Designing and implementing due diligence regulations: what can we learn from Voluntary Sustainability Standards?

There is a growing momentum among governments in Europe to legally require businesses to conduct environmental and human rights due diligence. These developments are often praised as a necessary way forward to complement private governance schemes such as Voluntary Sustainability Standards (VSS), which thus far have failed to bring about the full extent of the needed change towards more sustainable supply chains. Despite the broad enthusiasm, scholars and civil society have increasingly pointed to expected challenges in the design and implementation of due diligence measures, some of which may result in adverse, unintended effects on vulnerable groups in producer countries. Such concerns include, for example, aggravated market access for smallholders through ambitious traceability requirements or insufficient price premiums to cover the transition costs for smallholders. As long-standing private supply chain governance schemes, VSS have been facing similar design and implementation challenges (e.g., in relation to smallholder market access, price premiums, compliance assessment, and stakeholder engagement). These parallels present opportunities not only to anticipate similar challenges and failures in due diligence systems, but also to learn from successful attempts by standard-setting organizations to address them. In this study, we explore the linkages between due diligence regulations and VSS systems in terms of common design and implementation challenges and their adverse effects for vulnerable groups. We do so through a review of policy documents and scientific literature as well as expert interviews. We further identify innovative approaches in VSS systems to address these challenges and critically discuss their potential adoption in due diligence systems.