Global Witness DEF0029
Introduction
Global Witness was founded in 1993 and is now an environmental and human rights organisation with 100 staff and offices in London, Washington DC and Brussels. For over 25 years, we have investigated and exposed environmental and human rights abuses in the oil, gas, mining, and timber sectors, and tracked ill-gotten money and influence through the global financial and political system. We work with a global network of partners and allies, from forest communities in Papua New Guinea to civil society groups in Democratic Republic of Congo and through our partnerships with land and environmental defenders.
Our Forest team campaign to end the flow of money to reckless businesses - particularly damaging agribusinesses - enabling global deforestation. Our submission to the Environmental Audit Committee comes within the remit of our current UK advocacy work, through which we aim to persuade those in power to strengthen or bring in new laws to hold businesses and those who finance them to account, requiring them to address and mitigate the deforestation risks of their activities. In the UK, Global Witness actively worked with the GRI taskforce to recommend this mandatory due diligence - and have been advocating for strong legislation to put this into law.
The effectiveness of UK efforts to reduce global deforestation
The UK has a considerable deforestation footprint associated with its consumption of agricultural goods driving global deforestation. The UK’s deforestation footprint is principally the result of the import of 7 commodities and their derivatives – beef/leather, soy, palm oil, maize, rubber, timber and cocoa. WWF’s 2020 Riskier Business report states that “A total of 21.3 million hectares (Mha) of land (88% of UK land area) were required overseas each year, between 2016 and 2018, to satisfy the UK’s demand for seven commodities (beef & leather, cocoa, palm oil, pulp & paper, rubber, soy and timber).” According to the UK’s own JNCC data, in 2017 (the most recent year that data was available), the UK’s footprint led to 5,790 ha of deforestation for all commodities in Brazil and 5,640 ha in Indonesia - the world’s largest beef and palm producers respectively. [1]
Global Witness has produced a number of reports examining deforestation and land grabs linked to the import and financing of forest risk commodities highlighting links to UK businesses or supply chains.
For example, Global Witness’ 2022 report Cash Cow revealed that between 2017 and 2019, JBS had bought cattle from 327 ranches that failed to comply with its no deforestation obligations.[2] An estimated GBP 102 million of JBS beef was imported into the UK in 2020[3]. An investigation of the websites of UK supermarkets, such as Morrisons, Sainsbury’s, Iceland and Asda, for example, found in February 2022 all four offered cans with corned beef from JBS’s Brazilian operations. [4][5]
The UK accounts for an estimated 5% of the world’s palm oil footprint, which is considerable as the UK accounts for only 1 % of the world’s population. [6] Global Witness’ 2021 report The True Cost of Palm Oil shows the devastating impact of palm oil on communities in Papua New Guinea linked to well-known global brands. Although 2019 data showed an estimated 75% of UK palm oil supply comes from RSPO certified palm[7], Global Witness’ investigations – as well as other damning reports such as from the Environmental Investigation Agency[8] - shows that this does not guarantee sustainable outcomes.
UK based financial institutions are also major financiers of global deforestation. Global Witness’ Deforestation Dividends report showed that UK banks and asset managers provided an estimated $16.6 billion between 2015-2020 to just 20 agri-businesses implicated in deforestation, making an estimated $192 million (£147 million) in profit[9]. Over £300 billion of UK pension money is invested in companies and financial institutions with high deforestation risk and the UK financial sector faces up to £200 billion in risk exposure in Brazilian beef and soy supply chains and Indonesian palm oil supply chains alone.[10] Many financial institutions are signed up to voluntary deforestation commitments but without legislative underpinning such commitments have consistently failed to deliver the progress needed.
The Joint Nature Conservation Committee (JNCC) is a public body that advises the UK Government and devolved administrations on UK-wide and international nature conservation. It produced a report on the deforestation impacts of UK consumption and undertook work on an indicator to measure overseas environmental impacts of UK consumption. This work is welcome and provides useful analysis to help understand the UK’s contribution to global deforestation. However, the most recent data used is from 2017 so this should be updated as soon as possible.
