companies would be to cease, prevent or mitigate adverse impacts. Implementation of measures take should be tracked and results communicated on how those impacts are addressed.
Implementing OECD Due Diligence Guidelines from Responsible Business Conduct can help companies avoid and address adverse impacts related to workers, human rights, the environment, bribery, consumers and corporate governance that may be associated with their operations, supply chains and other business relationships. The Guidance includes additional explanations, tips and illustrative examples of due diligence.
Adhering to the OECD guidelines and due diligence are a prerequisite for RVO support and participation in missions.
Tools and Funds
To assist Dutch companies doing business in foreign countries in implementing RBC policy, the Ministry of Foreign Affairs has taken several measures. Companies can access the RiskChecker (https://www.mvorisicochecker.nl/en/worldmap) website to understand the different kinds of risk per country. Companies may also approach Dutch missions (Embassy or Consulate General) abroad to get a better overview of the different risks and how other Dutch organisations are working to mitigate those risks.
The Fund for Responsible Business Conduct provides a subsidy to Dutch companies who want to conduct regional research into the underlying causes of RBC risk and misconduct in their value chains and implement measures to address them. MVO Nederland also offers RBC vouchers for improvements in international supply chains. A dedicated Fund against Child Labour (FBK) will be opened soon for providing Dutch companies with financial support for taking action to prevent child labour in their businesses.
India and RBC: risks and inspirational examples
According to the RiskChecker, India has 18 identified country risks which includes risks like labour rights, environment, human rights & ethics and fair business practices. Considering the size of the country and disparity across regions it may be possible that these kinds of risk are present in certain areas and not across the whole country. To address the concerns of Dutch entrepreneurs when it comes to RBC risk, MVO Netherlands and the Embassy of the Netherlands in Delhi have created the INDUS platform. It is a matchmaking platform where Dutch entrepreneurs meet other Dutch companies for answers to sustainability issues.
Many Dutch companies have successfully mitigated RBC risks in India and have grown their business activities. For example, several Dutch companies in the agro – food sector have taken measures to address the challenge of presence of child labour in their supply chain. East West International B.V. secured a funding under FBK to run a multi-year program on stopping child labour in seed production in India. Similarly, Verstegen Spices and Sauces, through funding from FBK has carried out an exercise to find the presence of child labour in their supply chain for herbs and spices. In a report published last year, Arisa, a Dutch NGO, described how in the last five years, companies have taken steps to combat child labour in the cotton seed and vegetable seed sector.
Nedspice is an example of a company that has invested in India and that recognizes the importance of Responsible Business Conduct. Alfons van Gulick, CEO Nedspice: ‘We have set up the Nedspice Farmers Partnership Programme in 2013 to help farmers make their cultivation practices more environmentally, economically and socially sustainable. By treating farmers as partners and important stakeholders throughout the process, we create true sustainable relations. On the one hand, farmers can benefit from trainings on good agricultural practices, price premium and have a guaranteed buyer. On the other hand, we receive high-quality and sustainably cultivated ingredients from a traceable supply chain. That’s what we mean when we say: ‘we are working together on sustainable spicing.’
Dutch NGOs like IDH, Solidaridad and Global March are actively working with multinational enterprises across sectors in India on improving working conditions for semi and unskilled workers, mitigating any adverse environmental impact due to business operations and enabling local governments to implement policies like minimum wages, gender inclusiveness etc. Dutch companies who are concerned of doing business in India or sourcing from India due to the RBC risk can always approach these Dutch NGOs directly or through the Embassy and Consulates to know more about the inherent RBC risk in a supply chain.
RBC is becoming increasingly important in Dutch foreign economic policy. Due diligence is at the heart of Dutch RBC policy. In case of questions or comments, please contact the Ministry of Foreign Affairs (firstname.lastname@example.org) or the LNV Department in the Embassy (email@example.com).