United NationsDepartment of Economic and Social Affairs Sustainable Development

Global Pilot Project for the OECD-FAO Guidance on Responsible Agricultural Supply Chains

    Description
    Intro

    Companies operating in the agricultural sector are increasingly under pressure to address social and environmental impacts in their supply chains while finding ways to meet the critical targets that are set under the Sustainable Development Goals (SDGs). At the same time, the context within which companies operate includes the increasing challenges of resource scarcity, soil and water degradation, climate change, and a world population projected to reach 11 billion by the end of the century. The OECD-FAO Guidance for Responsible Agricultural Supply Chains (OECD-FAO Guidance) helps companies meet these challenges by providing a framework for risk-based due diligence to identify and address risks in global agricultural supply chains.

    The OECD-FAO Guidance is the global standard for responsible business conduct in agricultural supply chains. It covers several areas that are key to business and development in the agricultural sector, illustrating impacts in areas such as: food security and nutrition, human and labour rights (including child labour), gender, climate change and natural resource depletion (including deforestation), governance, animal welfare, land tenure rights, technology and innovation, and many more. The OECD-FAO Guidance incorporates established standards for responsible business conduct (RBC) including the OECD Guidelines for Multinational Enterprises, the UN Guiding Principles on Business and Human Rights (UNGPs), and the UN Committee on World Food Security’s Principles for Responsible Investment in Agriculture and Food Systems (CFS-RAI). Importantly, the recommendations of the OECD-FAO Guidance is recognized by over 39 countries as well as civil society, workers and employers organizations – and businesses themselves. Its key features include:

    • An introduction to a model enterprise policy, outlining the standards that enterprises should observe to build responsible agricultural supply chains;

    • Presenting a practical framework for risk-based due diligence describing the five steps that enterprises should follow to identify, assess, and mitigate risks and report on work for addressing the adverse impacts of their activities;

    • Outlining and describing the major risks faced by enterprises in the agricultural sector, highlighting measures for mitigating these risks; and

    • Featuring examples on engaging with and addressing development vis-à-vis vulnerable groups, such as indigenous peoples.

    To promote the uptake of the OECD-FAO Guidance, the OECD and FAO launched a global pilot project in 2018 with volunteer companies and industry initiatives operating in agricultural supply chains. Participants included enterprises operating upstream and downstream at different parts of the value chain, responsible for producing, transporting and transforming a wide range of agricultural food and non-food commodities such as bananas, beef, cocoa, cotton, dairy products, palm oil, soy, sugar, among others. A total of twenty-seven companies and seven industry initiatives volunteered their participation in the global pilot project.

    Feature Links:

    FAO Responsible Business Conduct (RBC) in Agriculture - http://www.fao.org/responsible-business-conduct-in-agriculture/en/

    OECD-FAO Guidance for Responsible Agricultural Supply Chains - http://www.fao.org/economic/est/issues/investment/guidance/oecd-fao

    Global Pilot Project for the OECD-FAO Guidance for Responsible Agricultural Supply Chains - http://www.fao.org/economic/est/issues/investment/road-test-of-the-oecd-fao-guidance-for-responsible-agricultural-supply-chains/

    Description

    The OECD-FAO Guidance was launched in 2016 following a two-year multi-stakeholder consultative process and a public consultation led by the OECD and FAO. The OECD-FAO Guidance provides a common framework and globally applicable benchmark to help enterprises operating along agricultural supply chains to identify and mitigate adverse impacts and contribute to sustainable development.

    In February 2018, the OECD and FAO launched a global pilot project to test the practical application of the OECD-FAO Guidance and generate knowledge on how companies and stakeholders are implementing its key recommendations. The project’s first milestone included a baseline report of participating companies and supply chain initiatives that evaluated the extent to which the recommendations of the OECD-FAO Guidance was addressed and implemented by participants.

