Deforestation as a result of palm oil production in Southeast Asia threatens species such as orangutans © Getty Images
Deforestation as a result of palm oil production in Southeast Asia threatens species such as orangutans © Getty Images

Commodity law makes firms 'quasi-regulator of supply chain'

posted by Will Green and Charlie Hart
11 November 2020

Mandatory due diligence reporting on deforestation is to be incorporated into the Environment Bill, the UK government has announced.

The new law will make it illegal for UK businesses to use key commodities - including soya, palm oil, timber, pulp and paper, beef and leather, rubber, and cocoa - if they have not been produced in line with local laws protecting forests and other natural ecosystems and will require greater due diligence from businesses, the government said. 

The legislation, which has been added as an amendment to the Environment Bill currently going through Parliament, will also require companies to demonstrate that they have undertaken due diligence on their supply chains, and to publish the results, with firms that fail to comply subject to fines and other civil sanctions.

However, the government said the law would only apply to “larger businesses”, despite calls from firms such as McDonald’s, Tesco and Nestlé, to introduce thresholds based on the “volume of material and not the size of the company”.

A lawyer told SM the law appeared to envisage businesses as “quasi-regulator of their supply chain”, which would add costs.

The proposed legislation has been added to the bill following a consultation which launched in August and ended on 5 October 2020.

Lord Zac Goldsmith, international environment minister, said: “In every conceivable way we depend on the natural world around us. Rainforests cool the planet, provide clean air and water, and are a haven for some of the most endangered species on Earth – and so protecting them must be a core priority.

“Our new due diligence law is one piece of a much bigger package of measures that we are putting in place to tackle deforestation. Our intent is not just to take world-leading domestic measures, but to build a global alliance of countries committed to working together to protect the world’s precious forests.”

Jason Tarry, CEO of Tesco UK & ROI, said: “Due diligence has an important role to play in halting deforestation, fighting climate change and protecting communities.

“We welcome these new measures as an important first step towards creating a level playing field in the UK, aligned with Tesco’s goal of zero deforestation. We hope this encourages all businesses to do the right thing.”

But Pat Venditti, campaigns director at Greenpeace, said the new law “will do almost nothing” to end global deforestation. 

“For this new law to be fit for purpose, all deforestation, not just deforestation deemed illegal should be ruled out. And stronger sanctions should be imposed, such as bans on products entering the market if they cannot be proved to be free from deforestation and human rights abuses throughout the entire supply chain.

“The government seems willing to settle for a weak legal framework in the name of UK diplomacy to persuade other countries to step up on deforestation. But this doesn’t stack up given the Bolsonaro government in Brazil has systematically attacked indigenous rights and environmental safeguards, leading to the fastest rate of Amazon rainforest destruction since 2008.

“The idea that British ministers can invite Bolsonaro to have a cup of tea and cordially convince him to stop trashing Brazil’s forests is fanciful.”

Nick McMahon, head of health and safety at law firm RPC, told SM the law would put a greater burden on businesses to monitor activities on the ground. 

“It would not necessarily be enough to rely on local regulators to do that job,” he said. “Further, in some cases local law and/or enforcement strategy may not be entirely consistent with the aim of the proposed legislation – see for example the Brazil government's tolerance of agriculture at the expense of areas of rainforest. 

“The proposals would suggest that businesses envisaged as within scope would be expected to act as a quasi-regulator of their supply chain, which would carry with it challenges to resource and overhead cost.”

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