The Importance of Building an Equitable Supply Chain

The world relies on the global supply chain. It supports growing economies while providing consumers access to innovative products and services that quickly become an everyday part of our expected standards of living. It also helps to generate vast wealth for large corporations and can support individual entrepreneurs around the world who act as suppliers of raw ingredients and materials for everything from food to textiles and electronics.

However, while politicians and corporate leaders debate trade policies, tariffs, and regulations, issues of human rights and equitable access along the supply chains are often absent from the conversation.

Alena Kahle is one of the people working hard to change that. Kahle is the senior policy and project coordinator at the Fair Trade Advocacy Office, a Brussels-based advocacy wing of the Fair Trade movement, which works to bring fairness, equity, dialogue, and cooperation to global trade policies.

As an advocate for equitable trade policies, Kahle is heavily invested in the sustainability policies of the European Union (EU), especially the Corporate Sustainability Due Diligence Directive (CSDDD), which is currently under consideration as part of the proposed Omnibus Regulation. “The Fair Trade Advocacy Office focuses on the impact that legislation will have on more marginalized individuals, but especially those who are smallholder farmers, who are actors with very small businesses that are trying to integrate fairness principles into their daily operations,” said Kahle. “Many of them are also sustainability front runners, and it's always really cool to see what they're doing and how they're trying to push the needle by using their own businesses to live those sustainable business practices.”

The Impact of the Omnibus on Supply Chain Protections

Since European Commission President Ursula von der Leyen announced in November 2024 a potential omnibus to harmonize sustainability directives like the CSDDD and the Corporate Sustainability Reporting Directive (CSRD), experts have been left wondering what impact this will have on the protections those directives provide to the environment and to workers along the supply chain.

“Those of us in the civil society space and those who work with progressive businesses have been grappling with this battle for years,” said Kahle. “The EU has made a wonderful step in collectively deciding on the consent of all member states to put in place binding due diligence legislation, but there are several countries that came out of this with changes in government. There has also been a lot of disinformation, with companies saying that this is actually harming us because they're not fully informed about the implications of what this legislation actually means. It's become more politically popular to buy in to rhetoric that human rights are a problem, and this is extremely dangerous in our view.”

Kahle says that corporate lobbyists are playing an outsized role in pushing the narratives that seek to undo much of the work that has been done. “For the past few years, there have been very hardcore lobbyists working with full force against CSDDD, the EU Deforestation Regulation (EUDR), and the CSRD, and they have unfortunately gained a gigantic megaphone. There have been wonderful investigations by such groups as Friends of the Earth that have identified the way in which expert groups and the Regulatory Scrutiny Board have been lobbied directly by these corporate lobby groups, which is in violation of the independent way these entities should function.”

This kind of lobbying pressure has created a narrative in which many politicians see no other path but to dismantle anything they see as potentially harmful to EU competitiveness, especially sustainability laws.

“The views that have been coming to the people who need to get reelected has led to a situation in which it seems to be more popular just to try to dismantle everything that we've been working for with many thousands of hours of hard negotiations over the past few years,” said Kahle. “I think it's quite clear that there are sore losers such as the German government, who are performing poorly domestically. They're really grasping at straws and are scapegoating sustainability legislation. But this is not something that is being decided democratically or is based on any evidence.”

Advocacy Builds on Decades of Work

While the CSDDD and other supply chain regulations might take up a lot of headlines today, the advocacy work to protect workers and support equity has been going on for decades, particularly in the textile sector.

“If you look at how companies are dealing with transparency reporting with disclosures of their supply chains, it's usually the textile sector that has been a forerunner longer than other sectors,” said Kahle. “The scrutiny of companies having to identify their supply chains and assess how they function has always been quite prominent in the textile sector.”

Kahle noted that the Fair Trade movement has been extremely active for decades in trying to know who their supply chain actors are. Usually, the smaller your supply chain is, the easier it is to have an overview of it. “But the fact that even a tiny SME (small-medium enterprise) that is very mission-driven and isn't necessarily out to sell millions of products can find the time to look at their supply chains and make sure everybody along the supply chain has a decent income really makes me optimistic about the ability of larger companies to do the same,” Kahle added.

According to Kahle, one of the significant elements of the CSDDD is the way in which it addresses how purchasing practices can help to secure more ethical supply chains.

“As a company, you might do your assessment and identify that there might be a supplier that has a risk of health and safety issues or fire hazards and be unsure what to do,” said Kahle. “To understand what to do and to put in place an action plan requires looking at your purchasing practices, because that's something that you as a company have direct control over.”

If you constantly give very last-minute order requests to your supplier, change them last minute, decide that you need 20 samples before you can finally decide whether to put the order in, or have them pay for parts of the delivery but change the contract, that makes it hard for the supplier to know what's coming, advised Kahle, and then the supplier will cut corners.

