Some clarity on UK forest risk commodities rules at COP28 Nature Day

United Kingdom

The UK government announced a series of important measures seeking to tackle the impacts of climate-change on the natural environment at COP28’s Nature Day on 9 December 2023. The measures cover a variety of habitats and ecosystems ­­– including the marine environment, land, and saltmarsh habitats. For some, one of the most anticipated announcements was the publication of further operational details of the UK’s forthcoming forest risk commodities regime (the “Forest Risk Commodities Regime”). While some clarity has been provided, the scope of commodities has reduced, other details are awaited and the timing on secondary legislation bringing the scheme into effect remains unknown.

The background to the Forest Risk Commodities announcement

The UK Environment Act 2021 provided a primary framework of rules aimed at reducing or eliminating materials associated with deforestation (“forest risk commodities”) from UK supply chains, with the detail – including in-scope commodities - and enabling provisions to be provided in secondary legislation.

DEFRA consulted on Implementing due diligence on forest risk commodities in December 2021 and in its June 2022 consultation response, provided further detail on various aspects of the proposed regime. Our explanation of the original consultation can be accessed here and our commentary on the consultation response can be accessed here.

In summary, the Forest Risk Commodities Regime makes it unlawful for businesses in scope operating in the UK to use forest risk commodities in their supply chains unless relevant local laws were complied with; and requires in-scope businesses to carry out due diligence on their supply chains to assess and mitigate the risk of forest risk commodities having been produced on illegally owned or used land.

The announcement

The announcement confirms the following operational details of the Forest Risk Commodities Regime will be included in secondary legislation:

1.    Material scope: the regime will cover non-dairy cattle products (beef and leather), cocoa, palm oil and soy. Without explanation, coffee, maize, and rubber are not mentioned, despite their inclusion in the original proposal.

2.    Financial scope: organisations using forest risk commodities in UK supply chains are in scope if they have a global turnover of over £50 million.

3.    Volume threshold: organisations using forest risk commodities that do not exceed the annual volume threshold of 500 tonnes will be exempt.

4.    Grace period: in-scope organisations (and affected third parties) in their supply chain will have a grace period before the beginning of the first reporting period.

5.    Penalties: Unlimited variable monetary penalties (“VMPs”) will be available as a civil sanction for breach of the Forest Risk Commodities Regime rules.

6.    Timing: secondary legislation implementing the regime will be brought forward when “Parliamentary time allows”.

Commentary

The details provided suggest a balancing act. A narrowing of the scope of the prohibition: the original proposal subject to the consultation covered coffee, maize and rubber, but these have now been removed; and the annual volume threshold of 500 tonnes is at the upper end of the potential options advanced in the consultation. Conversely, some aspects of the regime are stricter than anticipated: a wide financial scope has been adopted (a threshold of £50 million is the lowest of three options advanced in the consultation), and the availability of unlimited VMPs is greater than the earlier proposed maximum of £250,000 (but is in line with other changes to UK VMPs).

However, many questions remain unanswered. Nothing has been announced on the extent of the reporting obligations; the duration of the grace period is not yet known; and it is not clear when we can expect secondary legislation giving effect to the Forest Risk Commodity Regime. Those affected must stay alert for further developments but should also consider any similarities and differences with the new EU Deforestation Regulation. The position as regards to which requirements will apply in Northern Ireland remains unclear.