    The findings of the baseline report, together with subsequent analysis and discussion with participants, informed the scope of other activities that were undertaken during the pilot. These included a series of peer-learning webinars, and in-person meetings that enabled participants and a wider community of stakeholders to share experiences and discuss solutions to address challenges identified. A progress survey was carried out in Spring 2019 to understand the progress made by companies in implementing the recommendations of the OECD-FAO Guidance.

    In addition to assessing how companies interpret and implement responsible business conduct and due diligence principles, the global pilot aimed to support companies in better understanding the five-step due diligence framework recommended by the OECD-FAO Guidance for systematically and comprehensively managing risks in agricultural supply chains. Importantly, the global pilot provided a bridge to understanding how businesses in the agricultural sector – together with stakeholders – can support positive development impact and the SDGs through their business operations and relationships with suppliers along the supply chain. The project also allowed companies to openly share learnings and good practices in implementing due diligence, raise questions and share solutions for addressing gaps and inconsistencies. 

    Feature Links:

    Global Pilot Project for the OECD-FAO Guidance for Responsible Agricultural Supply Chains - http://www.fao.org/economic/est/issues/investment/road-test-of-the-oecd-fao-guidance-for-responsible-agricultural-supply-chains/

    Baseline Report of the Global Pilot Project for the OECD-FAO Guidance for Responsible Agricultural Supply Chains – http://www.fao.org/documents/card/en/c/CA1655EN/

    FAO Responsible Business Conduct (RBC) in Agriculturehttp://www.fao.org/responsible-business-conduct-in-agriculture/en/

    OECD-FAO Multistakeholder Consultation Report -  http://www.fao.org/publications/card/en/c/CA8344EN/

    OECD-FAO Public Consultation Reporthttps://www.oecd.org/investment/fao-oecd-guidance-consultation.htm

    OECD-FAO Guidance for Responsible Agricultural Supply Chains - http://www.fao.org/economic/est/issues/investment/guidance/oecd-fao

     

    Contribution to SDG Implementation

    Often times, businesses struggle to understand how to absorb the SDGs – and make them relevant to their operational environments. This project linked business conduct and development outcomes, with a view to helping companies understand how they can reduce adverse impacts on environment and society by meeting the SDGs. Owing to the magnitude of risks and development impacts that take place in sourcing, processing and trading agricultural raw materials from low- and middle-income countries, virtually all SDGs are addressed when considering due diligence. The OECD-FAO Guidance contributes to the achievement of the 2030 Agenda and several of the Sustainable Development Goals (SDGs), including in particular SDG 1, 2, 5, 8, 10, 12 and 15. This can range from de-risking company impacts through decent work in supply chains (SDG8), helping ensure that business operations do not contaminate or take away from local freshwater supplies (SDG6), to safeguarding food security by addressing supply chains and overcropping (SDG2).

    The OECD-FAO Guidance recommends that businesses implement due diligence to know and show that they are addressing the most significant environmental and social risks associated with their agricultural supply chains and that they are considering the whole range of their impacts on the SDGs. Stakeholders in the pilot project explained that due diligence can benefit businesses by lowering operational, reputational and financial risks but also pointed out that development orientated, risk-based processes, can also make a lasting contribution to the SDGs. The key to ensure maximum impact for the SDGs was expressed as extending a company’s material risk focus beyond their immediate operations to business relations and suppliers across the entire value chain.

    Elaborated below, peer learning activities were an important aspect of the project, where the SDGs featured prominently in trying to decipher how they interrelated with company due diligence processes. In particular, one working group in the peer learning session comprised of four companies and one industry initiative which focused their attention on the SDGs. Their discussions, effort and input related to how their own business operations responded to both the SDGs and the OECD-FAO Guidance, with application to Life on Land (Goal 15), Decent Work (Goal 8) and Responsible Consumption and Production (Goal 12), among others. The discussions and input inspired the development of an OECD-FAO policy note outlining how companies can address the Sustainable Development Goals through the OECD-FAO Guidance for Responsible Agricultural Supply Chains.