To build a more comprehensive picture of deforestation related risks and impacts, monitoring and indicators should also cover tenure rights; land conflicts; rights of indigenous people; corruption and transparency; as well as sub national level data to build a more sophisticated understanding of deforestation.
Along with other environmental groups, Global Witness welcomed the introduction of the deforestation provision in the Environment Act (Schedule 17). We had been calling for legislative requirements on businesses to check their supply chains for deforestation and setting out detail on how this could work using information from our investigations which highlighted the continuing role of UK imports in global deforestation. [11]
However, we are disappointed, that nearly one year on from the adoption of the Environment Act we are still awaiting the secondary regulation that will bring the legislation into effect. As we made clear in our response[12] to the consultation on secondary regulation, we are also concerned that the government may undermine the effectiveness and intention of the legislation by only legislating to cover two commodities.
We believe that secondary legislation to the Environment Act should include, as a minimum, the 7 commodities responsible for the UK’s deforestation footprint mentioned above and their derivatives from the outset. The 2022 Defra consultation “Implementing due diligence on forest risk commodities,” only offered a very limited range of options: 2 commodities within 18-24 months or 5-7 commodities taking 4-5 years. According to our calculations these options would still see the UK contribute over 90,000 hectares of deforestation risk between 2023 and 2030.[13] This does not match the ambition nor the mandate for legislation secured through the adoption of the Environment Act.
Global Witness also raised concerns about the following omissions from the act and/or proposals for secondary regulations which limit its effectiveness. These are summarised below and covered in more detail in our parliamentary briefing and response to consultation on the secondary legislation:
Omission of ‘legal’ deforestation: throughout the passage of the Environment Bill Global Witness highlighted concerns about the limited focus on illegal deforestation, relying on a small number of forest related laws in producer countries, without reference to broader laws, including indigenous land tenure. 30% of tropical forest destruction is defined as ‘legal’ under local country laws so would fall outside the scope of the legislation.[14] This was the subject of an unsuccessful amendment to the Bill.The UK government should use the review process to extend the due diligence requirement to all deforestation at the earliest possible opportunity. This would align with legislative proposals under consideration in the EU addressing both illegal and legal deforestation.[15]
Omission of deforestation financing: As referenced above, the UK based financial institutions continue to back companies driving global deforestation, any action to tackle the UK’s role in global deforestation should therefore cover the role of finance. The Global Resource Initiative (GRI), the government’s own taskforce, recently recommended that the government should introduce a legal duty for financial institutions to prohibit lending/investments in illegally produced forest risk commodities.[16] We made the case for the Environment Act provision to also cover finance and an unsuccessful amendment was backed by a number of parliamentarians.[17] Global Witness sees the Financial Services and Markets Bill as a potential opportunity to correct the omission of UK financial services from the scope of the Environment Act provision.
Enforcement: The effectiveness of the Environment Bill will ultimately rely on its enforcement. It is therefore crucial that adequate resources are made available for enforcement authorities and that penalties are set at a level sufficient to act as an effective deterrent to non-compliance. This was a point also made by the UK government’s Global Resource Initiative taskforce made similar recommendations. Global Witness recommends that penalties should be fixed as a percentage of annual global turnover, not as a fixed maximum. Fines of max £250,000 as suggested in previous DEFRA consultations are not dissuasive for large companies. For example, the Data Protection Act has provision for fines of maximum £17.5 million or 4% annual global turnover (whichever is greater) and the EU Deforestation proposal sets it at least 4% annual turnover. Secondary legislation should bring forward strong percentage-based fines and provision for a well-resourced regulator with sufficient expertise and powers, facilitated by strong information-sharing obligations on companies as well as mechanisms for input by third parties. The enforcement system should be fully transparent . In our response to the consultation on secondary regulation, we highlighted that the following information should be made publicly available online:
When penalties are enacted, these should be made publicly available in a database in order to inform importers, consumers and promote transparency.
