As many as 84% of European nutraceutical industry players are in favour of governments establishing a minimum legal standard for corporate sustainability and due diligence, according to a Vitafoods Insights survey, with 76% saying companies should be penalised for non-compliance.
In February 2022, the European Commission adopted a proposed regulation to ensure sustainability and corporate social responsibility (CSR) throughout global value chains.
The Commission says the aim of the Corporate Sustainability Due Diligence Directive is to “foster sustainable and responsible corporate behaviour, and to anchor human rights and environmental considerations in companies’ operations and corporate governance”.
It will require companies to implement accurate, comprehensive sustainability reporting, identifying and, where necessary, preventing, ending, or mitigating adverse impacts of their activities on human rights and the environment.
The measures are part of the EU’s efforts to become climate-neutral by 2050.
The rules will apply to EU companies that have more than 500 employees and a net turnover of €150 million, and EU companies with more than 250 employees and a net turnover of €40 million which operate in “highimpact” sectors.
High-impact sectors are identified as agriculture, forestry, fisheries (including aquaculture), the manufacture of food products, and the wholesale trade of agricultural raw materials, live animals, wood, food, and beverages.
Many nutraceutical companies, including manufacturers of vitamins and minerals, fish oils, collagen, whey protein, and probiotics, are expected to be affected.
Birthe van der Voort, sustainability partner at Deloitte, told an audience at Fi Europe 2022 that the new rules were guaranteed to have a huge impact “not only on your financial reporting side… but also very much on your business, on your operations, on how you communicate and work with your suppliers in your entire value chain”.
Her colleague Emily Cromwell, consumer ESG lead, emphasised the importance of the social aspect of the directive, saying there was a tendency to focus on climate change and carbon emissions.
“Social issues and human rights are absolutely as critical as the environmental side of ESG,” Cromwell said. “And there’s a real face to this, so if you can get it right, this is an opportunity to make a tremendous impact on tens of thousands of people, if not more. It’s an opportunity as much as an obligation.”
To gauge support for these kinds of initiatives, Vitafoods Insights conducted a survey, asking our readers what they thought of such regulatory frameworks, what their priorities were for sustainable business, and who should foot the bill.
To carry out this survey, we questioned our European database and received responses from a range of entities. The results revealed widespread support for government intervention to ensure sustainable targets are met.
As many as 84% of respondents – who were drawn from backgrounds including marketing, product development and innovation, consultancy, procurement, distribution, and R&D – agreed that governments should establish a minimum legal standard for corporate sustainability and due diligence. Just 16% said they opposed such mandatory action.
Three-quarters (75%) said they believed that the EU Due Diligence Directive would impact their supply chains, with almost the same proportion – 76% – saying they thought companies should be penalised if they failed to adhere to the minimum legal standard for corporate sustainability and due diligence. Almost a quarter (24%) said they should not be penalised.
Should companies be penalised if they do not adhere to the minimum legal standard for corporate sustainability and due diligence?
However, there was also a desire for flexibility, with 64% of participants saying companies should be allowed to define their own corporate sustainability standards.
“No matter what the sustainability topic is, in order to really embed it in your business doesn’t mean that it’s going to be only costly for the business, but … that the business needs to make some different types of decisions,” said Cromwell. “It may be that you aren’t just procuring solely based on cost and reliability, but you begin to have a more balanced scorecard that weighs other issues alongside these traditional issues.”
Her observation was reflected in our survey: more than half of respondents agreed that nutraceutical companies should do business in a more environmentally sustainable way, and that they should be prepared to accept a reduction in profits to achieve this. Almost a third (29%) strongly agreed with this statement and 29% somewhat agreed, while 17% strongly disagreed and 10% somewhat disagreed.
However, a majority of participants also said they wanted to see consumers shoulder responsibility for increased costs. Almost four in 10 (39%) strongly agreed that consumers should buy food supplements and nutraceuticals produced in an environmentally sustainable way and be prepared to spend more money on such products, with more than a quarter (27%) somewhat agreeing with this statement. Just 9% strongly disagreed, while 12% somewhat disagreed.
It seems that the willingness of the nutraceutical industry to take on these costs is lower than that felt among the wider food industry. These figures were noticeably lower than the responses to the same question in a Fi Global Insights survey, where 34% of food industry respondents strongly agreed and 38% somewhat agreed that companies should do business in a more environmentally sustainable way and be prepared to accept a reduction in profits to achieve this. Just 6% strongly disagreed.
Reducing greenhouse gas emissions and plastic waste were identified as key areas for action, with 44% and 21% of respondents respectively ranking these as the most important issues to achieving a sustainable nutraceutical industry.
Protecting biodiversity was the top action point for 8%, followed by reducing pesticide use (6%) and protecting workers’ rights (5%).
To what extent do you agree with the following statement: Nutraceatical companies should do business in a more environmentally sustainable way, and be prepared to accept a reduction in profits to achieve this
Reducing greenhouse gas emissions
Reducing plastic waste
Protecting biodiversity
Reducing pesticide use
Protecting workers’ rights
Reducing water pollution
Supply chain transparency
Recyclable packaging
Ecologically friendly manufacturing processes
Sourcing ingredients locally
Using plant-based ingredients over animal-based ones
Cultivating botanicals (rather than wild sourcing)
Third-party certification
Using biotechnology to produce nutrients
Producing nutrients from upcycled side-streams
When asked about specific environmental or social actions that their company had implemented within the past 12 months, the examples given reflected the heterogeneity of approaches to managing sustainability.
Reducing plastics, both in terms of usage and waste, was a commonly reported measure, with contributors highlighting moves such as reducing microplastics and replacing virgin plastics with PCR.
Reducing greenhouse gas emissions and/or introducing greener alternatives such as solar power and renewable energy were also mentioned by multiple respondents; examples given included reducing electricity, steam, and water consumption, limiting CO2 during production and manufacturing processes, using more electric vehicles, and implementing cycle schemes.
Some participants outlined moves to use recycled raw materials in production and packaging. Upcycled and biodegradable ingredients also received mention.
Sustainable sourcing and supply chain transparency were hot topics, with multiple companies reporting a move towards local production where possible.
Accountability was a central concern for many brands. Survey respondents spoke of introducing ESG programmes, appointing task forces and/or dedicated directors, and setting measurable goals and reporting on them, with some saying that third-party certification was crucial to achieving their targets.
Seventy-three percent of respondents said their company already implements a due diligence process for sustainable business; however, only about half (51%) said they thought this process was sufficient to tackle the current climate crisis.
This painted a gloomier picture than the Fi Global Insights survey, where 100% of participants said their company implemented a due diligence process and almost two-thirds (64%) said they believed these processes were adequate.
• Most – 84% – of our respondents were in favour of a minimum legal standard for corporate sustainability and due diligence, with 76% saying companies should be penalised for non-compliance.
• Almost two-thirds (64%) of participants said companies should be allowed to define their own corporate sustainability standards.
• Reducing plastic waste and greenhouse gas emissions were identified as the most important areas of action, followed by protecting biodiversity, reducing water pollution, and using ecologically friendly processes.
• Almost three-quarters (73%) of respondents said their company already implemented a due diligence process for sustainable business.
• However, participants were split when it came to the effectiveness of such due diligence processes, with just over half (51%) saying they thought those in place were sufficient to tackle the current climate crisis.
