Earthsight                            DEF0020

 

Written evidence submitted by Earthsight

 

 

About Earthsight:

 

Earthsight is a London-based non-profit organisation that uses in-depth investigations to expose environmental and social crime, injustice and the links to global consumption. We believe in the unique power of primary investigative research and reporting to bring attention to pressing issues of human rights and environmental justice.

 

Earthsight has researched numerous case studies highlighting the role of UK demand in driving global deforestation. We are therefore particularly well placed to provide evidence to the inquiry and to judge which regulatory approaches are most likely to prevent such cases in the future.

 

See here for our previous reports and investigations.

 

 


 

  1. In what ways and to what extent are UK value chains (in the form of public procurement, goods, services, or the private sector) contributing to global deforestation?

 

Earthsight’s research in recent years has demonstrated how UK supply chains, both in the private sector and in public procurement, are linked to deforestation in different countries.

 

Our Grand Theft Chaco investigation has showed over the past two years that leather used by British car manufacturer Jaguar Land Rover is linked to the illegal deforestation of at least 10,000 hectares of indigenous Ayoreo Totobiegosode lands in the Paraguayan Chaco over the last six years. Jaguar Land Rover is a customer of Conceria Pasubio, a major Italian tannery that supplies leather for car interiors to several large car manufacturers, including BMW. Pasubio is one of Europe’s leading buyers of Paraguayan leather, including from the exporters linked to the illegal ranches in Ayoreo lands. As a result, the British market is exposed to this illegal deforestation and indigenous rights violations not only through leather used by Jaguar Land Rover but also other manufacturers that sell cars in the UK.

 

An Earthsight investigation found that giant furniture retailer Ikea’s UK arm has imported wood products linked to the illegal logging of over two million cubic metres of wood in protected Siberian forests in Russia over the last decade. The wood is linked to a vast timber corruption case that allowed the illegal felling of some four million trees, many of them over 150 years old.

 

A separate Earthsight investigation found that two UK-registered companies imported goods linked to one of Russia’s largest logging scandals, which Russian prosecutors have claimed resulted in the illegal logging of 600,000 cubic metres of wood from taiga forests.

 

Earthsight has also revealed that UK armed forces in the Middle East were being served beef from a Brazilian company whose suppliers have illegally cleared more than 8,000 hectares of land – including swathes of the Amazon and Cerrado biomes. Beef used by the UK Ministry of Defence in Bahrain is supplied by, among others, Frigorifico Sul Ltda, which has purchased thousands of cattle from farmers fined a combined R$33.5 million (£6 million) by Brazilian authorities for deforestation and other illegalities.

 

Related to this, Earthsight has also found that Operational Ration Packs (ORP) used by UK armed forces personnel domestically from 2009 until at least as recently as 2016 were manufactured by Brazilian meatpacking giant JBS, which has been repeatedly linked to ranches responsible for thousands of hectares of illegal deforestation in the Amazon.

 

In addition, Earthsight has exposed how British supermarkets stock processed beef products, including corned beef, manufactured by JBS. The corned beef brands Princes and Exeter, which can be found at major supermarkets, also use JBS beef for some of their products.

 

Apart from direct commodity supply chain links to deforestation, the British financial sector – including banks Barclay’s and HSBC– has been found by researchers to provide financial services to some of the agribusinesses with the most harmful impacts on forests in South America, Southeast Asia and Africa (here and here). The Forest 500 index for the financial sector has not given any British-headquartered bank a score over 43 per cent owing to deficiencies in their deforestation policies when it comes to providing services to the soy, palm oil, beef and timber sectors.

 

  1. 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?

 

Schedule 17 of the Environment Act 2021 has several loopholes and omissions that seriously undermine the law’s intended goal to minimise British consumers’ contribution to illegal deforestation abroad.

 

A major flaw of the law is that it does not include human rights protections for indigenous peoples and local communities. See our answer on the question regarding indigenous peoples and local communities for evidence on this. It is essential that the UK government addresses human rights abuses connected to deforestation abroad through other legislative means going forward.

 

Another flaw is the law’s narrow focus on legality. As per the Environment Act, businesses must not use the specified commodity in their UK commercial activities only in the case that local laws in the producer country were not complied with. While eliminating illegal deforestation from international supply chains is a long overdue necessity, restricting regulation to compliance with local laws will by itself not be enough to tackle the global climate and biodiversity crises.

 

Such laws may allow unsustainable levels of deforestation connected to British consumption to continue. Under pressure from powerful agribusiness lobbies, politicians in producer countries beholden to those interests (often corruptly) may also legalise what was previously illegal. Such scenario needs to be addressed and countered by the UK government.

 

Other potential weaknesses of Schedule 17 of the Environment Act can still be remedied through strong secondary legislation, which Defra is currently in the process of drafting. Earlier this year, Defra ran a public consultation on implementing due diligence on forest risk commodities, accompanied by an impact assessment, in which it presented possible approaches to secondary legislation for Schedule 17 of the Environment Act.