Human rights: Human rights abuses of indigenous people and local communities on the frontline defending forests are inexorably linked with deforestation and forest degradation. Human rights abuses, including threats, are deeply concerning in and of themselves. They also often serve as a pre-indicator of illegality, including environmental crime, corruption and extra-judicial violence. It is for this reason that the Global Resource Initiative taskforce’s 2020 report recommended that human rights and environmental concerns be included within the scope of a due diligence obligation.[18] This was raised by a number of groups as the Bill went through Parliament. However, the government rejected proposals to embed respect for human rights in the deforestation provision. We believe this was a missed opportunity to tackle this crucial issue which is so closely linked with deforestation. Any post-implementation review of the Environment Act should seek to obligate business to ensure that monitoring, identifying and responding to human rights concerns is outlined as a key pillar to effective due diligence.
Exceptions and thresholds: There is a very real risk that the effectiveness of the legislation could be undermined by exceptions and/or thresholds of applicability of the Environment Act’s due diligence regulations. We believe that any importer should be subject to the Act regardless of trading volume or size thresholds.
As stated in our response to the consultation on secondary regulation, we believe that all companies should be in scope without exemption. This will avoid loopholes and streamline the provision of information to companies across the supply chain. Such an approach is in line with international standards, such as the OECD guidance on responsible business conduct and the UN Guiding Principles on Business and Human Rights. Schedule 17 of the Environment Act allows the provision for the Secretary of State to choose to apply the regulation to a company group - which should be done through the legislation.
If UK government chooses to not follow such a recommendation to ensure all companies are in scope, then any metrics related to inclusion in scope of UK-based or overseas-headquartered companies should be based on the global turnover of the company group. This global turnover approach would ensure greater consistency and clarity - ensuring that there is no loophole where a company group could simply create multiple UK companies to avoid meeting the threshold.
We believe that the concerns outlined above risk undermining the effectiveness of the Environment Act and that the government should ensure that secondary legislation is designed to tackle these loopholes. Where possible the government should also use other legislative vehicles, eg the Financial Services and Markets Bill, and any post-implementation reviews of deforestation provision in the Environment Act.
The GRI taskforce has produced two reports on deforestation which have been crucial to inform the development of legislation and government action in this area. The government responded to the initial March 2020 report’s central recommendation to introduce a due diligence obligation on deforestation risk by incorporating this into the draft Environment Bill which was then adopted into law as Schedule 17 of the Environment Act. Whilst this addressed one of the key recommendations, the provision failed to incorporate many of the recommendations of the report.
Both the initial 2020 report and the GRI’s subsequent 2022 report on finance both mentioned the need for legislation to include due diligence obligations for financial institutions. [19] As noted above, the UK financial sector plays a crucial role in lending to and investing in companies responsible for deforestation. However, this was not covered in the Environment Act and the amendment from Parliamentarians was unsuccessful. We await the formal response from government to the 2022 taskforce report on deforestation finance which we hope will outline plans to bring forward due diligence obligations for financial institutions.
The 2020 GRI report did not distinguish between either illegal or legal deforestation in its text, rather “commodities and derived products that contribute to deforestation on the UK market”. So the approach undertaken by the government in addressing just illegal deforestation falls short of the GRI taskforce recommendation. Similarly, companies when making commitments to screen deforestation from their supply chains do not distinguish between legal and illegal deforestation – reflecting the widespread recognition that all deforestation is harmful whether or not it is illegal. As stated in responses to other questions, the UK government should use the review process at the earliest possible opportunity to include the need for companies and financial institutions to carry out due diligence regarding the risk of all type of deforestation, whether technically legal or illegal. Relying on local legislation may even act as an incentive for in-country legislation to be rolled back to allow access to the UK market.
Additionally, the final UK bill did not specify a need for companies to carry out due diligence on risks of human rights abuses and impacts in their supply chains, even though this was explicitly recommended in the first GRI report. There is potential to rectify this through the Environment Act’s secondary legislation, or separate legislation requiring due diligence on human rights abuses as called for by a growing number of organisations and businesses.[20] Global Witness advises that secondary legislation should make explicit reference to the need for due diligence carried out by companies and financial institutions to identify the risks of human rights violations as stated under international human rights law.[21] Reference to standards established under international human rights law – as opposed to relying on local legislation on human and workers’ rights – is crucial, as these local laws may be contradictory and/or weaker than international legislation.
