EU Launches Code of Conduct

The European Commission (EC) published its Farm to Fork (F2F) strategy in 2020, as part of the European Green Deal initiative. The strategy aims at making ‘the entire food chain from production to consumption more sustainable and neutral in its impact on the environment’.

An initiative under the strategy this year is the EU Code of Conduct (the Code) for responsible business and marketing practices in the food supply chain, linked to a monitoring framework.

The Code is intended to enhance sustainable practices at all stages of the food chain in order to ultimately increase the sustainability of the food system, and reduce the overall environmental footprint of the food industry and the retail sector.

On July 5, 2021, the EC, together with industry stakeholders, officially launched the ‘EU Code of Conduct on Responsible Food Business and Marketing Practices – A common aspirational path towards sustainable food systems’. The same day, 65 signatories become the first companies and associations to embrace it.

They comprise 26 food manufacturers (including Barilla, Ferrero, Mondelez, Nestlé and PepsiCo); 14 food retailers (including Ahold Delhaize and Carrefour); one from the food service sector; and 24 associations (including the European association of trade in cereals, oilseeds, pulses, olive oil, oils and fats, animal feed and agrosupply; the European farmers and agri-cooperatives; and the EU vegetable oil and protein meal industry association).

The Code is not only open to companies and associations in the food sector, but also to any organisation with an interest in sustainability. It has been reported that financial institutions, for example, may sign up with a view to implementing it in their operations; or non-governmental organisations (NGOs) could apply it in partnership with food businesses, to promote their sustainability.

Importantly, this is an industry code that has been developed by EU associations and companies, with active involvement and input from other stakeholders – including international organisations, NGOs, trade unions and trade associations – and together with the EC services.

The EC played the part of the organiser, being closely involved in the preparation of the Code and in the organisation of meetings. It will also oversee implementation.

The EC intends to present the Code at the UN Food Systems Summit later this year. This appears to be the reason why the drafting of the Code took only three months from Jan 26, 2021. Members of the European Parliament and of the EC worked with high-level stakeholders on the drafting process.

On the occasion of the launch, Stella Kyriakides, European Commissioner for Health and Food Safety, stated: “Today we are marking one of the first deliverables in our work under the [F2F] strategy towards a healthy and environmentally-friendly food system. Close cooperation between all actors is essential to achieve a successful transition to sustainable food systems.

“The EU Code of Conduct will facilitate this cooperation, building on the commitments the food industry has already made and encouraging more ambitious action. The European food industry is already known for the quality and safety of its products. It should now also become the golden standard for sustainability.”

The F2F strategy sets out a long-term vision to transform the way in which food is produced, distributed and consumed. The Code covers all major aspects of sustainability in food production and reflects the goals and ambitions of the strategy and of the European Green Deal.

Commitments of the signatories
The Code sets out indicative actions that actors in the food supply chain – for instance food processors – are voluntarily able to take on in order to improve their sustainability.

Associations and companies that sign the Code commit to accelerating their contributions to the transition towards sustainable food systems. With their pledges, the signatories endorse the objectives set out in the Code and encourage similar companies to participate.

The main targets for signatories are the so-called ‘middle actors’, such as food manufacturers, retailers and food service operators. The Code provides a framework to support these companies in achieving the ambitious commitments required. In addition, having associations on board is viewed as an important element for the rest of the industry, showing the way to their members.

The Code provides for two levels of commitments:

• For companies, a framework has been set for commitments with measurable outcomes covering a wide range of relevant topics, such as animal welfare, sugar reduction or cutting greenhouse gas emissions in their full product range.

  Companies are to report on their progress by submitting a summary with relevant extracts of their latest available Environmental, Social and Governance reports or Non-Financial or Corporate Sustainability reports, and/or any other relevant information that would allow the evaluation of the progress made by companies with respect to their commitments under the Code. 

  For EU associations, there is a set of objectives, each with its targets and indicative actions that promote a shift towards healthy and sustainable consumption patterns. The objective is to improve the impact of food processing, retail and food service operations on sustainability, and to improve the sustainability of the food value chains in relation to primary producers and other actors in the chain. Associations are to report on their progress on a yearly basis.

• For businesses that are active both within the EU and beyond its borders, the commitments would, in principle, apply to the sales/activities within the EU, including impacts related to their supply chains outside the EU (associated to these sales/ activities). If companies prefer, they can put forth commitments that apply to their total global sales/activities and related supply chains.