 

Earthsight is very concerned about the idea of ‘legislative frequencing’ proposed by Defra. Under the approach it would take a minimum of 18 months to implement the law for one commodity, and four years to implement it for all seven.

 

Such approach is unsupported by evidence. The 2008 amendments to the Lacey Act in the USA took effect immediately. No companies went bankrupt as a result. The European Timber Regulation / UK Timber Regulation (EUTR/UKTR), which ban illegal wood from entering the EU/UK markets, allowed two years for implementation, but that was needed at the time to allow all 28 EU Member States to pass implementing legislation.

 

The clear lesson with EUTR/UKTR and timber was that it takes time for enforcement authorities

to learn how best to do their new job. They can only learn this by doing the job, which can

only happen when the law takes effect. Thus, the real gap between the law being passed and

it being properly enforced will be even greater than the timescales outlined on Defra’s consultation. If it takes four years to include the key commodities (as the government claimed), it will likely be another two to four before the relevant authorities have developed working methods for ensuring compliance. Under Defra’s plans, therefore, it may

be eight years before the law is working as intended – i.e., 2030. That would be too late to

have any meaningful effect on achieving UK and global climate goals.

 

All seven commodities identified by Defra in its impact assessment and consultation (cattle, cocoa, coffee, maize, palm oil, rubber, and soy) must be introduced immediately. In the previous question answered as part of this written evidence, Earthsight provided evidence for cattle (i.e. beef and leather) linked to illegal deforestation entering the UK market or UK public procurement supply chains.

 

It is of vital importance that the scope of Schedule 17 of the Environment Act includes all derivatives of the forest-risk commodities and products in which they are embedded, such as those used as ingredients or in imported meat. Significant volumes of forest-risk commodities are imported to the UK in derived and embedded forms. For example, around 63% of leather imports, 70% of cocoa imports and 90% of rubber imports are imported in processed products rather than the raw form.

 

Another major flaw of Schedule 17 of the Environment Act is that it allows for Defra to introduce volume-based exemption thresholds and turnover thresholds, which would mean that smaller businesses and businesses only importing a certain volume of forest risk commodities would be exempt from the law. 

 

Earthsight’s research shows that any exemptions, whether based on annual turnover, trade volumes or otherwise, would introduce loopholes to the Schedule 17 framework that will directly undermine its efficacy and impact. Even the lowest proposed thresholds for exemptions would exclude key players. Using Brazil as a case study, Earthsight’s analysis shows that even the lowest revenue threshold proposed in the Defra consultation (£50m per annum) would exclude many of the largest UK importers of these commodities. In addition, revenue thresholds could easily be circumvented. This is something that Earthsight has already observed in practice with timber since the passing of EUTR. In 2018, Earthsight revealed how many of the largest importers of Ukrainian wood in Europe were circumventing the regulation and avoiding their obligations by establishing small shell firms, including one registered at a flat above a shop in a small village in eastern Poland (page 48).

 

We strongly recommend the UK government follow the UK Timber Regulation approach and not limit coverage of forest risk commodities flowing into the UK based on the characteristics of the entity introducing them to the UK market. It is important that all companies that import, use, or trade forest risk commodities are included in scope, regardless of their annual turnover or the trade volume threshold. This will be vital to ensure that no companies operating in the UK use offshore manufacturing to avoid the new requirements and therefore reduce their UK operations.

 

Earthsight’s research – especially research on the implementation of the EU/UK Timber Regulation – also shows that much of the effectiveness of the law will depend on strong enforcement mechanisms. These are yet to be determined through secondary legislation.

 

A key enforcement mechanism that should be introduced by Defra via secondary legislation is a public list of non-compliant businesses. Such a list, which essentially serves a ‘naming and shaming’ function, would provide a powerful additional incentive for compliance. Companies are very sensitive to brand image. Greater transparency through a mandatory public list of non-compliant companies can lead to negative media coverage and engagement by clients, business partners and investors. It thereby serves as a key deterrent factor for companies. This is more so the case as companies would be included in the list regardless of the penalty imposed. Civil society is key in holding companies accountable. Having access to a list of companies found to be in violation of legal requirements would also lead to greater transparency and thereby enable civil society to carry out their work more effectively and ultimately lead to greater compliance.

 

  1. What role can sustainable certification and Government Buying Standards (GBS), have in tackling deforestation? How can the UK Government support the private sector to reduce its contribution to furthering deforestation?

 

In 2018, Earthsight revealed how illegal wood from Ukraine bearing the imprimatur of the world’s biggest wood ‘sustainable’ certification scheme, the FSC, has been flooding into Europe. In 2020, we showed how timber from the biggest illegal timber scam in Russia this century had been laundered by FSC’s biggest competitor, PEFC, and 100,000 tonnes of it entered the EU and the UK as a result. In 2021 we exposed another scandal involving an FSC-certified forest in Siberia, where the illegal harvesting of four million trees by a corrupt politician-cum-businessman had gone unnoticed by auditors. The wood ended up in Ikea children’s furniture, including that sold in the UK.

 

The week before COP26, 34 NGOs from around the world sent an unprecedented open letter to FSC, calling on it to make immediate changes to its  systems to adequately reflect the global deforestation crisis.