    The project’s final report explains that through the OECD-FAO Guidance, businesses can proactively identify and address the impacts to workers, the community and the environment and ensure that actions and inactions are not undermining the Sustainable Development Goals (SDGs). Further, the lessons from the project point out that by systematically managing risks, companies can demonstrate their contribution to the SDGs in a measurable way. 

    Feature Links:

    Global Pilot Project for the OECD-FAO Guidance for Responsible Agricultural Supply Chains - http://www.fao.org/economic/est/issues/investment/road-test-of-the-oecd-fao-guidance-for-responsible-agricultural-supply-chains/

    Final Report of the Global Pilot Project for the OECD-FAO Guidance for Responsible Agricultural Supply Chains – http://www.fao.org/3/ca6772en/CA6772EN.pdf

    FAO Responsible Business Conduct (RBC) in Agriculturehttp://www.fao.org/responsible-business-conduct-in-agriculture/en/

    OECD-FAO Guidance for Responsible Agricultural Supply Chains - http://www.fao.org/economic/est/issues/investment/guidance/oecd-fao

    OECD-FAO Guidance – Helping Achieve the Sustainable Development Goals (SDGs) – http://www.fao.org/3/ca7970en/CA7970EN.pdf

    Implementation methodologies

    A multi-stakeholder Agricultural Advisory Group (AG), led by USAID and supported by vice chairs from business, investors and civil society provided advice and feedback via the OECD and FAO to help shape the project activities and engage with participants via peer-learning webinars. The learnings from the pilot were communicated to the AG regularly through the course of the pilot. Throughout the duration of the project, the participants had the opportunity to share their experiences and help define good practice in addressing recommendations of the OECD-FAO Guidance through a collaborative and interactive approach. The pilot provided an opportunity for companies to hold in-depth conversations with peers in a safe and confidential space to discuss successes and challenges in supply chain due diligence and learn from others. A total of twenty-seven companies and seven industry initiatives volunteered their participation in the pilot project. The following milestones formed the basis of this project:

    Launch of the pilot project (February 2018)

    A kick-off meeting was organised to discuss the objectives of the pilot and identify priority areas (e.g. specific issues, risks and challenges) to be addressed through the project.

    Pilot participant in-person meeting (June 2018)

    This meeting discussed findings from the baseline survey, provided feedback into a baseline report, and discussed priority topics for the peer learning sessions.

    OECD-FAO Roundtable on Responsible Agricultural Supply Chains (June 2018)

    A multi-stakeholder roundtable included presentations and interventions by members of Agricultural Advisory Group (AG), policy makers, the ILO, civil society, researchers, companies and industry initiatives. The roundtable facilitated a dynamic discussion around specific themes on supply chain due diligence in the agricultural sector and for participants to share their views on specific topics to be prioritised for further learning as part of the pilot project.

    Pilot participant in-person meeting (March 2019)

    A meeting was organised for pilot participants, to discuss the Progress survey structure and obtain feedback on the pilot process and approach.

    Pilot participant in-person meeting (October 2019)

    A final meeting was organised for pilot participants to share feedback on the pilot and discuss potential follow-up activities.

    OECD-FAO Roundtable on Responsible Agricultural Supply Chains (October 2019)

    A roundtable meeting was held at the end of the pilot to discuss findings and possible next steps for advancing the OECD-FAO Guidance recommendations with OECD country delegates, civil society, trade unions, researchers and businesses.

    The first project deliverable included a baseline report that evaluated the extent to which the recommendations of the Guidance were addressed by participants, supported further by information sharing on good practices and peer-learning webinars. The findings of the pilot project were validated at the OECD-FAO multi-stakeholder roundtable in October 2019 which brought together over 60 participants from government, business, civil society, intergovernmental organizations, worker representatives and academia. They informed the final report released at the end of 2019, which introduced how companies can address challenges while considering the OECD-FAO Guidance.