Certification schemes have repeatedly been shown to fall well short of effectively limiting deforestation worldwide, and should in no circumstances be used as a substitute for rigorous due diligence or proof of no deforestation.
The certification schemes with the widest coverage are timber (the Forest Stewardship Council [FSC], Programme for Endorsement of Forest Certification [PEFC]) and palm oil Roundtable on Sustainable Palm Oil [RSPO]). These schemes have now replicated by similar initiatives for soy and biomass. However, certification schemes have been shown to be insufficient to curb deforestation in supply chains. They have numerous weaknesses, including poor enforcement, flawed auditing, and a reliance on (in the case of FSC and PEFC) paper-based documentation for traceability. It should be noted that multiple environmental and human rights organisations, (including Rainforest Foundation UK, Fern and Greenpeace) have left the FSC[22], considered the stronger of the two principal timber certification schemes. This has been due to the weakening of environmental standards, supposedly to appease the industrial chamber of the initiative.
Furthermore, certification covers only a tiny percentage of the market – around 7% of the timber produced in tropical regions by FSC, and around 20% of all palm oil. Businesses should be required under UK legislation to show proof of compliance with local laws, chain of custody, robustness, full traceability as well as other factors that are indicative of heightened risks - such as deforestation, human rights abuses, conflict and local communities not providing their free, prior and informed consent. There should be no loophole that exempts a business from meeting its own legal requirements - for example, by allowing it to outsource its due diligence obligations to a third party (such as a certification body). This is particularly important given that certification bodies are not regulated under Schedule 17 of the Environment Act. Influential businesses and financiers have themselves acknowledged the shortcomings of certification schemes. [23]
We recommend that at a minimum, all commodities included in scope of the due diligence regulations are brought within the GBS, including those currently not listed like beef and leather (which present the highest deforestation risk embedded in UK consumption according to JNCC analysis). Similarly, the GBS should be extended across all of Government to schools, hospitals, care homes, canteens, prisons and the military to enable a far greater impact on market demand for sustainable commodities. Several reports have exposed the flaws in certification systems and demonstrate in detail the insufficience of certification in tackling the issue of deforestation, including: There is an overreliance on certification in the current GBS standards and existing mainstream certification schemes do not verify that products are deforestation and conversion free.
Greenpeace – Destruction Certified – the report an excellent breakdown of all key commodity certification schemes, and accurately assesses their key strengths and weaknesses.
Earthsight – Flatpacked Forests (timber)
Environmental Investigation Agency – Who Watches the Watchmen 2 (palm oil)
Working with international partners to tackle deforestation
It was significant and welcome that the UK used their hosting of COP26 to highlight the crucial role of forests in tackling climate change and the need for stronger action to tackle global deforestation. We have also appreciated Lord Goldsmith’s personal commitment and engagement on this issue.
While it was encouraging to see leaders come together under the Glasgow Declaration and committing to working collectively to halt and reverse forest loss and land degradation by 2030, it is important to note that it is not a binding commitment. There are no mechanisms in place to monitor compliance and no repercussions for those that do not meet the commitments. This lack of accountability is of particular concern in light of the failure of previous similar pledges such as the New York Declaration on Forests, which committed to halve deforestation by 2020 and end it completely by 2030.
The effectiveness of the declaration will be judged by its impact on deforestation rates, and early signs are not encouraging. Almost a year after the Glasgow Declaration, deforestation in the Brazilian Amazon is the highest on record, despite Brazil’s government being a signatory of the declaration.[24] Any mechanism to deliver on the Glasgow Declaration will be ineffective without monitoring, accountability, and consequences for non-compliance.
In light of the failure of voluntary initiatives to tackle deforestation, binding legislation is needed to ensure companies and financiers take into account deforestation risk in their decision making. There are some moves in this direction, with the adoption of the UK’s Environment Act, and measures under consideration in the EU and US. The UK should use its international engagement to encourage countries to pursue legislation, this will help drive up standards globally and ensure that national efforts are more effective.
