Fairness and transparency

The principle of fairness, one of the guiding principles of organic agriculture stipulates that “organic agriculture should build on relationships that ensure fairness with regard to the common environment and life opportunities”. IFOAM EU has a vision regarding how this can be achieved:

  • Farmers and workers are paid fairly: value and power are equally distributed across the system;
  • New business models and communications foster trust between all actors;
  • The environmental, social and public health costs and benefits of farming are reflected in payments to farmers and in the cost of food.

As such, IFOAM EU works on issues such as the directive on unfair trading practices, true cost accounting and market transparency.

Unfair trading practices

Since 2008, the issue of unfair trading practices has been on the European political agenda. Finally, a legislative proposal on unfair trading practices was published in April 2018, and after an intense few months of negotiations between the European institutions paralleled by advocacy activities from civil society and other stakeholders, the directive on unfair trading practices in business-to-business relationships in the agricultural and food supply chain was published in the Official Journal in April 2019. The first recital of this directive highlights that “significant imbalances in bargaining power between suppliers and buyers of agricultural and food products are a common occurrence. Those imbalances in bargaining power are likely to lead to unfair trading practices when larger and more powerful trading partners seek to impose certain practices or contractual arrangements which are to their advantage in relation to a sales transaction”. Unfair trading practices include those practices that “grossly deviate from good commercial conduct, be contrary to good faith and fair dealing and be unilaterally imposed by one trading partner on the other; impose an unjustified and disproportionate transfer of economic risk from one trading partner to another; or impose a significant imbalance of rights and obligations on one trading partner”.

IFOAM EU together with other civil society organisations published a transposition guide to this directive which inter alia gives an overview of the scope of this directive (page 5), of the unfair trading practices that are banned by this directive (pages 4-5), and of the reporting and enforcement mechanisms foreseen by the directive (page 7).

This legislative proposal is a directive, not a regulation, meaning that Member States can go beyond the provisions laid down in the Directive when transposing it into national legislation. Member States must transpose the Directive into national law by April 2021 and apply it 6 months later. IFOAM EU is therefore currently monitoring the process of transposition, advocating to go beyond the provisions of the directive concerning, e.g. the number of unfair trading practices banned by the directive.

True cost accounting

Currently, certain agricultural practices have devastating consequences on the environment. For instance, the use of pesticides results in water pollution and the subsequent need to use resources to clean this water. Given that nature does not provide the bill for these harmful environmental consequences, it is simply more financially advantageous to harm the environment, exploit people and negatively impact their health, than it is to preserve natural resources and strive for a socially just food system. A study by IFOAM Organics International found that “consumers pay three times or even four times for seemingly cheap food. In some countries citizens ‘subsidize’ unsustainable agriculture e.g. through government schemes that promote synthetic fertilizers. Then, they also pay the price of the product, and in addition they finance, through tax payments, the mitigation of the negative impacts of production (e.g. for purifying drinking water) and finally bear the health costs of non-commutable diseases”.

IFOAM EU has commissioned the study “taxation as a tool towards true cost accounting” to identify whether e.g. increased taxation of synthetic pesticides or reduced taxation of organic products could be feasible and therefore better reflect the true cost of food. The study found that “indirect taxes on plant protection products tend to have a higher chance of being implemented and thus having the intended impact compared to indirect taxes on food”. Another interesting finding of this study is that cultivating a hectare of conventional potatoes in Germany costs 1298 euros in terms of water pollution (the 1298 euros are needed to clean the water), while cultivating a hectare of organic potatoes in Germany costs 0.4 euros in terms of water pollution.

IFOAM EU is currently exploring the concept of corporate taxation, i.e. how to uphold the “polluter pays” principle. It is unfair and environmentally damaging that companies are using the environment and society as their personal waste bin without paying the consequences.

Market Transparency

Currently there is a lack of data regarding several prices of food commodities, especially regarding prices towards the end of the supply chain, i.e. at processors’ and retailers’ level. Also, producers tend to have less (access to) knowledge about the market, which leads to information asymmetries between producers and actors further along the supply chain. Information asymmetries and a lack of market transparency can lead to inefficient markets where those that have access to market related data have more powers than those that do not.

The Commission is currently working on a fairer legislative proposal for market transparency which would cover the meat, eggs, dairy, fruit and vegetables, arable crops, sugar, and olive oil sectors. Data for organic products will also be collected separately, which is something that IFOAM EU had long advocated for. Indeed, it is necessary to have a better and more holistic view of the prices of organic products through the supply chain. As such, this legislation should not only look at the prices in the beginning of the . The new legislation on market transparency was supposed to be published in the Summer of 2019, but has not been published yet.

IFOAM EU is also advocating for more market transparency in terms of costs, not only prices, which ties into the topic of true cost accounting above.