Due diligence in agricultural value chains: sector specific challenges and chances
Bettina Rudloff, Christine Wieck, Sarah Iweala, Achim Spiller
May 12, 2025
#Agriculture and food
#Environment and climate change
#EU / Western Europe
#Sustainability standards
#Corporate responsibility and lead firms
Teaser
The agricultural sector plays a dominant role in many of the challenges along international value chains that are addressed by the new European due diligence rules. Food production and food demand have a strong impact on deforestation, climate and biodiversity. Child labor is more prevalent in agricultural production than in any other sector. Moreover, the human right to food is explicitly and specifically relevant to agriculture.
Unlike other sectors, actors in the agri-food sector are simultaneously affected by two new EU due diligence regulations: the Corporate Sustainability Due Diligence Directive 2024/1760 (EUCSDDD) and the more sector and product-specific EU Regulation 2023/1115 on Deforestation-free products (EUDR), both of which have recently been facing several changes.
In the following, we outline the most important due diligence related challenges for agricultural value chains. We identify the specific features of the structure of the value chains and trade patterns and how they are generally linked to the obligations imposed by the new rules on due diligence. We also summarize the main differences between the sectoral and product-specific EUDR and the horizontal EUCSDDD, and conclude by identifying some selected needs for policy support and for further research in specific areas.
1. Sustainability and due diligence issues in agricultural value chains
1.1. Sustainability risks
Food systems are linked to many global challenges related to human and labor rights and environmental targets (BMUB, 2016):
Another issue related to income opportunities in agriculture is access to resources, especially land. Land-use rights are often only weakly protected and thereby human rights violations can occur in case of large-scale purchase or leasing of farmland. This can result in displacing or expropriating the local population due to unclear land rights or the disregard of customary land rights. This can cause limited or permanent loss of access to land without compensation and thus restricting income opportunities and food security if production for own consumption is limited (German et al. 2013).
The right to food is a fundamental human right to ensure that everyone has access to adequate, sufficient and healthy food. It is covered by Article 11 of the UN International Covenant on Economic, Social and Cultural Right. The human right to food is often cited as the "most frequently violated human right” (CSM4CFS 2018, FAO et al. 2024). It is a crucial human right for the agricultural sector in particular, as a large proportion of hungry people around the world are smallholder farmers (FAO et al. 2024). Violated labor rights by insufficient wages and income contribute to food security challenges - such as caused by unaffordable food - and thereby can undermine the right to food. Indigenous and local knowledge is also key to food security as the use of traditional crops and farming practices can be highly resilient to different external shocks e.g. by heat or by international price peaks as being unaffected and thereby support food security (Antonelli 2023).
The environment- and climate-related dimension of agriculture is defined by close ties between agricultural production and natural resources (Wieck et al. 2023). For instance, deforestation is driven predominantly by agriculture (Pendrill et al. 2022). The largest share of EU’s driven deforestation via European imports comes from some selected products like palm oil, soy, wood, cocoa, coffee, cattle and rubber, which are covered by the EUDR. For these products the highest footprint of European consumption is assessed by considering imports (“embodied deforestation”) (EU Commission 2021a, p. 32). Indigenous peoples have a critical role to play not only as producing actors in value chains but as well for the environment- and climate-related dimension (IPBES 2019). Linked to forestry for example, studies have shown that indigenous peoples' lands include more than one-third of the world's sustainable forests (Fernández-Llamazares et al. 2024).
1.2 Pattern of value chains and trade flows affecting due diligence
Agricultural supply chains have specific characteristics that make the application and implementation of due diligence obligations particularly challenging. Agricultural production is highly dependent on environmental conditions such as temperature, rainfall and soil quality. A large heterogeneity of farm sizes is observed, that often coexist in one market: from large-scale farms, over medium and small-scale farmers to subsistence farmers that are only marginally linked to international markets. They also use varying degrees of external inputs in their production. These differences, together with the following additional characteristics, explain the positive and negative influences of the due diligence approaches:
Food systems are linked to many global challenges related to human and labor rights and environmental targets (BMUB, 2016):
On human and labor rights, agricultural value chains are characterized by a particularly high risk level of respective violations (ILO 2017). Compared to other sectors, jobs in agricultural supply chains are paid less and are more susceptible to child and forced labor (Barrett et al. 2022, USDOL 2020, ILO 2017). The agricultural, fisheries and forestry sectors account for the bulk of global child labor (ILO and UNICEF 2020: 8 et seq). Analyses tend to locate child labor in small-holder farming structures, while forced labor is more commonly encountered in larger agricultural enterprises (UNICEF, p.38 and ILO et al. 2019, p. 9). In addition, informal contractual arrangements without protection of labor rights and self-exploitation in terms of working hours are commonplace. Agricultural work is also often unsafe in terms of health, as for example due to the improper use of pesticides (e.g. Miyittah et al. 2020).
