On 4 May ClientEarth filed a case against Cargill with the US National Contact Point (NCP) over its alleged failure to conduct adequate environmental and human rights due diligence on its soya supply chain in Brazil. This is not a legal case; the process is voluntary. Regardless of the outcomes, NCP cases put public pressure on companies whilst legislation is increasing on company supply chain due diligence and before the EU’s deforestation ban comes into force for companies.
About the case
- On 4 May 2023, NGO ClientEarth submitted a complaint with the US OECD National Contact Point (NCP) against the food company Cargill over its failure to conduct adequate environmental and human rights due diligence on its soya supply chain in Brazil.
- ClientEarth used data from Trase, a data-driven transparency tool that maps the international trade and financing of commodities, and research from NGO Aid Environment that provides remote satellite imagery, supply chain analysis, and field research, to analyse Cargill’s supply chain activities in Brazil.
- ClientEarth alleges that despite Cargill having a monitoring, verification and reporting system in place to end deforestation related to soy production in its supply chains, and a policy commitment to support Indigenous Peoples and local community rights, the company does not conduct proper environmental due diligence on
- Soy bought from farmers, cooperatives, processors and traders which makes up 42% of all Brazilian soy it purchases
- Soy sourced from the Cerrado savanna, despite the massive rate of deforestation there and its environmental importance, nor from the Atlantic Forest which is an important region for conservation
- Soy owned by other companies that passes through seven ports in Brazil which Cargill operates
- Indirect land use change i.e., the conversion of land.
- ClientEarth alleges that Cargill is not carrying out due diligence in-line with the OECD Guidelines for Multinational Enterprises (OECD Guidelines). Under the OECD’s sector specific due diligence guidance, the OECD‑FAO Guidance for Responsible Agricultural Supply Chains, companies are required to prevent and minimise their negative impacts on forests and biodiversity. The OECD Guidelines apply to all multinational enterprises that are operating in OECD adhering countries, including the US and Brazil.
About the US NCP mandate and process
- A number of media outlets have been reporting the case to be a legal case against Cargill. This is not accurate.
- National Contact Points (NCPs) are non-judicial governmental grievance mechanisms set up in all OECD countries. The US NCP does not have legal authority to investigate, prosecute, or adjudicate issues submitted under the NCP process. They provide mediation and expert decisions on cases related to the OECD Guidelines for Multinational Enterprises (OECD Guidelines). The US NCP does not have a mandate to decide whether Cargill has adhered (or failed to adhere) to the OECD Guidelines.
- As a first step the US NCP will carry out an initial assessment to determine if the case is material and substantiated before accepting it.
If the US NCP accepts the case, it will offer mediation between ClientEarth and Cargill. The intent is that the facilitators help ClientEarth and Cargill reach an agreement. The process is voluntary, and Cargill can decline to enter mediation. - If Cargill accepts mediation and if ClientEarth and Cargill reach an agreement, they can choose to publish their agreement, but this is not mandatory.
- If Cargill declines mediation, the US NCP will publish a public statement on the case and why it did not proceed. The statement will include information on the parties involved, the issues raised and recommendations or observations that the US NCP considers appropriate.
- This is the third notable case filed with the US NCP this year.This is the third notable case filed with the US NCP this year
- On 7 February, 10 Ugandan and Tanzanian organizations and NGO Inclusive Development International brought a case against US insurance firm Marsh in its role as an insurance broker for the East Afrian Crude Oil Pipeline (EACOP).
- On 27 February, a case was filed against Nike with the US NCP by NGOs Asia Floor Wage Alliance (AFWA) and Global Labor Justice – International Labour Rights Forum (GLK-ILRF), and twenty trade unions in Cambodia, India, Indonesia, Pakistan, and Sri Lanka. The case alleges that Nike contributed to layoffs, terminations, arbitrary pay cuts, unpaid wages and gender discrimination in its supply chain by cancelling orders during the COVID-19 pandemic. The complaint is not public.
- Other cases relating to deforestation in the Amazon have also recently been filed with other NCPs. In December 2022, a case was filed with the Italian NCP against the Italian leather company Gruppo Pasubio for purchase of leather linked to illegal deforestation of Indigenous lands, and a case with the Dutch NCP against the commodity trader Louis Dreyfus Company’s involvement in illegal palm oil plantations. These cases remain open.
Implications
- While this case is not a legal case, companies operating in this sector need to be aware of increasing EU legislation on responsible business conduct in company supply chains globally and on deforestation risks.
- The EU Regulation on Deforestation-Free Products will go into force for companies in 2025. It prohibits products from being placed on the EU market or exported from the EU unless they are deforestation-free and are covered by a due diligence statement. The Regulation targets cattle, cocoa, coffee, palm-oil, soya and wood, rubber, and products that contain, have been fed with or have been made using these commodities, such as charcoal, paper products, leather, chocolate, furniture, and palm oil derivatives.
- The EU is in the process of passing mandatory human rights and environmental due diligence under the EU Corporate Sustainability Due Diligence Directive (EU CSDD). Unlike most national legislation in Europe which focus only on human rights risks, the EU CSDD will cover how a company identifies, prevents, and addresses environmental harms in its value chain. Read our analysis on the regulation.