Environment Bill

Written evidence submitted by the Environmental Investigation Agency (EIA) (EB38)

Global footprint, deforestation and mandatory due diligence

March 2020

About EIA

The Environmental Investigation Agency (EIA) is an NGO that works to investigate and campaign against environmental crime and abuse. EIA has been working to protect forests for over two decades and was instrumental in the establishment of the EU Timber Regulation (EUTR) in 2013 to ensure illegal timber is not placed on the EU market [1] . EIA is part of a coalition of UK based NGOs that work to promote forests in the context of climate change, biodiversity, development and human rights.

Summary

EIA welcomes the UK Environment Bill but finds it could be strengthened. In light of climate change and with the UK due to host the UNFCCC COP later in 2020, the Bill provides a key opportunity for the UK to show global leadership by addressing i ts global environmental footprint, in particular its role in global deforestatio n . Improvements should include provis ion s that regulate UK supply chains to ensure commodities are free from deforestation , environmental degradation , and associated human rights abuses .

Background

Forests and other biodiverse ecosystems are essential for maintaining water tables, combating climate change and halting biodiversity loss, and supporting the livelihoods of many hundreds of millions of people. Deforestation and forest degradation are widely linked to poor governance and drives crime, land conflict and the abuse of human rights.

Several scientific studies have highlighted that old growth forests on all continents take decades to several centuries to fully recover from degradation and restore the biodiversity and services that they once provided [2] . Intact tropical forests are key for mitigating climate change which will not be possible unless these tropical forests are conserved [3] .

Despite global political pledges by governments and companies alike to halt deforestation by 2020, including through the New York Declaration on Forests [4] and the UN Sustainable Development Goals [5] , recent years have seen some of the worst forest loss on record [6] . Over 75 per cent of forest loss has been attributed to commodities’ production, including large-scale commercial operations (27%), forestry (26%) and small-scale shifting agriculture (24%) [7] .

While companies have increasingly adopted ambitious ‘no deforestation’ commitments, they are not legally required in any market. Correspondingly they display shortcomings including leakage, selective adoption, limited transparency and traceability, and perpetuate smallholder marginalisation and the absence of the free, prior informed consent (FPIC) of local and indigenous communities, on who’s lands they operate [8] .

A recent review concluded that half of corporate targets are limited to ‘net-zero’ instead of ‘zero-gross’ deforestation commitments [9] , allowing for the planting of trees to compensate for the destruction of old growth forests and often these include future implementation deadlines allowing for pre-emptive clearing [10] .

The Forest 500, that identifies the 500 most influential companies in terms of forest risk supply chains, found voluntary corporate pledges to end deforestation by 2020 have failed and some companies had not made commitments at all [11] . Many of these 500 companies operate and/or are headquartered in the UK, such as Unilever, Nestle, M&S, Tesco, GlaxoSmithKline, Superdrug, Barclays and HSBC, to name but a few.

Similarly, certification schemes have failed to deliver [12] . The limitations of certification schemes have been widely documented for palm oil, (EIA 2015 [13] ; EIA 2018 [14] ; EIA 2019 [15] , [16] ) timber [17] , [18] , soy [19] and other commodities.

The Roundtable on Sustainable Palm Oil (RSPO) is the main certification scheme used for palm oil in the UK. Yet EIA has documented how the RSPO has still failed to ensure implementation of its standards, meaning forests are still being cleared in violation of the RSPO’s rules [20] . This mirrors wider findings that third-party audits fail to adequately detect and correct environmental issues in global supply chains [21] . Yet, the UK has largely relied on RSPO certified palm oil to meet its targets on achieving 100% sustainable palm oil [22] .

Regulation would enable a level playing field and reward front runners. The market needs clear legal incentives for deforestation free supply chains, and consumers should be assured their products are upheld to common and clear standards.

A recent EU-wide YouGov poll found that 93% of UK respondents care deeply about forests and 86% think that new laws are needed to ensure that products sold do not contribute to global deforestation [23] . In light of the failure of voluntary initiatives, including both certification schemes and corporate policies, to halt deforestation [24] , EIA urges the UK to develop robust regulatory measures such as a due diligence obligation.