 

A study released by Greenpeace in 2021 showed that certification schemes for cocoa, coffee, palm oil, soya and wood on their own have not helped companies meet their 2020 commitments to exclude deforestation from their supply chains.

 

Following pressure from environmentalists, in 2010 a raft of major corporations involved in producing, trading and consuming forest risk commodities such as soya, palm oil, beef, and paper products promised to voluntarily end their role in driving deforestation by 2020. When Greenpeace set out to systematically examine progress just prior to the deadline, it concluded the results were “a total disaster”. Its 2019 report found that during the previous ten years, a further 50 million hectares of tropical forest – an area twice the size of the UK – had been razed to produce the commodities such companies consume.

 

Earthsight’s Grand Theft Chaco investigations (see above) exposed serious flaws of the Leather Working Group (LWG), a certification scheme with over 1,300 members across the leather supply chain, which has set up traceability requirements to tackle deforestation. Two of Europe’s largest tanneries, Gruppo Mastrotto and Conceria Pasubio, were both linked to illegal deforestation in Paraguay by our investigation. Since the report’s publication, Pasubio has become an LWG gold-rated member despite the firm scoring only 44 per cent on its traceability volume. Gruppo Mastrotto has also achieved gold rating with zero per cent traceability volume. This means that companies can be certified despite not being able to link their leather back to the farm it came from. 

 

The above examples clearly show that a voluntary approach cannot work. Hence, the approach adopted by government ought to be one of mandatory due diligence rather than providing support to flawed certification schemes.

 

It is also essential to recognize that voluntary certification schemes cannot replace a company’s due diligence obligations under laws such as the UKTR and Environment Act.

 

The reasons certification schemes cannot ensure compliance with UKTR and, in the future, Schedule 17 of the Environment Act are baked into their DNA. First and most importantly, the burden of proof with certification schemes, including FSC, is the complete reverse of that required by EUTR/UKTR and Schedule 17. The certification schemes assume companies are innocent until proven guilty, whereas the EUTR/UKTR requires that a company shows there is ‘negligible risk’ in its supply chains (note that the level of risk required by the Environment Act has not yet been decided). Secondly, the certification schemes don’t assure what they claim to. Riddled with structural flaws and conflicts of interests, and captured by industry, they systematically fail to spot illegal commodities and rights abuses by certified companies.

 

  1. What impact will the UK’s measures to tackle deforestation have on producer countries, indigenous peoples and local communities?

 

It is disappointing that Schedule 17 of the Environment Act does not include strong provisions on the human rights protection. While a ban on products and commodities linked to illegal deforestation would address some supply chains linked to traditional communities’ rights violations, much of the trade linked to such violations does not affect areas that have experienced recent or even illegal deforestation.

 

A prime example of this situation is highlighted in Earthsight’s recent exposé There Will Be Blood, which uncovered the links between chicken sold by major UK retailers and a soy farm in Brazil implicated in indigenous land theft and murder.

 

The farm in question, Brasília do Sul, sits on nearly 10,000 hectares of indigenous Guarani Kaiowá land, known as Takuara. Despite the Brazilian government having for years officially recognised the farm as Kaiowá land, the indigenous community continues to be denied their right to the land.

 

Due to political paralysis and hostility, and the aggressive use of courts by the farm’s owners to block progress, Takuara still has not been returned to the Guarani Kaiowá in clear violation of their constitutional rights. The Kaiowá live in a precarious encampment on the margins of the farm and have suffered a number of violent attacks perpetrated by the farm’s employees and hired gunmen, resulting in the murder of one of its leaders in 2003.

 

A major Brazilian chicken exporter, Lar Cooperativa Agroindustrial, buys soy – used in animal feed production – from the farm. Lar exports large volumes of chicken products to UK-based Westbridge Foods, which produces chicken products for British retailers. Among Westbridge’s customers are KFC, Asda, Iceland and Aldi.

 

None of these companies, when contacted by Earthsight, could convincingly explain how they are able to stop chicken products linked to indigenous rights violations from entering their supply chains. Their responses indicate the supply chains going back to the farm in question were first brought to their attention by Earthsight.

 

This demonstrates the need for legally binding rules that will force importers, manufacturers and retailers to monitor their supply chains for human rights abuses, including those taking place at the farms from which their commodities originate. Crucially, such rules must demand that businesses comply with international human rights law as part of their obligations, not only the laws of producer countries, which may be deficient or non-existent on traditional communities’ rights.

 

Unfortunately, the Environment Act does not place such demands on businesses. The UK needs urgent regulation that aims to not only limit Britain's role in forest loss overseas but also the human impacts of agribusiness expansion.

 

Related to this is the need to regulate all commodities and products directly linked to widespread human rights and environmental abuses. The supply chains highlighted above would not be regulated if chicken, for example, is not included in secondary legislation to implement the Environment Act. The UK government must be as ambitious as possible in the scope of its regulations to capture all relevant trade and not limit regulations to only two commodities for years to come.

September 2022