DVT rejects a supply chain law

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The German Pet Food Association e.V. (DVT) rejects a supply chain law in its planned form. It advocates the application of obligatory measures only where voluntary implementation by market participants in terms of recognised requirements does not lead to the desired results. The DVT also calls for the responsibility for compliance with the postulated human rights and environmental standards to be shared adequately between the state and companies. The successes of the feed industry's activities make it clear that state intervention is not necessary at this time and, moreover, for reasons of competition, may only take place supranationally.

As a supplier of farmerswith lifestock, the feed industry is an important, integral part of food production and thus an essential element of high-quality food security. Although the majority of the raw materials required for this come from domestic production, the feed industry is dependent on imports, including from overseas, especially for the high-protein feed components. In 2019, a total of 2.5 million tonnes of soybean meal and 0.7 million tonnes of rapeseed meal were imported. Most of the soya came from South America and the USA, while rapeseed was imported in larger quantities from France and Ukraine.

In Germany, the oil by-products such as oil cake and extraction meal are used for feed production. In addition to the compound feed industry, farms as self-mixers are also a significant purchaser of oil meals.

In the context of the overall scale, oil by-products play an important role, but overall the feed industry needs a variety of elementary additives and raw materials (for example minerals) to ensure adequate nutrition and supply of livestock.

Efforts and activities of the German and European compound feed industry

For the medium-sized feed industry, the sustainability of its economic processes is of great importance. Through its active participation in the Forum for More Sustainable Protein Feed (FONEI), DVT supports various solutions to strengthen sustainability. This includes the endeavour of using sustainable domestic protein sources as an alternative to imported soy. In addition, the feed industry is working together with other market players in the agricultural and food sector to improve the traceability of certified goods along the value chain. The aim is to use only sustainably produced (certified) soy in animal feed, taking into account all sustainability criteria: Ecology, economy and social issues. Furthermore, the Forum develops agreements of company or industry targets that support this process. By becoming a member of the Forum on Sustainable Palm Oil (FONAP), the feed industry also commits to the goal of increasing the use of sustainable palm oil.

As there are limits to the use of domestic raw materials for nutritional and/or economic reasons, the feed industry is constantly looking at optimising the feed components used, their origin and sustainability. This includes various raw material components, additives and minerals whose availability is locally and regionally limited and for which corresponding complex supply relationships exist.

In 2015, the European Federation of Feed Manufacturers (FEFAC) developed guidelines for sustainable soy procurement. These form the basis for existing certification systems, make it easier for companies to choose and are currently (2020) being supplemented with important criteria, such as "freedom from deforestation". From 2021 onwards, the certification systems can thus start adapting them in practice. In Germany, there is an interest in including not only freedom from deforestation, but also other environmental and social criteria that have already been taken into account, and in implementing them comprehensively in the market. In this context, the business community is interested in making the criteria the global standard in order to achieve a comprehensive, rapid implementation and to prevent additional costs.

Currently, about 60 per cent of the soy meal used in animal husbandry is already certified as sustainable - and the trend is rising! Furthermore, we assume that the majority of the soy used comes from areas with a low risk of deforestation. The DVT is currently conducting a survey among its members to confirm this assumption with facts and figures.

Principles of European feed management (summary of guidelines):

  •     Compliance with legal requirements, i.e. recognition of local laws.
  •     Responsible working conditions: no child labour, compliance with international labour standards such as fixed weekly working hours, payment of fair wages, etc.
  •     Environmental responsibility: respect for designated nature and landscape conservation areas, no soy cultivation on land illegally cleared in Brazil after 2008.
  •     Good agricultural practice: respect for the rules of integrated crop management / crop protection, use of techniques to maintain soil quality, measures against erosion,
  •     Respect for land use rights, e.g. proof of ownership,
  •     Protection of communal conditions, for example, existing procedures for resolving complaints and grievances of traditional land users.

Critical comments on regulatory mechanisms and recommendations for action

    Although the feed industry is aware of its responsibilities, DVT believes that the requirements should be implemented by market operators and not enforced by law.
    Against this background, the DVT is critical of the implementation of regulatory measures at company level. For example, the five core elements of human due diligence as laid down in the National Action Plan (NAP) - based on the United Nations Guiding Principles (UNGPs) - require, among other things, a fully comprehensive risk analysis to identify potentially negative impacts. In addition, companies must develop integrated measures to minimise the identified risks. All these processes must be continuously monitored for effectiveness. All of this poses immense challenges for companies and generates high costs. Thus, the implementation of a consistent sustainability due diligence process in procurement requires the consideration of the entire value chain. However, this is often very intransparent due to the complex supply chains for bulk goods and includes many processes and stages of action.
    The German feed industry, which is dominated by small and medium-sized enterprises, can only have a limited impact on the regulatory processes of companies based in third countries. The time-consuming and cost-intensive procedures for inspection and certification should therefore not be applied equally to all companies. It is imperative that the verification procedure for compliance with the due diligence obligation be adapted to the economic clout of the companies. If regulatory measures are taken, it must be ensured that they can be borne equally by large and small companies without distorting competition.
    DVT firmly rejects the full liability along the entire value chain envisaged in the key issues paper. It considers such a legal extension of liability neither practically feasible nor legally justified. The DVT sees considerable constitutional concerns in this regard. An obligation to assume liability for all risks or actual damages arising in a supply chain is unreasonable for companies. If at all, liability can only be considered for such damages that arise in the company's direct sphere of influence on its own contractual partners. Even a liability limited to this direct contractual partner will not be compatible with international trade law and with the international contract provisions customary in our industry (basis among others GAFTA, London). The inclusion of an improved internationally uniform environmental and social standard liability law in the contracts is conceivable. These could be developed by GAFTA, for example. This would effectively replace a law that is difficult to administer.

In connection with liability regulations, there is always the question of proving whether a legally ascertainable damage has occurred at all, in what amount and who has to bear the responsibility. The burden of proof must always lie with the plaintiff. Under no circumstances would it be acceptable for companies to have to prove their own "innocence". The key issues paper on the Supply Chain Act sees it the same way "in principle". This must also remain the case in any further consideration of the project. Under no circumstances should there be a reversal of the burden of proof in possible proceedings.

The DVT is therefore in favour of internationally uniform standards. At the European level, the EU Commission is currently drafting binding legislation regarding due diligence obligations for companies within the supply chain, so that a German regulation must be oriented towards the European regulations - also with a view to fair competition. From DVT's point of view, it is important to keep an eye on the international interconnectedness of the flow of goods and not to focus solely on intra-European trade.

DVT supports responsible, sustainable supply chains within the feed industry. The numerous efforts to improve business practices that the industry is already undertaking underline this. However, the necessary framework conditions should be brought about by the market participants.