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15 Sep 2015

Irit Tamir & Tim Gore, Oxfam

Paying for climate change in supply chains

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Part of Climate Dialogues blog series

When the Rana Plaza disaster of 2013 took the lives 1137 Bangladeshi textile workers and devastated the livelihoods of their families, the big global clothing brands who sourced from the factory suddenly found themselves in the spotlight, answering questions about their responsibilities towards workers in their supply chains.

Public campaigns from Bangladesh and beyond, and pressure from bodies such as the International Labour Organisation (ILO) saw the establishment of a compensation fund for workers affected by the disaster and their families under the auspices of the ILO, to which those big brand companies were pressed to contribute, albeit somewhat begrudgingly. In fact, the fund is totally voluntarily and does not offer recommended amounts based on a share of the market or suppliers involved in the disaster. In other words, while the disaster certainly called for the clothing brands to step up, a proper framework that tied their responsibility to the disaster retroactively did not develop. That being said, nearly 200 apparel companies and retailers did sign up to the Bangladesh Accord, a 5 year agreement which among other things does ensure sufficient funds are available for remediation of supplier factories to avoid such disasters in the future.

At this year's G7 meeting in Germany, government leaders went a step further, declaring that “G7 countries have an important role to play in promoting labor rights, decent working conditions and environmental protection in global supply chains,” and giving their support to a “Vision Zero Fund” to be established in cooperation with the ILO. This will act as a kind of insurance fund, part-funded by trade associations in G7 countries, and provide resources both to firms that commit to taking prevention measures and for the compensation of victims of disasters when they occur.

Could this be a model for helping to respond to climate disasters in a warming world? If big clothing brands can be held responsible for the compensation of workers in their supply chains that are victims of unsafe working conditions, shouldn't big food and beverage brands pay their share of the loss and damage suffered by farmers and their families in the wake of extreme weather events when their sourcing clearly plays a role in creating the disaster at hand?

Under the UN climate change regime, the issue of “loss and damage” from climate impacts to which it is not possible to adapt is now established as a third pillar of climate policy alongside mitigation and adaptation. But how to organize funds to meet these needs – expected to grow as climate change impacts become more extreme in the years ahead – has yet to be resolved.

Undoubtedly governments will need to contribute, but it is only right that farmers in the global supply chains of big companies should expect a level of support from those same companies in the event of climate disasters, that have been driven by excess greenhouse gas emissions for which they are least responsible. After all, those companies rely on their farmers to generate huge profits when the weather is good, they cannot expect to turn their backs with impunity when the weather turns bad.

Farmers in particular bear most of the risk when it comes to climate change. While food and beverage companies can often turn to other sources for their commodities, farmers must stay and weather the storm. When Typhoon Haiyan ripped through the Philippines in 2013, it created a humanitarian crisis but also devastated the country's coconut industry.  In the second largest coconut producing region, Easter Visayas, some 33 million coconut trees were damaged or destroyed and more than a million coconut farmers impacted. The Philippine Coconut Authority has estimated losses at $396 million. Many companies stepped to aid the humanitarian effort including, Coca-Cola and PepsiCo, which source coconuts from the Philippines for their popular brands, Zico and One. Such small philanthropic donations to the recovery effort are welcomed but are they fair in light of the fact that these two beverage brands together made $127 million in 2013 alone. As climate change gathers pace a much more reliable and equitable system is needed.

Whether it is through a global fund similar to the Vision Zero Fund housed under the UNFCCC, a series of national multi-stakeholder trust funds to help cover the loss and damage incurred by farmers and their families following specific weather events or trends, or through a structured system for fair private sector contributions to the Green Climate Fund, one thing is clear: the demand for company contributions to the climate costs incurred by people in their supply chains is only going to grow louder in the years ahead—will these companies share the risks with the farmers that are feeling it most?