New Forest Risk Commodities UK due diligence obligations proposed

United KingdomScotland

Until 11 March 2022 there is an opportunity to respond to a consultation on the implementation of due diligence provisions aimed at tackling illegal deforestation in UK supply chains. The consultation follows the introduction of outline provisions in the Environment Act 2021.

The proposed measures will make it unlawful for certain businesses operating in the UK to use the following commodities in their UK commercial activities unless relevant local laws were complied with in relation to that commodity:

  • Cattle (beef and leather)
  • Cocoa
  • Coffee
  • Maize
  • Rubber
  • Palm oil
  • Soy

The connection between commodities like palm oil and cattle to deforestation has been widely known for some time. According to a report by the Join Nature Conservation Committee, there is evidence that the seven commodities listed above are responsible for an estimated 65% of the annual tropical deforestation risk associated with UK supply chains.[1]

The aim of the law is stated to be to ensure there is no place on our supermarket shelves for commodities that have been grown on land illegally occupied or used and to support other countries to strengthen and enforce their forest protection measures. It is intended to be part of a wider package of measures to improve the sustainability of supply chains and contribute to efforts to protect forests and ecosystems. The consultation seeks views on the key aspects of the proposals, as set out in further detail below, and secondary legislation will be passed to implement the proposed provisions.

What is a Forest Risk Commodity?

Schedule 17 of the Environment Act 2021 sets out that a "forest" means an area of land more than 0.5 hectares with a tree canopy cover of at least 10% (excluding trees planted for the purpose of producing timber or other commodities). This includes land that is wholly or partly submerged in water. A "forest risk commodity" is defined as a commodity that has been produced from a plant, animal or other living organism, where it is considered that forest is being or may be converted to agricultural use for its production i.e. that it is driving deforestation for the purposes of its production. Derived products are also intended to be captured.

Due Diligence

Businesses in scope will be required to carry out due diligence on their supply chains to assess and mitigate the risk of regulated commodities having been produced on land illegally owned or used.

It is proposed that a risk mitigation level would be set, so that businesses in scope eliminate risk or reduce risk to as low as reasonably practicable, with the aim of making clear how far businesses should go to prepare for and reduce the likelihood of forest risk commodities being produced on land illegally owned or used.

Businesses will then be required to report their findings annually, which will be subject to scrutiny by a yet to be determined regulator. The findings will be published to support further accountability and inform decision making by consumers and financial service providers.

Which businesses will the proposed measures apply to?

It is intended that larger businesses with a greater influence on supply chains are captured by the legislation. The Environment Act 2021 establishes that to be in scope, the business must exceed a to be determined turnover threshold (or have a parent company that does) and use regulated forest risk commodities in their UK commercial activities. Secondary legislation will set out that businesses are in scope if they exceed the turnover threshold in the previous financial year, in a similar way to supply chain regulation via the Modern Slavery Act.

Views sought by the consultation

Views are sought on the following areas:

  • Legislative sequencing, including the order in which the key commodities are introduced, and how many to target in the first piece of secondary legislation. The consultation asks for evidence of any additional commodities that drive deforestation, so there is potential that additional commodities, affecting wider industries, may be introduced as in scope.
  • Whether UK turnover should be used as the metric, how to regulate overseas businesses that operate in the UK, and turnover threshold levels.
  • Calculating the volumes of commodities used, and the exemption threshold level.
  • The risk mitigation level i.e., how far businesses should go to adequately reduce or eliminate the risk, as well as the form of guidance to support understanding and establishment of an effective due diligence system, and a pathway to recognised existing certification schemes and standards to help meet the requirements.
  • What should be reported on to enable scrutiny, and whether non-commercial sensitive information should be made public.
  • Which regulator should be established as the relevant enforcement authority.
  • Maximum fines, civil sanctions available as a remedy, and the enforcement regime in general.

Comment and timeline

The Food and Agriculture Organization of the United Nations estimates that 420 million hectares of forest, an area larger than the European Union, were lost to deforestation between 1990 and 2020.[2] The UK is therefore not alone in planning to legislate in respect of forest risk commodities. The European Commission published a proposal for a regulation on deforestation-free products in November 2021, with the purpose of ensuring only deforestation-free and legal products (according to the laws of the country of origin) are allowed on the EU market.

The Government will provide a summary of responses to the consultation within 12 weeks of it closing. It is proposed that 6 months is the minimum length of time between laying the secondary legislation and the requirements coming into force, which allows businesses limited time to prepare.

[1] Towards indicators of the global environmental impacts of UK consumption: Embedded Deforestation | JNCC Resource Hub