Out-Law News | 11 Jan 2022 | 9:35 am | 2 min. read
The UK government has opened a consultation on proposed new rules to curb global deforestation that would enable large firms to do due diligence checks on forest risk commodities.
Forest risk commodities are goods and raw materials that are extracted or produced from tropical forests and contribute significantly to global deforestation.
The consultation document (37 page/370KB PDF), published by the Department for Environment, Food and Rural Affairs (DEFRA) suggested that the due diligence regulations will initially apply to cattle for beef and leather, cocoa, coffee, maize, palm oil, rubber, and soy. DEFRA said that these seven commodities are responsible for around 65% of the annual tropical deforestation risk associated with UK supply chains.
The consultation also outlined the government’s future plan to use secondary legislation to bring other commodities into the scope of the rules, though illegally harvested timber and timber products will not be included, since the UK Timber Regulations already prohibit their production and sale.
Fiona Ross, environmental law expert at Pinsent Masons, said: “Even if a phased approach is being taken, the list of products can be viewed as a sign of things to come, and it is perhaps likely that such supply chain due diligence requirements will increasingly apply to a wider range of products and commodities.”
DEFRA said the new rules would be designed to address illegal deforestation while not placing an “undue or disproportionate burden on business” and will therefore focus on larger firms with the greatest influence on forest risk commodity supply chains, using a turnover threshold.
The consultation asked whether businesses should have their domestic or global turnover used to calculate the threshold. One option under consideration would see businesses given different turnover thresholds - ranging between £50-£200 million - based on which forest risk commodities they used.
Ross said: “The impact assessment sets out a really wide range of types of business that could be affected. In practice, however, because of the turnover threshold, it is likely to impact large consumer goods businesses, large food production and processing businesses and large retailers – and could also affect motor vehicle and tyre manufacture, as well as manufacturers and distributors of refined petroleum and fuel products.”
A separate provision would allow firms to seek an exemption from the due diligence regulations if they can prove the amount of a commodity they use in their UK commercial activities in a given year falls under an exemption threshold that will be set at between one and 1,000 metric tonnes.
Firms that fall within the scope of the regulations will be required to assess the risk that “relevant local laws pertaining to land use and land ownership were not complied with” in relation to regulated commodities in their supply chains, and then “eliminate risk or reduce risk to as low as reasonably practicable”, according to DEFRA’s proposals.
Ross said: “As a starting point, businesses should gather information and consider how they might embed assessment of risk into their practices, consider how they currently manage such risks in their supply chain, and give consideration to what more could be done to mitigate the risk. This could include reviewing supplier contracts, engaging with suppliers - both to gather information and to engage them on the issue more widely - and considering whether any changes may be needed to existing supplier policies.”
“A lot of businesses are already looking to make their supply chains more sustainable, driven by corporate targets and commitments around achieving net zero, and factoring this additional type of due diligence in early could help to ensure that they are prepared for when requirements are imposed,” she added.
“Brand reputation could also be enhanced by adopting a transparent approach, as proposed in the consultation, with separate published company reporting on the supply chain due diligence and management of risks. It is likely to align with both carbon and biodiversity related corporate strategies and commitments,” Ross said.
The consultation will run until 11 March 2022.
03 Nov 2021