The European Commission has published a new Guidance Document, aimed “to address the risk of forced labour” in EU businesses’ supply chains. The document, promoted by the Directorate-General for Trade (DG Trade) and the External Action Service (EEAS), gives a clear indication of how the EU will approach labour rights issue in its forthcoming Due Diligence regulation.
The Due Diligence regulation – also known as Sustainable Corporate Governance – is expected in September/October 2021. This document could significantly impact Indonesian exporters to Europe: it will affect businesses up and down the palm oil supply chain by enforcing new requirements on sustainability, labour rights and other factors.
Indonesia, and especially the palm oil sector, is in a strong position to meet those Due Diligence requirements. One reason for this is that significant labour rights demands and proposals, and Due Diligence rules, have been set forth by others – most notably the U.S., and more recently the U.K. – and Indonesia has been proactive about meeting those demands, including through the Indonesia Sustainable Palm Oil (ISPO) certification.
The guidance document provides a welcome insight into Brussels’ thinking. It is also – unusually – clearly written and reasonable in its scope. The headline definition of forced labour comes from the ILO, and includes debt bondage, child labour and state-orchestrated forced labour. Its outline of Due Diligence best practice is taken from the OECD. Country risk factors are highlighted (e.g. mass mobilization) and so are migration-linked risk factors (e.g. dangers of informally-employed migrants). All of this is broadly settled international opinion when it comes to best-practice in supply chains, for both governments and the private sector. In other words, the DG Trade & EEAS authors have resisted the temptation to propose a new arbitrary and draconian EU approach. This is a welcome innovation.
Suggested actions for companies and regulators to ensure labour rights as part of due diligence, include enhanced training for suppliers, unannounced site visits, gender-sensitive warnings systems, and greater cooperation with the ILO.
The timing is interesting, too. Broadly speaking, the EU is playing catch-up on labour rights. It has been focused on promoting itself as a leader on global forest protection (despite EU nations’ woeful records on protecting their own forests) and labour issues had taken a back seat. Brussels is now belatedly following Washington’s lead.
But challenges persist in Europe’s backyard. According to the U.S. State Department, whose annual Trafficking in Persons (TIP) report is considered the gold-standard in global enforcement of labour provision, Norway, Italy and Germany have persistent labour rights challenges themselves.
Corruption, human trafficking and labour rights abuses have been well documented in the Italian agricultural supply chain, for example. Similarly, in Norway there have been persistent cases of exploitation of migrant workers.
As the TIP report states, Indonesia is more often a source of trafficked labour, rather than a destination for trafficked labour. This has led to the government taking protective action: establishing the Indonesian Migrant Worker Protection Agency (BP2MI), for example, which operates a hotline to protect Indonesian workers overseas.
The Indonesian government and palm oil community have guarded against complacency – despite this encouraging track record on labour issues. Multiple government and industry actors are collaborating on labour and human rights issues – including the Ministries of Agriculture and Manpower, the Coordinating Ministry of Economic Affairs, the Indonesian Palm Oil Association (Gapki) and the country’s trade unions. The International Labour Organization (ILO) and the U.S. Government also have collaborative projects underway with Indonesian agencies. This coordination between Jakarta, Washington and the ILO clearly indicates the confidence that serious bodies have in the Indonesian government and the palm oil sector’s willingness to accept that concerns exist, and the maturity of Indonesian institutions to work to fix issues where they arise.
Such maturity is not always present in the anti-palm oil movement in Europe. Too often in recent years, EU proposals received – and deserved – criticism for focusing on a negative outcome (e.g. banning palm oil; erecting trade barriers), but here broadly the focus is on a positive outcome – a commodity-neutral approach to improving labour rights in supply chains. The Guidance document is reasonable; it does not arbitrarily attack palm oil or individual countries.
Sadly, this reasonable approach probably will not survive contact with the EU’s legislative process. Amendments will be tabled by the usual suspects in the EU Parliament; Indonesia and palm oil will be blamed for all manner of ills. The facts – even those stated by the ILO and others – will be ignored, including what goes on within Europe’s own borders. There are also wider concerns about the unilateralism the EU is determined to pursue under Due Diligence – and why they are not following the U.K. model of a legality-based Due Diligence regulation, which is far superior.
Regardless of the politics to come in Brussels, the Indonesian palm oil community can be proud of its commitment to labour rights and the recognition it has received from the international community. The EU would be wise to heed the words of its own document, and focus on “practical guidance”, if it is to produce a policy that enjoys both domestic and international support.