The UKs Global Resource Initiative

Under the UK’s 25 Year Environment Plan the UK has committed to use resources from nature, such as food, fish and timber, more sustainably and efficiently. The plan further sets the policy of protecting the global environment, including zero-deforestation supply chains and leaving a lighter global footprint.

As part of these efforts, the UK has set up a cross-government Global Resource Initiative (GRI) to work with businesses, NGOs, producer countries and intermediary countries to bring together key actors to identify actions across supply chains that will improve the sustainability of products and reduce deforestation.

EIA participated in the GRI taskforce and has contributed to associated discussions via its membership in the UK NGO Forest coalition.

The GRI final report [25] clearly sets out ambitious recommendations including that the "government urgently introduces a mandatory due diligence obligation for companies that place commodities and derived products that contribute to deforestation on the UK market and to take action to ensure similar principles are applied to the finance industry".

The GRI further recommends that "new collaborative partnerships between consumer and producer governments must be at the heart of collective global action on deforestation. In building these partnerships it will be essential to listen to and understand producer country priorities in order to cocreate sustainable solutions for the mutual benefit of all."

These recommended elements have not been included within the Environment Bill as introduced and the Bill should be amended to include elements, such as proposed under amendments 76 and 77.

Why a due diligence regulation

In addition to calls from the UK GRI, in March 2018, the European Union’s (EU) Commission published a feasibility study on possible actions to combat deforestation [26] . Due diligence regulation was considered to have the highest potential impact on forests from the demand side. Moreover, it was strongly requested by the European Parliament in its September 2018 resolution on forests [27] and the December 2019 EU Council conclusions [28] .

Another recent study commissioned by the European Union’s DG Justice [29] highlighted that the maximum positive social and environmental and impacts would result from a new regulation requiring mandatory due diligence. The study also found that increasingly multi-national companies support the introduction of mandatory due diligence regulation. Options that only provide new guidance or require reporting but do not substantively require companies to take any due diligence measures would have minor positive impacts. The study highlighted the importance of a standard of care requirement (rather than due diligence as a mere process) as it would require companies to do whatever is required to prevent and mitigate risks, rather than simply create "tick-box" processes.

Key elements of mandatory due diligence regulation

- Any regulation should ensure supply chains are free from deforestation and fully respect human rights.

- A Partnership Approach

In line with the GRI, EIA urges the government to explore ways for concerned producer country stakeholders to work with the UK in partnership or dialogue via a multi-stakeholder approach to address their concerns. This would also allow the incorporation of any national requirements additional to compliance with human rights and sustainability standards required by any regulation, to better inform UK business and promote sustainable supply chains.  It could be specified, for example, that anti-deforestation partnership agreements can be signed with national or sub-national governments that outline the policies and actions to ensure ‘no deforestation’. These governments are then prioritised for financial and technical support, or the award of public procurement or investments. Potentially the UK could also explore how ancillary funding could come from the collection of effective, proportionate and dissuasive penalties from non-compliant operators within the scope of a regulation.

- Any due diligence should apply to cross-commodities, along value chains and include finished products and derivatives .

Palm oil for instance, is contained in half of all supermarket products, often in very small percentages. Excluding finished products and derivatives would miss a large chunk of the market – in the UK alone more than 300,000 tonnes of palm oil were estimated to be imported within finished products, in addition to the 595,000 tonnes imported as crude palm oil itself [30] . Moreover, if a regulation is only applied to raw products, i.e. excludes finished products and derivatives, this may drive increased processing outside the UK to avoid regulation.

- Include robust enforcement and transparency.
Regulated companies should publicly disclose what action has been taken in relation to a due diligence obligation. Any regulation should also include an independent complaints mechanism where stakeholders can submit relevant information and the relevant UK authorities should respond in a transparent and prompt manner. The government should ensure that enforcement also includes a robust penalty regime for non-compliance that is sufficiently resourced, proportionate and dissuasive.

- Certification schemes should not be relied on alone to uphold and deliver ‘no deforestation’ or degradation standards.
Where there are certified supply chains, they should not receive a green lane and should be liable to the same obligations and penalties as uncertified inputs.

April 2020