Related to labor rights is the level of wages and income of farmers, as actors in agricultural production are often self-employed. Both wages and income are often insufficient to ensure a decent standard of living for households, which is particularly relevant for smallholders (van de Ven et al. 2021, Smith et al. 2019).
Another issue related to income opportunities in agriculture is access to resources, especially land. Land-use rights are often only weakly protected and thereby human rights violations can occur in case of large-scale purchase or leasing of farmland. This can result in displacing or expropriating the local population due to unclear land rights or the disregard of customary land rights. This can cause limited or permanent loss of access to land without compensation and thus restricting income opportunities and food security if production for own consumption is limited (German et al. 2013).
The right to food is a fundamental human right to ensure that everyone has access to adequate, sufficient and healthy food. It is covered by Article 11 of the UN International Covenant on Economic, Social and Cultural Right. The human right to food is often cited as the "most frequently violated human right” (CSM4CFS 2018, FAO et al. 2024). It is a crucial human right for the agricultural sector in particular, as a large proportion of hungry people around the world are smallholder farmers (FAO et al. 2024). Violated labor rights by insufficient wages and income contribute to food security challenges - such as caused by unaffordable food - and thereby can undermine the right to food. Indigenous and local knowledge is also key to food security as the use of traditional crops and farming practices can be highly resilient to different external shocks e.g. by heat or by international price peaks as being unaffected and thereby support food security (Antonelli 2023).
The environment- and climate-related dimension of agriculture is defined by close ties between agricultural production and natural resources (Wieck et al. 2023). For instance, deforestation is driven predominantly by agriculture (Pendrill et al. 2022). The largest share of EU’s driven deforestation via European imports comes from some selected products like palm oil, soy, wood, cocoa, coffee, cattle and rubber, which are covered by the EUDR. For these products the highest footprint of European consumption is assessed by considering imports (“embodied deforestation”) (EU Commission 2021a, p. 32). Indigenous peoples have a critical role to play not only as producing actors in value chains but as well for the environment- and climate-related dimension (IPBES 2019). Linked to forestry for example, studies have shown that indigenous peoples' lands include more than one-third of the world's sustainable forests (Fernández-Llamazares et al. 2024).
1.2 Pattern of value chains and trade flows affecting due diligence
Agricultural supply chains have specific characteristics that make the application and implementation of due diligence obligations particularly challenging. Agricultural production is highly dependent on environmental conditions such as temperature, rainfall and soil quality. A large heterogeneity of farm sizes is observed, that often coexist in one market: from large-scale farms, over medium and small-scale farmers to subsistence farmers that are only marginally linked to international markets. They also use varying degrees of external inputs in their production. These differences, together with the following additional characteristics, explain the positive and negative influences of the due diligence approaches:
- Especially the "bulk character" of a commodity determines whether production can be easily segregated and by that defines the risk of non-compliance of arriving and imported lots. The less traceability and segmentation exists in a value chain, the more complex and costly is the implementation and control of the new due diligence regulations (Weber 2023). From the export side, it affects the costs of applying different rules for different destinations (Azevedo-Ramos 2024) and from the EU side as import region, it determines the traceability of the imports’ origin and the compliance of individual lots with obligations. For instance, segmentability of the value chains of soy and palm oil as bulk commodities is more limited compared to coffee and cocoa (EU Commission 2021b, p.145ff).
- The EU’s trade relevance defines the overall leverage of enforcing due diligence along international value chains but as well a potential burden to trade partners. For some agricultural products large concentration and relevance for potentially affected export revenues exists e.g., for the EUDR-relevant product cocoa, Côte d’Ivoire exports nearly 50% to the EU (Table 1). In Ghana, additional to a large import leverage by the EU, cocoa accounts for 40% of the total country's export revenues being possibly affected by the EUDR (see ITC trade map deforestation).
