Implementing BHR measures remains challenging for many EMDE businesses, particularly for micro, small and medium-sized enterprises. Compared to larger firms, MSMEs face greater challenges in complying with rapidly evolving BHR regulations and standards. Competitive pressure and disproportionate costs associated with human rights due diligence practices make compliance even more challenging for MSMEs. Understanding these complexities is essential for assessing the broader implications of BHR and responsible business conduct (RBC) standards for EMDE and their businesses.
Governments, donors, and buyer companies should engage in collaborative efforts to provide targeted, proportionate support to help MSMEs in EMDEs manage the high initial costs of compliance and implement ongoing BHR measures to maintain and gain access to export markets.
Key conclusions:
- Many local producers and farmers lack the resources, awareness and technical support to comply with BHR requirements, and therefore worry about losing access to global markets.
- Small farmers often have to prioritise basic survival over regulatory compliance and are not part of a cooperative structure and are therefore removed from the decision-making processes. As a result, these farmers are excluded from sustainability programs and price protection mechanisms, making them more vulnerable to market and seasonal fluctuations and thus reducing their incentives to adopt responsible practices.
- For SMEs, compliance with BHR requirements, creates financial and administrative burdens, including expensive certification and audits and overlapping sustainability standards. Even in cooperatives that provide premiums to support compliance, the portion of funds absorbed by administrative costs is significant.
- Numerous sustainability standards and duplicative requirements produce an endless list of tick boxes. This can turn compliance into “managing to standard” rather than managing actual risks. Standards should be streamlined and tailored to suppliers’ size, operations, context, capacity and risk levels, enabling a focus on continuous improvement rather than rigid compliance.