Fauna & Flora International DEF0015
Written evidence submitted by Fauna & Flora International
Fauna & Flora International (FFI) is the world’s oldest international wildlife conservation organisation. We have been developing and influencing conservation practice since our foundation in 1903.
Our focus is on protecting biodiversity (the diversity of life on Earth), which underpins healthy ecosystems and is critical for the life-support systems that humans and all other species rely on.
In response to the Environmental Audit Committee call for evidence, we are providing a response on question 8:
How effective are the measures to improve due diligence and ban imported products of illegal deforestation in the Environment Act 2021? Do these measures target the right sectors? Given that they do not extend to all products of deforestation, are they adequate?
FFI welcomes the measures in Schedule 17 of the Environment Act 2021. FFI believes that mandatory due diligence on companies which use deforestation-risk commodities is an important step towards reducing deforestation and environmental harms.
How effective the measures will be will depend in part on the way the Government chooses to implement them. There are also some ways in which the requirement could be strengthened.
IMPLEMENTATION: DEFRA have consulted (consultation published in December 2021) on the way in which the provisions should be introduced. FFI responded to that consultation, and although DEFRA have since published a summary of responses, it is not clear yet how they will amend their proposals based on the consultation.
We have a number of concerns with DEFRA’s proposals or assumptions in that exercise, which seemed to indicate that they were trying to minimise the impact of the law on business, at the expense of the forests:
- Timescale: The consultation gave a range of choices for when regulation could be introduced, being (i) regulating two commodities in 18-24 months, (ii) regulating 3-4 commodities in 3-4 years, or (iii) regulating 5-7 commodities in 4-5 years. We do not believe that this timetable is ambitious enough, given the urgency surrounding deforestation. Whilst we can see an argument for perhaps having two phases of implementation, we believe that the initial rollout should cover palm oil, soy, cocoa, beef and rubber at a minimum, and we would expect companies to be able to prepare for that in a much shorter time-frame than DEFRA’s 4-5 years.
- Turnover thresholds: In their consultation DEFRA suggested some turnover thresholds for companies below which they would not be obliged to comply with the law. These were suggested as £50m, £100m or £200m. Even the lowest of these is significantly higher than the threshold for a large company under the Companies Acts reporting requirements or for modern slavery due diligence. We believe this was also unambitious, and suggested in our response to DEFRA that the threshold should be set at £36m, in line with a “large company” under the Companies Acts. DEFRA also suggested a volume threshold (for the amount of commodity a business handled) on top of the turnover threshold, which would exempt further businesses from scope. We do not believe that two thresholds are necessary, but if a volume threshold were to be introduced, it should be at a real “de minimis” level.
- Penalties: DEFRA proposed that the maximum penalty should be £250,000. This seems to underline the lack of seriousness that they attach to the law. Other laws which target profit-seeking illicit behaviour have much higher penalties (for example GDPR is £17.5m or 4% of global turnover).
COMMODITIES COVERED: Your question specifically asks as to whether the law is inadequate given it does not cover all forest risk commodities. FFI believes that it is reasonable to structure this particular law, in the context in which it was passed, as applying only to named commodities, but the key is to ensuring that the named commodities are those which pose the greatest risk.
One particular inadequacy of the existing law is that only plant- or animal-derived commodities can be covered, which excludes anything related to mining. Mining (including gold mining and mining for minerals used in electronic and “green” energy products) is a major factor in deforestation, and an amendment to the Environment Act to bring mining activity into scope would be a significant step forward.
Looking to the future, as we explain in more detail below, FFI believes that a better future regulation would be broader-based, covering environmental harms and human rights violations more broadly.
ILLEGALITY: Turning to the text of the Environment Act itself, the biggest disappointment was that it only applied to commodities arising from deforestation which was illegal in the host country at the relevant time. Other UK laws hold business to high standards irrespective of local legal standards (e.g. modern slavery, bribery). It would also have been as easy (in fact, easier) to simply reference deforestation without reference to local laws.
As was pointed out by many people at the time, including for example Lord Randall’s article in the Times of 15 September 2021, the approach taken in the Environment Act enables huge amounts of deforestation-based commodities to legally enter the UK, if the host country’s laws permitted the deforestation. This potentially encourages businesses to source commodities from countries with lax environmental protection, and encourages countries to license deforestation. It also makes the due diligence harder, as companies do not only need to ascertain where their commodities came from (and use mapping technology to look for deforestation), they also need to understand the legal framework in the relevant countries and how it has changed over time. FFI believes that removing the “illegality” requirement from the regime would be a hugely positive step.
FINANCE: The obligations in the Environment Act also do not extend to UK banks and other finance providers who fund forest product supply chains. The Global Resource Initiative (GRI) report in 2021 urged the Government to encompass finance in its anti-deforestation regulation, and the GRI’s follow-up Finance Report of May 2022 proposes more detail for how financial institutions could be brought into scope.
THE FUTURE OF REGULATION: At the time of the initial Environment Act consultation in 2020, FFI’s response argued for a “modular” approach, whereby the framework of corporate obligation could be easily adapted to other environmental or societal harms, such that companies would be able to adapt their processes for new due diligence requirements. We felt then, and still believe now, that a law framed around corporate risk-based due diligence, would be more easily adaptable and scaleable, as opposed to a law which prohibits the sale of specific products. What we mean by “risk-based due diligence” is an obligation on companies to identify risks in their operations and supply chains, take steps to eliminate or mitigate those risks, and publish details on the risks identified and steps taken. The law would include provision for regulatory sanction and civil liability, if adequate steps had not been taken. This kind of obligation could cover deforestation risk, but also pollution, broader harm to wildlife, and human rights violations.
In the intervening two years, the international legal landscape has shifted quickly, and rather than piecemeal legislation addressing specific issues, laws are now being proposed and enacted mandating broad-based corporate environmental and human rights due diligence. In particular, this year, the EU has proposed a regulation on mandatory corporate sustainability due diligence (including civil liability for failure). A specific-commodity-based deforestation due diligence law risks becoming outdated and may increase red tape for UK businesses who need to comply with the narrow UK obligation and also need to comply with the new generation of due diligence laws in other countries. For all these reasons, we believe that the UK government should now look at introducing such a law.
Fauna & Flora International
September 2022