    Feature Links

    Global Pilot Project for the OECD-FAO Guidance for Responsible Agricultural Supply Chains - http://www.fao.org/economic/est/issues/investment/road-test-of-the-oecd-fao-guidance-for-responsible-agricultural-supply-chains/

    Baseline Report of the Global Pilot Project for the OECD-FAO Guidance for Responsible Agricultural Supply Chains – http://www.fao.org/documents/card/en/c/CA1655EN/

    Final Report of the Global Pilot Project for the OECD-FAO Guidance for Responsible Agricultural Supply Chains – http://www.fao.org/3/ca6772en/CA6772EN.pdf

    FAO Responsible Business Conduct (RBC) in Agriculturehttp://www.fao.org/responsible-business-conduct-in-agriculture/en/

    OECD-FAO Multistakeholder Consultation Report - http://www.fao.org/publications/card/en/c/CA8344EN/

    OECD-FAO Guidance for Responsible Agricultural Supply Chains - http://www.fao.org/economic/est/issues/investment/guidance/oecd-fao

     

    Results

    Twenty-seven companies and seven industry initiatives volunteered their participation in the pilot project and completed a baseline survey which assessed how their processes considered the OECD-FAO Guidance and other related international standards. Questions were structured around the five-step framework of the OECD-FAO Guidance, and also aimed to identify potential gaps and opportunities for improvement in the implementation of due diligence in agricultural supply chains. Findings of the baseline survey were presented in the baseline report published in October 2018.

    In addition, seven online peer-learning sessions were held with pilot participants, building on the findings of the baseline activities and the challenges and gaps identified by companies. Some of the most significant gaps responded to company policy commitments and how such commitments translate into risk assessment and risk management actions. Two peer-learning sessions were organised in relation to this topic to discuss how companies can embed the five-step due diligence framework into management systems, processes and verification.

    Topics addressed by other peer-learning sessions focused on other key challenges, such as those relating to supply chain mapping and traceability and understanding risks and good practice management approaches for informal, seasonal, and family labour. Other sessions discussed opportunities to support effective due diligence, for example by exploring companies’ experience in strengthening collaboration with third parties, the role of financial institutions in supporting responsible agricultural practices, and how the OECD-FAO Guidance can help achieve the SDGs. Three webinars were also organised to discuss the initial findings of the surveys conducted during the pilot and identify potential next steps to build on the outcomes of the pilot project.

    In 2019, twenty-four participating companies completed a progress survey with the aim to understand the changes companies had made with respect to the implementation of the OECD-FAO Guidance recommendations since the baseline survey. For the survey, progress was defined as the steps taken by participants towards strengthening their due diligence practices in line with the OECD-FAO Guidance. Participants were not expected to have fully adopted the five-step due diligence framework, but weighed according to progress in implementing the key tools of the OECD-FAO Guidance. A last method to the project included six in-person meetings that were undertaken during the pilot, including two which were open to all stakeholders (see project milestone meetings above).

    The results of the pilot project, presented in the final report, suggest that the participating companies have, overall, taken steps to strengthen their approach to due diligence. Many companies in agricultural supply chains have a sophisticated approach to responsible business conduct, but the adoption of due diligence strategies is often impacted by reactions to external pressures. Sample findings points include:

    • Businesses have taken steps to strengthen their approach to due diligence, with several demonstrating sophisticated management tools to identify and mitigate risks.

    • The adoption of due diligence strategies is often driven by external pressure or attention to certain thematic areas in supply chains.

    • Gaps still exist in how companies translate policy commitments into actions, particularly in organizing and maintaining regular stakeholder cooperation.

    • Many businesses are reliant on industry schemes, audits or third-party platforms which may not be tailored to their business models, or effective for identifying or mitigating risk.

    • A lack of information on individual due diligence practices among businesses has been observed in public reporting, preventing a culture of sharing practices and lessons on due diligence tools.

