As part of the reform of the EU Non-Financial Reporting Directive, the European Commission plans to develop mandatory EU sustainability reporting standards. The analysis of the non-financial reports of 1000 European companies by the Alliance for Corporate Transparency has proven how companies fail to report relevant, specific and comparable information. While this is true for all sustainability matters, it is particularly exacerbated in the case of corporate impacts and risks along the supply chain.
This is in part due to confusion and lack of consensus on meaningful supply chain reporting criteria and metrics. Yet, as highlighted by the Project Task Force mandated to initiate preparatory work for the development of EU standards, corporate disclosures must reflect impacts and risks along a company’s value chain.
With the objective of developing consensus on meaningful supply chain reporting requirements, Frank Bold coordinated the Supply Chains Transparency Project in 2020. Building on the findings of the Alliance for Corporate Transparency, this initiative engaged over 30 supply chain experts through various rounds of consultation and online workshops. The work of this project has resulted in a joint civil society statement which outlines recommendations for standardizable supply chain data and indicators applicable across high-risk sectors, as well as providing sector-specifications for the Garment & Footwear, Food & Beverage, Extractive and Electronics industries.
The full statement is supported by 17 civil society organisations and can be read here.
The main priorities covered by our recommendations include:
- Baseline requirements for the description of the supply chain
- Mandatory disclosures of Tier 1 suppliers in high-risk sectors
- Salient workforce information on composition, wages, and collective rights
- Sector-specific data on procurement practices
- Sector-specific salient environmental issues and indicators
- Garment & footwear: Priority issues for a roadmap for disclosure beyond Tier 1
- Food & Beverage: Specification of categories of suppliers and farmers, living wage and land-grabbing indicators
- Extractives: Specification of essential project-level data
- Electronics: Product and components related disclosures
These proposals have been discussed and developed thanks to the input of over 30 supply chain experts and are supported by the following organizations:
Frank Bold, Sustentia, ShareAction, The Workforce Disclosure Initiative, Freedom Fund, Business & Human Rights Resource Centre, Mining Shared Value, International Corporate Accountability Roundtable, Clean Clothes Campaign, Anti-Slavery International, Interfaith Center on Corporate Responsibility, Transparentem, ECCJ, World Fair Trade Organisation, Poder, Fair Trade Advocacy Office, WWF.
Joanne Houston, EU Policy Officer at Frank Bold coordinating the research and consultation states “the recommendations of this project aim to help policy-makers and engaged stakeholders in the EU and globally to set the right priorities for the development of clear and useful reporting standards on supply chains. The information on companies’ supply chains risks and impacts can no longer remain invisible to the public, investors and companies alike”.
Wrong indicators may lead to misleading and meaningless disclosures, or may be outright impossible for companies to use. Therefore, the recommendations are based on a careful review of all existing reporting frameworks and and assessment of each recommended indicator based on the following criteria:
- Capacity to convey information regarding risk exposure or the likelihood that the company’s practices are reducing negative outcomes and increasing positive outcomes for people and the planet;
- Measurability, reliability of the data, and methodological clarity;
- Intrinsic value of the information, namely the extent to which an indicator can be relied upon for insight into a company’s impacts / risks in the absence of contextual information to enable its interpretation;
- Low risk of undesirable consequences with regard to company practices.