New European rules raise the bar on the sustainability of cosmetic ingredients

The European cosmetic industry is leading in showing sustainability in its supply chains. Companies in the industry use voluntary standards for their commitment to sustainability. Still, the European Commission has concluded that voluntary efforts alone are not enough. New rules will be introduced to ensure that companies carry out environmental and human rights investigations within global supply chains. The new rules will also affect exporters of natural ingredients for cosmetics to Europe.

European legislation on sustainability

The European Union is developing a legal framework for Corporate Sustainability Due Diligence. In February 2022, the European Commission published its proposal. In June 2023, the European Parliament published its position. This Directive is aimed at all sectors, not just the cosmetics sector.

The proposal aims to ensure that companies act responsibly and think about the environment and people when they do business. It ensures that companies follow rules that protect human rights and the environment throughout the entire supply chain.

Impact on exporters of natural ingredients

The proposed Directive will not directly impact you as an exporter. The obligations are placed on European companies. At the same time, these obligations will influence you if you are part of a global supply chain for a European company. Under the proposed rules, European companies must put due diligence measures in place to meet the new standards. To supply European companies, you will be assessed on your sustainability performance.

Prepare for the new legislation

As an exporter, you need to know your supply chains very well. Also, you will need to take positive actions in the areas of human rights and the environment. In the proposed Directive, the European Commission gives definitions of "adverse human rights impacts" and "adverse environmental impact". These definitions reference international conventions and agreements on human rights and environmental protection.

To help you prepare for the new legislation, you can ask yourself the following questions:

• Where does your company stand on the topic of "(the employee's) right to enjoy just and favourable conditions of work including a fair wage, a decent living, safe and healthy working conditions, and reasonable limitation of working hours" in agreement with Article 7 of the International Covenant on Economic, Social and Cultural Rights?
• Do you take the necessary actions to "minimise adverse impacts on biological diversity" in line with Article 10 (b) of the 1992 Convention on Biological Diversity?
• Have you assessed the risks associated with human rights and the environment in your company and your supply chains?

European companies will ask their suppliers to be transparent about sustainability. They will also pay more attention to how they choose their partners for sourcing natural ingredients. They may use supplier questionnaires and external compliance audits to assess your sustainability performance. An example of a supplier questionnaire is the SEDEX self-assessment questionnaire. It covers policies, procedures and activities on labour, environment, working conditions, and business ethics in your business and your supply chains.

Voluntary standards are still relevant

The new sustainability rules are binding. So, using self-assessment questionnaires is useful but is unlikely to be enough. Third-party-certified voluntary standards are expected to continue to play an important role. It is likely that European companies will use voluntary standards to show due diligence in the supply chain as part of the obligations of the Directive. In a similar way, voluntary standards for organic certification are used to show compliance with organic legislation.

The cost of binding and voluntary standards can be very high, especially for small and medium-sized enterprises (SMEs). It is unclear how the proposed Directive will deal with this, to avoid SME exporting companies being excluded from global supply chains.

Learn more

For more information, read our market study on trends in the European market of natural ingredients for cosmetics. Also, read our studies on how to become socially responsible and how to go green in the natural ingredients for the cosmetics sector. 

Fair Venture Consulting and ProFound – Advisers in Development wrote this news article for CBI.

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