    Feature Links

    Global Pilot Project for the OECD-FAO Guidance for Responsible Agricultural Supply Chains - http://www.fao.org/economic/est/issues/investment/road-test-of-the-oecd-fao-guidance-for-responsible-agricultural-supply-chains/

    Baseline Report of the Global Pilot Project for the OECD-FAO Guidance for Responsible Agricultural Supply Chains – http://www.fao.org/documents/card/en/c/CA1655EN/

    Final Report of the Global Pilot Project for the OECD-FAO Guidance for Responsible Agricultural Supply Chains – http://www.fao.org/3/ca6772en/CA6772EN.pdf

    FAO Responsible Business Conduct (RBC) in Agriculturehttp://www.fao.org/responsible-business-conduct-in-agriculture/en/

    OECD-FAO Multistakeholder Consultation Report - http://www.fao.org/publications/card/en/c/CA8344EN/

    OECD-FAO Guidance – Helping Achieve the Sustainable Development Goals (SDGs) – http://www.fao.org/3/ca7970en/CA7970EN.pdf

    OECD-FAO Guidance for Responsible Agricultural Supply Chains - http://www.fao.org/economic/est/issues/investment/guidance/oecd-fao

    Factors and Constraints

    Companies recognise the importance of aligning due diligence practices with the recommendations in the OECD-FAO Guidance. Throughout their participation in the pilot and building on their existing practices, many companies have taken steps to strengthen their policy commitments and due diligence actions to implement such commitments. Whilst several challenges and gaps remain in how companies address key risks, particularly in how commitments translate into effective risk assessment and risk management actions, several opportunities and good practices were identified through the various meetings, peer-learning sessions and conversations held with participants and other stakeholders.

    The pilot project provided a business-meets-stakeholder learning environment, sharing good practices and examples of how they are translating their commitments into risk assessment and risk management actions. This includes, for example, establishing internal systems for collecting risk-related data and information, using technology, partnering with external stakeholders and utilising field-based staff to monitor risks and inform engagement with suppliers. Nevertheless, significant gaps remain between companies’ policy commitments and the translation of these commitments into practical due diligence actions such as risk assessment and risk management strategies.

    Certain challenges faced by companies, such as those associated with tenure rights over and access to natural resources, informal labour, child labour, and discrimination against vulnerable groups such as women and migrant workers, are widespread in the agricultural sector and require focused support. For many companies, managing these challenges is central to maintaining a long-term ‘social license’ to operate in the countries they source from and protecting the company from operational and reputation risks. All participants agreed that more efforts and development interventions are needed to help bridge due diligence to impacts at the community or sourcing level.

    Much remains also to be done. Supply chain mapping was seen as one of the biggest challenges for companies operating at all stages of the supply chain, where companies often lose oversight of risk from tier 1 suppliers and below, particularly in the case of unknown outsourcing. Among other key findings, a salient risk for human rights was that most companies’ existing risk assessment activities do not consider potential risks relating to food security and nutrition, benefit sharing around company operations, and their impacts of technology and innovation, all of which are specifically highlighted in the OECD-FAO Guidance. There is a need to increase awareness and understanding of how these issues relate to relevant risks in companies’ supply chains and what steps companies should take to identify and mitigate these potentially harmful impacts.

    Feature Links

    Global Pilot Project for the OECD-FAO Guidance for Responsible Agricultural Supply Chains - http://www.fao.org/economic/est/issues/investment/road-test-of-the-oecd-fao-guidance-for-responsible-agricultural-supply-chains/

    FAO Responsible Business Conduct (RBC) in Agriculturehttp://www.fao.org/responsible-business-conduct-in-agriculture/en/

    OECD-FAO Guidance – Helping Achieve the Sustainable Development Goals (SDGs) – http://www.fao.org/3/ca7970en/CA7970EN.pdf

    OECD-FAO Guidance for Responsible Agricultural Supply Chains - http://www.fao.org/economic/est/issues/investment/guidance/oecd-fao

