Why This Toolkit and How Does it Work?

This toolkit aims to be a source of inspiration and guidance for Due Diligence Management for Responsible Business Conduct (RBC). It can be used by those in charge of the development and implementation of such management (such as CSR or environmental coordinators, procurement staff, or general management). This introductory section describes why this toolkit is important for your business, what important RBC issues in the spice sector are and what your responsibilities are if you encounter such issues. This section also explains how this toolkit works.

Please note that international guidelines provide companies with the flexibility to adapt the characteristics, specific measures and processes of due diligence to their own circumstances. Companies should use this toolkit as a framework for developing and strengthening their own tailored due diligence systems and processes.

This toolkit has been developed by CREM Consultancy (www.crem.nl) in collaboration with KNSV members Epos Specerijen, Verstegen Spices & Sauces and P. Visser & Zoon.

Last update: November 2018

Why Responsible Business Conduct (RBC)?

In addition to the ethical motivations for not being directly or indirectly involved in issues such as human rights violations, there are several other reasons for Responsible Business Conduct:

Legislation. You are increasingly obliged by law to map RBC-related risks related to your operations and supply chains and to take measures to mitigate such risks. Examples are the Anti-Slavery Act in the UK, mandatory human rights due diligence for large companies in France and possible mandatory child labour due diligence in the Netherlands.
ICSR covenant. In June 2018, KNSV signed a covenant on International CSR with the Dutch government, trade unions and NGOs. The main objective of this covenant is to ensure that KNSV members conduct due diligence on their operations and supply chains. This is now a voluntary agreement but more regulation may follow if the covenant proves unsuccessful.
Requirements/expectations of downstream clients. Retailers, foodservice companies and food processors are increasingly expected to pay attention to the sustainability performance of spices and spice mixtures, just as has happened with other food products in various other sectors. This applies to both the food processing industry and retailers. FNLI (Netherlands Federation of Food Industries) and CBL (the Dutch supermarket trade organisation) have signed the ICSR covenant as well so their members will also become more critical about RBC-related issues and risks in their supply chains.
Other: Think of RBC requirements related to access to finance (loans from banks and governments, subsidies, export credit insurance) and trade missions, not to mention remaining an attractive employer (especially for young highly educated staff), improving relationships with suppliers and facing increasing pressure from shareholders (listed companies).

RBC Issues in Spice Supply Chains

The OECD Guidelines for Multinational Enterprises provide the general framework for International CSR (ICSR) and RBC. The following table gives an overview of the RBC issues which could possibly be related to any link in the spice supply chains.

RBC issues	Clarification
Living income and wages	Relatively low incomes, particularly for smallholder farmers and collectors of wild herbs and spices. Possible causes: Lack of knowledge as to the most adequate production methods and limited access to capital for production enhancing investments (e.g., high quality seeds, replacement of unproductive (senile) trees) means that productivity/ha is often far below the potential productivity. Volatile prices, especially for spices traded as commodities. The economic pork cycle often applies (e.g., black pepper). The negotiating power of smallholder farmers is often too weak for them to benefit from periods of high prices. First, they often have limited access to capital and they therefore need cash immediately after the harvest (they cannot keep the spices waiting for better prices and often have to sell at fixed prices assessed before the actual harvest). Second, they often have limited access to information and/or lack the capacity to interpret this correctly. Third, they often do not have adequate storage facilities and thus cannot wait to sell until prices have gone up, Fourth, they often do not have sufficient freedom to make decisions, for example because they are tied to paying back loans to creditors. Inferior quality and sometimes high losses due to inadequate post-harvest methods. Harvest failures due to causes such as pests and diseases, environmental degradation and climate change. In general, due to limited supply chain power, traders (not farmers) benefit of periods of high prices. Low living wages may be an issue for seasonal workers (sometimes migrants) at the farms and workers in processing facilities.
Labour terms and conditions	Possible exposure to (sometimes illegal) crop protection agents due to ignorant or excessive use. All kinds of other decent work issues on farms, during wild collection and at the processing level (e.g., secondary labour conditions, working times, payment for overwork, leave arrangements, health and safety, access to sanitary facilities, training).
Child rights	Child labour risks on farms, during collection of herbs and spices in the wild and at processing level. Impacts on children in local communities, due, for instance, to parents’ low income and to environmental degradation.
Women’s rights	A relatively high number of women are involved in spice cultivation, the collection of wild herbs and spices and in processing. Discrimination, labour conditions specific to women and sexual abuse are risk areas. In some countries women are not involved in decision-making processes and do not have access to training and management positions.
Bonded labour	In some cases, smallholders need to take loans from local traders that may result in debt traps. For example, loans may be necessary after harvest failures or to make investments. In turn debt traps may lead to forms of bonded labour.
Land rights	Possible conflicts related to land ownership and access to land and natural resources – these conflicts can involve indigenous peoples.
Other fundamental human rights	Risks for workers in the areas of discrimination, freedom of association and collective bargaining,
Local communities	Risks to the community such as those related to environmental degradation (especially water pollution) – these risks can involve indigenous peoples.
Cultural heritage	Risks related to spice cultivation and the collection of herbs and spices in the wild, including for indigenous peoples. Cultural heritage can be both tangible (artefacts, buildings, landscapes) and intangible (values, traditions, oral history).
Taxation	Risks of tax avoidance/evasion possibly related to processing and trade.
Corruption	Risks of corruption possibly related to processing and trade.
Fair competition	Risks of forms of unfair competition, e.g., market foreclosure, division of markets, illegal price agreements.
Consumer interests (food safety)	Risks related to residues of crop protection agents and other chemical contaminants, biological contamination as a result of inadequate post-harvest practices and/or processing activities and allergens. Sometimes also as a result of fraud/adulteration (addition of water, salt or inferior raw materials).
Water	Risks of water pollution due to the use of crop protection agents and processing facility emissions. Risks of excessive water use leading to conflicts with local communities and environmental needs.
Biodiversity and landscape	Risks related to cultivation, including water and soil pollution, erosion and other forms of soil degradation, excessive water use, conversion of natural ecosystems, and/or fire hazards (sometimes deliberately applied to combat plagues and diseases and/or to make agricultural land available). Risks related to collection in the wild: overexploitation. Risks related to processing, especially water pollution caused by cleaning methods.
Climate change	The contribution of spice production to climate change is very small. However, climate change itself may have an adverse impact on spice production. It may lead to harvest failures and shift of cultivation to other climate zones leading to conflicts with current forms of land use.

