Implementing sustainable business through EU aid and trade policies
During its EU Presidency over the first half of 2016, The Netherlands will seek to enhance the coherence of EU trade and development policies and their contribution to sustainable development, in particular by enhancing the sustainability of global value chains.
Sustainable development is a cornerstone of the European Union’s (EU) internal and external policies. And the private sector is a driving force behind it. Stimulating sustainability in global value chains (GVCs) should therefore be central to the EU’s external policies and in particular, to its trade and development agenda. During its EU Presidency over the first half of 2016, The Netherlands will seek to enhance the coherence of EU trade and development policies and their contribution to sustainable development. The EU needs to stimulate EU-wide, multi-stakeholder sectoral cooperation, providing leverage and a level playing field for businesses in global value chains that respect the principles of corporate social responsibility.
EU policies and the emergence of global value chains
The EU has a wide array of instruments and policies at its disposal for external action, particularly on trade and development. This is a sphere in which we are particularly keen to increase EU policies’ impact on sustainable development by enhancing the sustainability of global value chains. Global value chains – where the different stages of the production process are located across different countries – have come to be a dominant feature of world trade. More than 70% of world trade consists of intermediate goods, services and capital. The increased significance of global value chains, and the fact that the most serious environmental and human rights violations generally occur in producer countries in these chains, necessitate corporate social responsibility (CSR) and private sector engagement for sustainable development figuring more prominently in aid and trade policy. With the advent of global value chains, abuses come to light much more quickly, so that companies have an incentive to prevent them. They pursue a sustainability strategy not only to prevent their reputation from being harmed, but also because it offers them new opportunities and reduces their dependence on scarce resources. If they ensure that everything is in order at each location involved in making their products, they generate not only value but also good publicity. By promoting corporate social responsibility, or responsible business conduct, governments encourage companies to take responsibility for the impact that activities in their value chains have on society and the environment. According to the UN Guiding Principles on Business and Human Rights and the OECD Guidelines for Multinational Enterprises, it is the responsibility of companies to map the risks of adverse social and environmental impacts in their international supply chains and to take appropriate measures to prevent or mitigate them (due diligence). Creating value for people, planet and profit is not only a responsibility of business, but also an opportunity for business. The necessity of tackling these societal and environmental challenges and anticipating opportunities for collaboration between business, governments and civil society organisations is increasingly accepted. This often entails a sector-wide change in business behaviour. The G7 Leaders’ Declaration of June 2015 highlights the importance of responsible supply chains and the need for better application of internationally recognised labour, social and environmental standards, principles and commitments (in particular UN, OECD, ILO and applicable environmental agreements) in global supply chains. The EU is well positioned to act now on this declaration.
An agenda for EU action and a multi-stakeholder approach
The EU, together with business and civil society, can lead the way on sustainability in global value chains, provided that it devises a clear agenda that contributes to this. The new EU trade strategy Trade for All and the 2030 Agenda for Sustainable Development, centred on the Global Goals, set the stage to do so. Like other EU member states, The Netherlands actively and successfully promotes sustainable value chains. However, if we are to increase our effectiveness and ensure a level playing field, we will need to achieve policy coherence and implementation at EU level to back up our national solutions. By working together, EU institutions, EU Member States, business and civil society can collectively leverage the necessary transformation to enhance the sustainability of global value chains. We just need to start with a collective commitment to do so. In the end we need, and this will help, a global level playing field, as the G7 statement envisages. A multi-stakeholder approach to stimulating the sustainability of GVCs also contributes to bring the EU closer to citizens’ concerns, to produce and buy in a more responsible manner. No consumer wants to buy products that are made by children or have caused environmental damage. We all have the right to fair goods, produced respecting broad human rights and the environment. We look to our governments to regulate and implement these issues - even if they occur outside their territories - and we increasingly expect companies to ensure decent and respectful production processes everywhere they operate. The EU is already taking steps to promote sustainable global value chains and encourage businesses to invest more responsibly by enhancing market rewards for corporate social and environmental responsibility, disseminating good practices and improving company disclosure of social and environmental information. Through development cooperation, the EU aims to promote business engagement in sectors including agriculture, infrastructure and energy. The EU also promotes sustainability guidelines on corporate social responsibility, including the UN Guiding Principles on Business and Human Rights and the OECD Guidelines for Multinational Enterprises, notably via its free trade agreements (FTAs).
Priority for The Netherlands
The Netherlands welcomes and supports the following actions and next steps by the EU on sustainable economic growth: more coherence between development and trade policy…
- aligning aid policies better with the goal of greater sustainability in global value chains;
- stimulating more effective implementation of sustainability chapters in free trade agreements;
- encouraging a stronger EU focus within the aid for trade programming of the EU and its member states on sustainability aspects, such as anticorruption, transparency and responsible business conduct; and enhancing the benefit for developing countries from trade with the European Union.
- introducing a new EU agenda for action on corporate social responsibility, supporting a stronger external dimension of EU policy on CSR linked to the new private sector policy in development cooperation;
- facilitating and enhancing multi-stakeholder, voluntary EU sectoral initiatives like the EU garment supply chain initiative, including SMEs as well as large firms; and
- supporting private sector efforts to make global supply chains more sustainable e.g. inclusive business models and related private sector multi-stakeholder partnerships.
This article was published in GREAT Insights Volume 4, Issue 6 (December 2015/January 2016).