Table 1: EU as destination for agricultural products covered by EUDR1
2. EU’s due diligence rules relevant for agriculture: a comparison of different schemes
Both recently initiated approaches, the EUCSDDD and the EUDR, impose responsibilities on businesses, but they differ in scope and implementation timelines. The application start for the EUCSDDD originally was foreseen for 2027 with different implementation phases depending on the company size, while recently a decision postponed the application’s start for the EUDR by one year, i.e. 30 December 2025. This postponement was initiated by increasing international criticism e.g. by Brazil and Indonesia and supported as well by EU MS including Germany. In addition, in Germany the German Supply Chain Due Diligence Act (LKSG) has been in force since 2023, and in France the Corporate Duty of Vigilance Law since 2027. Both must be aligned with the requirements now set by the EUCSDDD as of 25 July 2026. End February 2025 the Commission proposed a legal Omnibus package to simplify reporting on sustainability across related acts besides EUCSDD like the Corporate Sustainability Reporting Directive and the Taxonomy Regulation. Parts of the package, precisely the “Stop the Clock”-proposal to postpone the start of application, was approved by the the European Parliament and Council mid-April 2025. Other parts are still being negotiated (Table 2).
Table 2: Differences between EU due diligence approaches affecting agriculture
The EUCSSD and the EUDR differ significantly in the following six key aspects: (1) on risk classification the EUCSDDD approach is not using a pre-definition for countries and thus, the risk evaluation relies completely on the companies’ risk assessments, while the EUDR employs a classification system that designates countries or regions as low, standard, or high risk for deforestation. This risk classification is based on quantitative indicators (like past deforestation rates and increase in respective plantations in countries) but can consider as well qualitative dimensions like existing domestic legislation to protect forests or bilateral partnerships between the EU and the partner. This classification resulted in political tensions and has not yet been finalized. It is now scheduled for June 2025. Possibly a unified classification of all countries at standard level is going to serve as starting point. The classification is linked to the specific duties. (2) In terms of the specific companies’ duties, the EUDR is much more detailed than the EUCSDDD on the individual companies’ risk assessment. The EUCSDDD only states that "actual and potential adverse effects" must be "identified", whereas the EURD lists ten risk assessment criteria to be taken into account. Unlike in the EUCSDDD no complaint mechanism for single actors is foreseen in the EUDR. Various simplifications are applicable e.g., for SMEs or depending on the benchmark classification. In terms of the (3) type of duty the EUDR establishes a duty of success, which is stronger compared to the EUCSDDD’s duty of care. The latter requires a more formal compliance to the bureaucratic rules. Under the EUDR, for areas of 0.5 ha or more, deforestation-free status must be proven through geo-localization for any land used after the cutoff date of December 31, 2020. The EUDR now prohibits mass balance certification, which is a common approach for bulk commodities like soy and allows mixing certified and non-certified material if overall tendency of the mix is identifiable. (4) Regarding the type of obligated companies, the EUCSDDD only covers large companies, resulting in a small number of affected companies in the agri-food sector, which is characterized by smaller companies. The Omnibus Initiative proposes to further increase the thresholds for company size, which will again limit the number of companies ultimately covered. However, smaller players may still be affected as obligations can be passed on, for example through codes of conduct for upstream players. The Omnibus Initiative can potentially reduce this risk by limiting due diligence obligations to direct first-tier suppliers. In contrast, the EUDR is applicable for all companies of any size but only for 7 mainly agricultural products and some defined derivatives (soy, cattle, palm oil, cocoa, coffee, wood, rubber). Additionally, (5) on enforcement tools both approaches know fees and the exclusion of eligibility for public procurement. However, civil liability only is covered by the EUCSDDD – even though the Omnibus-initiative intends to exclude civil liability again. The EUDR includes as well a type of a traditional trade measures, as products can be confiscated at the border. The responsible administrations also can differ between regulations. In Germany, for example, the Federal Office for Economic Affairs and Export Control (BAFA) oversees the EUCSDDD, while the Federal Office for Agriculture and Food (BLE) is responsible for the EUDR. There is (6) a dynamic component foreseen in both frames based on impact assessments. Under the EUDR, this is precisely defined and follows a progression plan on potentially including additional products and ecosystems with set timelines. The EUCSDDD originally included a review clause on the inclusion of financial services in the scope of the directive, which was removed by the omnibus package. The EUCSDDD primarily includes a report that assesses its effectiveness in achieving objectives.