What is Your Responsibility?

Once you have identified RBC issues and risks related to your operations and supply chains (not only your direct, or first tier, suppliers) you must determine to what extent you are considered responsible for doing something about it. The UN Guidelines on Business and Human Rights distinguishes three situations:

Your company causes an adverse impact on, for example, people or the environment. This is the case if there is causality between the operations, products or services of the company and the adverse impact. Causation can occur through action as well as omissions, in other words, a failure to act. This situation may be especially relevant if you are directly involved in spice cultivation and/or processing in a country of origin.
Your company contributes to an adverse impact. Contributing to an adverse impact is interpreted as “a substantial contribution, meaning an activity that causes, facilitates or incentivises another organisation to cause an adverse impact”. For example, if you have emergency orders you may trigger your supplier to source materials from less reputable producers.

Your company is directly linked to an adverse impact. Directly linked means the adverse impacts are associated with your business relationships, such as suppliers and (sub) contractors. You are not causing or contributing to an adverse impact yourself, but your direct or indirect business partner is. Please note this is not restricted to your direct suppliers only, but also to second tier suppliers and beyond!

The following table shows your responsibility to take measures in the context of these 3 situations.

IF A COMPANY…	THEN IT SHOULD…	AND…	AND…
Has caused or may cause an adverse impact	Prevent or mitigate the adverse impact		Remediate the harm if the adverse impact has occurred.
Has contributed or may contribute to an adverse impact	Prevent or mitigate its contribution to the adverse impact	Use or increase its leverage with other responsible parties to prevent or mitigate the adverse impact	Contribute to remediating the harm if the adverse impact has occurred, to the extent of its contribution.
Has or may have its operations, products or services linked to an adverse impact through a business relationship		Use or increase its leverage with other responsible parties to seek to prevent or mitigate the adverse impact	May choose to remedy situation, but has no responsibility to do so.

Once you know what your responsibilities are it is important to note that you are allowed to take into account your company’s capacities and sphere of influence when identifying possible measures. Due diligence may be tailored to your company’s circumstances! See Module 1 of this toolkit for more in-depth information on how you can manage your responsibilities.

How Does This Toolkit Work?

This toolkit aims to be a source of inspiration and guidance for those in charge of Due Diligence Management within companies.

Module 1 gives practical tips on how you can organise your Due Diligence Management process as recommended by the OECD and other organisations. Implementation of these guidelines will help you to comply with the ICSR covenant and other requirements. This module also contains a checklist that can be used to report on your due diligence performance to, for example, the Social and Economic Council (SER).
Module 2 is specifically devoted to child labour due diligence. Child labour is a very serious and sensitive topic that is also closely related to other problems such as poverty, discrimination and gender issues.
In the future, other specific RBC topics may be added to this toolkit.
If you have any questions or remarks please contact the developer of this toolkit, Victor de Lange, at CREM consultancy: delange@crem.nl.