According to Kahle, “the emphasis on purchasing practices in the CSDDD is not only important, but it also makes it more actionable for companies to address the human rights issues they identify.”

Kahle also pointed out that standard protections built into traditional contracts can have unintended impacts on human rights. “Another very endemic issue is contractual cascading,” said Kahle. “Buyers want to make sure that suppliers abide by their code of conduct and pass on obligations in contracts that say human rights are important.”

According to Kahle, we now need to undo this, “because contractual cascading can actually be a major issue with human rights due diligence. It can lead to the supplier saying 'I guess we can't disclose if there are any risks because then we violate our contract, and if our buyer bails we'll never get a buyer again.' So the CSDDD says you have to engage with your buyers and suppliers to make sure that you're really talking about the issues, and that requires a culture of trust.”

Effective dialogue across the supply chain works alongside strong business practices to produce equitable, safe, and profitable relationships for everyone. “If buyers pay suppliers months after receiving orders, how are suppliers going to make investments to keep factories safe and pay workers on time?” said Kahle. “If suppliers get an order and need to do it within three or four days, how are you going to plan your business operations?”

All of this requires the buyer to have fewer but more stable relationships with suppliers, to speak to them, and to trust them, Kahle pointed out. “That's where the Fair Trade movement has lessons to share, because trust, cooperation, and dialogue are really the core of the Fair Trade charter.”

Achieving this goal, however, will be a big undertaking. “It's going to need a culture shift,” said Kahle. “I think a concrete step to take is to make sure that within your company's risk management and risk assessments, you integrate these principles to ensure they have the same weight as financial, legal, or reputational risks. Otherwise, as long as there are two separate departments that are not integrated within the company, the necessary shift will never happen.”

Looking Beyond Self Interest

Kahle emphasizes that for supply chains to support human rights and become truly equitable, legislators must look beyond simply doing what is best for the EU.

“When the commission conducts impact assessments ahead of any regulation, and then again when it reviews the implementation, the commission must think about third-country actors,” said Kahle. “For example, the methodology of the evaluation of the Unfair Trading Practices Directive in the agri-food sector in no way addresses the situation of actors outside the EU, even though the legislation explicitly gives protections to non-EU sellers who have contractual relationships with buyers in the EU. It's a systemic issue, and it's always a political question.” Kahle said the commission president's mission letters to her commissioners “focus entirely on securing EU interests.” The principle is no longer what can the EU bring to the world in accordance with its own treaties but how the EU can serve its own interests and needs. “There is not a single mention of supporting or considering the impact on people outside the EU, despite how interlinked the global economy is.”

According to Kahle, the EU's myopic lack of concern for these actors extends even to its most well-intentioned initiatives, such as the Ecodesign for Sustainable Products Regulation (ESPR).

“There the focus is really on whether the materials created, especially textiles, are durable, reliable, used with not as many chemicals, etc.,” said Kahle. “But if you look at the list of what the ecodesign criteria should be about, things like environmental impact are a bit further down and social aspects are completely left out. That's almost not a priority.”

A lot of this is still up for examination, and the Fair Trade Advocacy Office will be part of an expert group that will set up the criteria for each product group, said Kahle, adding “We will surely advocate for these points to be essential.”

It's Not Just Businesses That Need Support

With omnibus discussions focusing on the need to keep EU businesses competitive, Kahle points out that what every actor in the supply chain needs right now is certainty.

“There have been thousands of actors negotiating for years about how this should work and how this should look, and nobody's going to be perfectly happy with the outcome,” said Kahle. “But the CSDDD and other legislation such as EUDR and Ecodesign are here to stay, and rather than going back and changing them, everybody would benefit from implementing them now.”

Further, although much of the discussion in the EU Parliament is about how to support businesses, there are many actors along the supply chain that need the support and protection regulations can provide.

“Civil society can't implement this on our own,” said Kahle. “The EU Commission and EU member states and other actors are already thinking about what measures to provide to companies that need to comply. But companies are only one of the actors in the supply chain. There's more people along the way, and all of them need to receive enough information about what the laws are in order to play their part. Smallholder farmers want to have practices that are great for the planet and great for people, but they need to have support. For instance, they need support for the technical part, like computer servers or data management tools.”

Kahle further says that pricing will play an important role in facilitating the cultural shift required to support human rights and create strong supply chains.

“I think the key issue that's going to be critical for the implementation of all these different sustainability rules is the price that suppliers receive,” said Kahle. “Suppliers will need to receive more money and financial support for capacity building from their buyers in order to implement the things they need. There will need to be a lot of money flowing, but somebody is already paying with either their health or their life for the fact that these rules are not being implemented. Therefore, I think it's up to companies to pay the price instead of passing it down to people who may pay with their lives.”

Photo credit: Fairtrade Deutschland