3. Selected challenges and chances of due diligence rules for agriculture
Some selected areas of challenges and chances are of special relevance in this sector.
3.1. Challenge of traceability and geo-location
The EUDR requires a very detailed traceability approach, i.e., geo-localization as precise definition of the status of deforestation down to a plot of 0,5 ha. This localization can be technologically supported by satellite images. The comparison of geodata provided with satellite data enables a relatively efficient verification of whether zero deforestation is reached. However, the prerequisite is the provision of sound primary geo data. As different countries use different geodata mechanisms and forestry observatories an international dispute arose which one to be applied. Within a value chain, the block chain technology can be applied at retail side (Grünewald et al. 2022), which offers additional benefits like checking of payments for sales within the chain.
For some products traceability is more challenging than for others. This is particularly true for live animals like cattle as they have to be tracked along often different stations of rearing, fattening, slaughtering and processing. Countries use different animal traceability systems which may be in conflict with the strict EU’s requirement of the EUDR (INTA 2021). Bulk goods like soy require segregation of supply lines to separate the exports’ destination to ensure different import requirements. The EUDR’s prohibition of mass balance certification increases costs of compliance (Hinkes & Peter 2020). Some EU projects support complex traceability like the SAFE project of the Global Gateway for animal tracing in Brazil.
3.2. Challenge of addressing food security
Food security is immanently linked to agriculture, a sector that provides food yet often violates the right to food for those working within it. The EUDR and EUCSDDD address food security as a human right, i.e. the right to food is covered as part of corporate due diligence in a limited way. Compared to the addressed ILO core labor norms, the right to food is more complex in nature, because it goes beyond narrowly defined value chains and cannot be clearly defined like a prohibition (like “no forced labor”). If the right to food is seen as part of corporate due diligence, companies need to be assisted to operationalize it in order to make it more tangible for companies.
The right to food is closely linked to other human and labor rights covered by due diligence regulations, i.e. wages and incomes, as these are the determinants of whether the access or affordability to food (as a dimension of food security) can be met. The EUCSDDD addresses food security by referring in its annex (p.1) to a “fair wage” and a “decent living” and prohibits to restrict “workers’ access to adequate food”. However, it remains unclear what criteria will be used to evaluate whether this obligation has been implemented by companies along their supply chains. As disposable income is a key factor, enforcing compliance with at least the national minimum wage should be a central component of due diligence approaches (Holleman & Conti 2020) and consequently could contribute to improving food security. However, the minimum wage may still be too low to be considered a 'fair wage' or to provide a 'decent living' (UN Global Compact, n.d.). This raises the question of how a living wage and income could be implemented as part of corporate due diligence, given that the level of (minimum) living wages and, in particular, income are closely linked to competition issues and (global) market developments (Wieck et al. 2023, p. 145). This makes any solution sensitive to market developments, and unilateral national commitments may be difficult to implement. As long as the right to food remains only a programmatic goal in international conventions, due diligence rules are limited because they are not specific enough for companies to comply with. It should therefore be implemented gradually, once the necessary measurement and monitoring systems are in place. Ongoing activities by the UN Global Compact or scientists may lead the way towards implementation: Due diligence obligations could directly include measures such as ensuring the availability of food in the workplace for employees or implementing educational programs on healthy eating. Adding new elements (e.g. definition of a living wage) after a prior impact assessment and in close cooperation with relevant stakeholders, e.g. through multi-stakeholder platforms, may be a pragmatic but feasible approach (Wieck et al. 2023, p. 158).
Land displacement and deprivation of production factors are affecting access to land and thereby may reduce availability and access of and to food by individuals and communities. It is covered in the EUCSDDD (Annex I, para 16). A starting point of potential consideration in due diligence obligations could be for companies to check, as part of their due diligence duty, whether displacement has been taking place in their supply chains. However, concrete processes for how companies can best determine this, and how they can obtain the relevant and often sensitive information, still need further analyses.