    Sustainability and replicability

    Often times, businesses struggle to understand how to absorb the SDGs – and make them relevant to their operational environments. This project linked business conduct and development outcomes, with a view to helping companies understand how they can reduce adverse impacts on environment and society by meeting the SDGs. Owing to the magnitude of risks and development impacts that take place in sourcing, processing and trading agricultural raw materials from low- and middle-income countries, virtually all SDGs are addressed when considering due diligence. The OECD-FAO Guidance contributes to the achievement of the 2030 Agenda and several of the Sustainable Development Goals (SDGs). Through its core messages, it is replicable as a tool to help enterprises across the world, understand how to reduce their social and environmental footprints in developing and transitional economies, while meeting the SDGs.

    COVID-19 Impact

    The global pilot project on the OECD-FAO Guidance for Responsible Agricultural Supply Chains facilitated a global dialogue on social and environmental risk and its relationship to structural development issues. The arrival of COVID-19 has exposed these weaknesses and made matters more complex, exacerbating existing business risks to people and the planet while also bringing about new ones. Lockdowns across the world have witnessed many agricultural value chains being affected owing to cancelled orders, the closure of food processing, storage and distribution facilities, limitations to trade flows across borders, and leaving millions of people without income.

    Building on the key findings of the pilot project, FAO produced a policy note for governments, investors and businesses on environmental and social risk in agricultural supply chains in the context of COVID-19. The policy note explains how various relationships including those with suppliers and communities – may can come under stress as a result of food demand and health concerns that rise from the pandemic, and the various ways in which risks can manifest. 

    Feature Links

    COVID-19 and Responsible Agricultural Supply Chains - http://www.fao.org/3/cb1602en/CB1602EN.pdf

    Global Pilot Project for the OECD-FAO Guidance for Responsible Agricultural Supply Chains - http://www.fao.org/economic/est/issues/investment/road-test-of-the-oecd-fao-guidance-for-responsible-agricultural-supply-chains/

    FAO Responsible Business Conduct (RBC) in Agriculture – http://www.fao.org/responsible-business-conduct-in-agriculture/en/

    OECD-FAO Guidance – Helping Achieve the Sustainable Development Goals (SDGs) – http://www.fao.org/3/ca7970en/CA7970EN.pdf

    OECD-FAO Guidance for Responsible Agricultural Supply Chains - http://www.fao.org/economic/est/issues/investment/guidance/oecd-fao

     

    Key business risks and the 5 Step Framework to Due Diligence in the OECD-FAO Guidance for Responsible Agricultural Supply Chains

    Key Risk Areas, OECD-FAO Guidance for Responsible Agricultural Supply Chains

    Figure 1. Key Risk Areas, OECD-FAO Guidance for Responsible Agricultural Supply Chains (FAO and OECD, 2016)

     

    OECD-FAO Guidance and Due Diligence

    Figure 2. OECD-FAO Guidance and Due Diligence (FAO and OECD, 2016)

    Other sources of information

    OECD- FAO Guidance for Responsible Agricultural Supply Chains 
    Pilot project on the implementation of the OECD-FAO Guidance for Responsible Agricultural Supply Chains
    - Baseline Report  
    - Final Report 
    Sustainable Development Goals and the OECD-FAO Guidance for Responsible Agricultural Supply Chains
    Responsible Investment and COVID-19: Addressing impacts, risks and responsible business conduct in agricultural value chains
    Building responsible global value chains for the sustainable production and trade of tropical fruits
    FAO and the World Banana Forum (WBF)
    CFS Principles for Responsible Investment in Agriculture and Food Systems

     

    Contact Name
    Tomislav
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    Organization/entity
    FAO
    SDGs
    Geographical coverage

    Global

    Timeline
    01 February 2018 (start date)
    15 December 2019 (date of completion)
    More information
    Countries
    Italy
    Italy
    Partnership
    N/A
    Contact Information

    Tomislav, Global Pilot Project for the OECD-FAO Guidance on Responsible Agricultural Supply Chains