Seven aspirations
Signatories to the Code are assumed to share its seven aspirational objectives, together with the potential actions suggested:

• ‘Healthy, balanced and sustainable diets for all European consumers’
  This should contribute to reversing malnutrition and diet- related non-communicable diseases in the EU; and reducing the environmental footprint of food consumption by 2030. This can be done, for instance, by encouraging fruit and vegetable consumption.

• ‘Prevention and reduction of food loss and waste (at consumer level, within internal operations and across value chains)’.
  This could, for instance, focus on achieving a 50% reduction in per capita food waste.
• ‘A climate neutral food chain in Europe by 2050’.
  This means, for instance, reducing net emissions generated through food systems.
• ‘An optimised circular and resource-efficient food chain in Europe’.
  One example is to improve the sustainability of food and drink packaging.
• ‘Sustained, inclusive and sustainable economic growth, employment and decent work for all’.
  Among others, this would enable quality jobs for everybody in the farm sector.
• ‘Sustainable value creation in the European food supply chain through partnership’.
  One way would be to improve both the resilience and the competitiveness of business operators in the food system.
• ‘Sustainable sourcing in food supply chains’.
  This means, for instance, shifting the commodity supply towards deforestation-free products.

The EC considers it ‘essential to complement legislative proposals with voluntary, non-regulatory initiatives addressed to pioneers in the industry that are keen to support the green transition’. As set out in the F2F strategy, the EC will monitor the commitments under the Code and consider legislative measures if progress is insufficient.

Large companies will have to submit an annual report on their progress before the end of April each year. Small- or medium-size enterprises that are not able to report annually will be allowed to provide simplified reports every two to three years.

The Code suggests that companies, if able, should apply risk-based due diligence processes to identify, map and prioritise measures to address adverse environmental, social and economic impacts. Various established guidelines, principles, standards and frameworks on due diligence and responsible business conduct/corporate social responsibility already exist.

The ‘OECD-FAO Guidance for Responsible Agricultural Supply Chains’ is an internationally recognised example, providing guidance for companies and producer countries on social and environmental risk reduction in agri-food supply chains. A non-exhaustive list of guidelines and initiatives is supposed to be made available on the website for the Code.

Implications for the palm oil sector
The Code’s aspirational objective No. 7 – ‘ Sustainable sourcing in food supply chains’ – appears to be the most relevant matter related to palm oil production and use in the food chain. Two aspirational targets are set out within this objective:

• Transformed commodity supply chains which do not contribute to deforestation, forest degradation and destruction of natural habitats, and which preserve and protect high value ecosystems and biodiversity; and
• Improved social performance in global food supply chains.

In this context, it is important to emphasise that Malaysia’s sustainable palm oil production does not contribute to deforestation, forest degradation and destruction of natural habitats.

The Code also identifies the indicative action of ‘Transformation commodity supply chains’, which consists of:

• Promoting sustainable sourcing of materials in relation with (direct) suppliers, inside or outside of the EU;
• Encouraging the uptake of scientifically-robust sustainability certification schemes for food (including fish and fishery products); and
• Identifying and contributing to appropriate solutions and strategies towards: supporting, conserving or protecting natural habitats and biodiversity; preventing, reducing or remedying negative impacts of operations on air, land, soil, water and forests; deforestation-/conversion-free food supply chains; afforestation; and sustainable land use.

On the requirement of scientifically robust sustainability certification schemes for food, it should be underlined that the Malaysian Sustainable Palm Oil (MSPO) standard mandates responsible and sustainable production by oil palm smallholdings and plantations, and palm oil processing facilities. The MSPO also enables transparency and traceability along the value chain.

One of the ‘Guiding Principles’ of the Code is that signatories ‘aim to base their contributions towards the objectives of this Code on robust scientific evidence, where available’. Recognition of the science-based MSPO standard is of paramount importance for Malaysian Palm Oil to become a part of the sustainable food supply chain recognised by initiatives like the Code.

The success of the Code and its objective of becoming the new ‘golden standard for sustainability’ will ultimately depend on the number of signatories at both company and association level, as well as the actual implementation of the commitments.

The way the EC monitors the voluntary commitments will determine whether the Code as a ‘soft’ instrument is sufficient to fulfil the ambitious F2F strategy and Green Deal sustainability objectives, or whether a ‘hard’ legislative instrument will have to be proposed to reach the targets.

Uthaya Kumar
MPOC Brussels