3.3. Chances given long standing experiences with certifications schemes
The agricultural sector can build upon long term experiences as certification schemes are more widespread than in other economic sectors (UNCTAD 2023). The experience gained here is also of general interest for the wider application to due diligence regulations and to other sectors. Experiences with product quality and documentation exist for high quality luxury brands or certified products, e.g. organic or fair trade or some tropical commodities, like cocoa and coffee (Wieck et al. 2023, p. 45). These products often benefit from more established business relationships, such as long-term contracts, contract farming, or even vertical integration.
An overview of more than 300 sustainability standards is provided in the Standards Map of the International Trade Center. At least eight2 of them have been identified as highly relevant for the scope of the due diligence obligations (Wieck et al. 2023). These standards all follow different sustainability objectives, achieving e.g., higher producer prices, zero deforestation, social sustainability, human rights, food security, food safety, nature conservation or organic farming. Some of them cover only a limited number of products (e.g., palm oil, coffee, tea) or specific product segments (organically produced) whereas the remaining cover all agri-food products. Also, different segments in the value chain are covered by them (e.g., agriculture, B2B, B2C, consumer level). A special challenge exists for small scale farmers as for them certification costs are often too high (Meemken 2017). In highly (price) competitive global markets, international value chains are dominated by large scale companies. This is for instance the case in international soy value chains (Voora et al. 2024) and internationally trading beef companies whereas in international coffee and cocoa value chains small scale farmers play an important role (European Commission 2021a, p. 61). The involvement of many smallholders in value chains poses a challenge for obligated companies in the EU, requiring them to comply with several duties like the risk assessment and traceability across a large number of producers.
Some references to existing certification approaches can be found in EUCSDDD and EUDR, though they are not referring to specific certificates to proof compliance. However, competent authorities, such as BAFA, issued guidelines on how the use of certain certificates in place can assist companies in fulfilling their due diligence regulations. In the context of the EUDR, certifications can also be used to help companies internally in their information collection efforts, but for compliance, full traceability of the commodities is required under the regulation. Certifications that do not allow for such traceability, such as mass balance chains of custody, are not useful for the compliance of the EUDR. Thereby, existing certifications matter more for the EUCSDDD, as for certified suppliers, compliance may become easier. Overall, shortcomings of certification schemes already in place need to be taken into account by the obliged companies and the competent authorities alike (Gardner et al. 2019; Meemken et al. 2021).
4. Overall Outlook
The EUDR is of special relevance in agriculture and the postponed start of its application provides opportunity to refine regulations, prepare for the implementation of traceability and geo-localization, and assess potential improvements or limitations in strengthening food security in the due diligence obligations. The same applies to the probable postponement of the start of the EUCSDD. Still it remains relevant to base any future changes by a sound impact assessments and continuous monitoring, to be carried out best jointly along the value chain, i.e., together with trade partners. Additionally, more flexibility for the way trade partners implement the new rules should be considered. One approach known in international trade is mutual recognition to accept different national means to reach the same aim like the overall targeted level of protecting forests. Such more individualized approaches should be envisaged as general principle. Existing approaches are generally foreseen by the EUDR as they are to be considered within the benchmark classification. he recent political agreement on the EU-Mercosur agreement in December 2024 also supports such individual initiatives, for example by allowing the negotiated agreement to be taken into account for (better) benchmark classification (see new Annex of TSD chapter, para. 56a). Additionally, it gives hints on mutual recognition by stressing to take into account Mercosur’s own verification schemes for deforestation (see new Annex of TSD chapter, para. 56b,c). More generally, the long-lasting experiences already in agricultural certification schemes can serve as a learning case to identify success and hindering factors for certificates’ application to other sectors. Improvements for smallholders should still be developed, such as cooperative approaches for joint due diligence declaration or certification, for which some experience exist in the organic sector (Das 2023, p. 23). Although the more agriculture-specific EUDR is particularly relevant to this sector, better alignment with the EUCSDDD should also be pursued to minimize costs arising from diverging obligations. This should be taken into account in the changes recently initiated by the omnibus initiative. However, in the course of the general simplification process that the EU is currently and increasingly pursuing in general and which fits to the new Omnibus regulation, the addressed objectives pursued should not be forgotten- efficiency always relates to costs and outcomes, and in this sense the quality of regulation, rather than pure cost savings, should be the guiding principle for any potential further changes in regulation.
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