From child labour to deforestation: companies need to know what is happening in their supply chains

June 6, 2024

Many companies in the agri-food sector are not sufficiently aware of the social and environmental risks involved in their supply chains. However, new legislation requires them to know those risks and act accordingly. Wageningen University & Research identifies these risks by product and country and allows zooming in at the sub-national level. The scores are available, for example through TRACT, a B2B sustainability measurement platform aimed at creating greater insight into supply chains.

For TRACT, Wageningen University & Research (WUR) identifies the risk of child and forced labour in the production of coffee, soy, and palm oil. "We focus on the product and the country," explains Miriam Vreman, project leader and researcher of Human Rights and Social Sustainability. "Our risk scores are made up of three different layers. For example, we use quantitative indicators from publicly available sources, such as the International Labour Organization and World Health Organization. We aim to maximise our geographical reach so that companies can also make comparisons between countries. We supplement this information with regional indicators by product. And we use qualitative data about the conditions in the production of a particular commodity in a particular country: who does the work, where does it take place, and who lives nearby? We use all the available information to assess the risks."

From voluntary to compulsory

According to Vreman, there is a global shift from voluntary guidelines relating to sustainability and social justice to mandatory legislation: "Consider the EU's deforestation regulation, which member states are required to implement in their own legislation. The Corporate Sustainability Reporting Directive, the Corporate Sustainability Due Diligence Directive, and the Forced Labour Ban are influential examples. There are also lots of different developments at the national level. Germany and France already have legislation with due diligence requirements for companies to prevent human rights violations in the supply chain. The UK has a Modern Slavery Act. And the Netherlands has a draft bill pending what Europe produces."

Continuous attention to risks

What do all these legal developments mean for companies? Vreman: "It really requires companies to constantly monitor risks and impact in their supply chains. They need to view these issues differently than before. Where do my products come from, who are the producers, and under what conditions are they produced? Essentially, they need to collect much more information than they do now." To address this, food companies Olam, ADM, Cargill, and Louis Dreyfus CO came together in a pre-competitive collaboration and established the joint venture TRACT, now an independent company.

“WUR risk scores offer clear, actionable insights for people managing food and agriculture supply chains,” explains Sarah Rawson, Director of Socioeconomic Impact at TRACT. “The scores help TRACT users pinpoint where risk and potential impacts are greatest, enabling them to more efficiently navigate due diligence and pursue their sustainability goals.”

Poverty as a breeding ground

Vreman uses an example to show the possible value of the information available to WUR: “You can study the risk of child labour in a country like Brazil, for example. In the mechanised soy industry in this country, the risk is lower than in the coffee industry. The coffee industry mainly involves small farmers with on average less than five hectares of land, which significantly increases the risk of children working in production. When you then compare the coffee industry in Brazil to that in Guatemala, there’s an even greater risk of child labour in the latter country. High levels of poverty in Guatemala’s coffee-producing regions create a major breeding ground for child labour. Companies can use this information to specifically monitor production conditions in their own production locations or those of their suppliers."

Objective: 80 percent of global production

Vreman and her colleagues supply 45 'product-country combinations’ to TRACT, including Indonesia, Ethiopia, and Colombia. These yield 45 separate scores for child labour and for forced labour for countries growing coffee, palm oil, and soy. But WUR has much more data at its disposal. Vreman: "We aim to cover 15 agri-food sectors worldwide by the end of next year. For each of these sectors, we want to select the countries with which we cover an average of 80 percent of production per commodity. For each sector, we can then collect data on eight social and seven environmental themes. Take the risk of unfair remuneration, inappropriate access to land and natural resources, deforestation, and water use, for example. In principle, we can support any sector that wants to understand supply chain risks. In doing so, we deliberately focus on risks by product sector because risks are much easier to interpret when you take the production conditions into account."

Companies need to address the issues, she stresses: "Up-to-date understanding of supply chain risks must be the standard. Using our data, in many cases we can already provide support by making risks transparent. Companies can then identify the key problems they need to prioritise to make their supply chain more sustainable and socially fairer."

About the methodology

WUR developed the methodology for risk analysis in 2020 and has since continued to improve it in various projects. The public-private partnership (PPP) ‘Sustainability insights of agro commodity flows' has made an important contribution to the further development and scaling-up.