The UK is also leading voice in the FACT dialogue, one of the key intra-country initiatives to reduce deforestation. However, it is difficult to judge the effectiveness of this initiative based on the very limited information in the public domain. At a minimum, minutes and discussions should be published with clear milestones set out to ensure accountability.
The UK’s $1.5bn commitment to the Global Forest Finance Pledge is also a welcome commitment. However, the UK should clarify as soon as possible the percentage of the funds pledged at COP26 which constitute new/additional funds, as opposed to funds already earmarked for forest protection and what it will be used for. It is difficult to assess the effectiveness of the funding without more information being available.
It should also be noted that the $ 1.5bn figure is dwarfed by the flows of private finance to deforestation linked companies. Global Witness’ 2020 report ‘Deforestation Dividends’ found that banks and investors in the UK, EU, US, and China ploughed $157 billion since the Paris Climate Agreement into agribusiness firms linked to tropical deforestation and associated human rights abuses, netting an estimated $1.74 billion in income along the way. Regulating the destructive behaviour of these financial institutions is clearly an international priority; without this, any money pledged to protect forests will undermined by the financial flows to deforestation.
Global Witness notes that the $1.7 billion earmarked for indigenous peoples is the first such commitment at COP and is a very positive development. Wherever possible, funding earmarked for forests regions in the global south should be used to support initiatives that challenge the structures of power and impunity that contribute to continued forest loss and rights abuses in these areas. Furthermore, concrete steps need to be taken to ensure that the £1.7 billion pledged to IPLCs in the global south reach organisations as directly as possible. When it is not possible for these funds to go directly, efforts should be made to ensure that funds are channelled through trusted partners of indigenous networks in order to help IPLC organisations build capacity to absorb financing. Channelling the funds through expensive middlemen and international development agencies should be avoided wherever possible, as this may eat into vital funds and their granting process may be difficult to access for IPLC groups. [25]
Human rights abuses (especially those towards indigenous peoples and local communities) are inexorably linked with deforestation and forest degradation. Increasing demand for forest risk commodities in the UK and in other consumer countries has driven a scramble for land in producer countries that has led to many environmental and human rights defenders losing their lives. The issue of violence and threats towards defenders has been consistently highlighted by Global Witness over the last decade. In 2021, Global Witness’ defenders reported highlighted that 227 environmental activists had been murdered – the worst on record.[26] 18% of these defenders were indigenous.
It is too early to tell what impact the UK Environment Act will have on producer countries, indigenous people and local communities. As outlined earlier in this submission, much is dependent on the secondary regulation which is yet to be published. If it is effective at reducing deforestation associated with UK imports, then this will have a positive impact on indigenous people and local communities. This would also be strengthened by including specific reference to laws relating to human rights in any secondary regulation or implementing guidelines, this should refer to international law and not just rely on local laws[27]. At a minimum companies should be required to ensure the free, prior and informed consent of indigenous people and local communities in relation to any activity on forested land. Beyond the Environment Act, the government should consider the introduction of a wider corporate due diligence law for all companies (not just for forest-risk commodities) to ensure that their supply chains are not linked to labour rights abuses, child labour, land grabs and human rights violations. There is significant demand for such a law not just from civil society organisations but also investors and businesses.[28] The EU is considering a proposal for a Directive on Corporate Sustainability and Due Diligence. [29] Companies will be required to identify and, where necessary, prevent, end or mitigate adverse impacts of their activities on human rights, such as child labour and exploitation of workers, and on the environment, for example pollution and biodiversity loss.
September 2022
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[1] JNCC data, 2017 https://commodityfootprints.earth/.
[2] Please note that these claims were disputed by JBS when they were given opportunity to comment on the report. Global Witness in turn disputed their responses.
[3] The Bureau of Investigative Journalism, 2019, “UK purchased £1bn of beef from firms tied to Amazon deforestation”, https://www.thebureauinvestigates.com/stories/2019-09-17/uk-purchased-1-billion-of-beef-from-firms-tied-to-amazon-deforestation
[4] It should be noted that at the time of publication (June 2022), Asda had dropped JBS products.
[5]Global Witness, 2020, “Beef, Banks and The Brazilian Amazon”, https://www.globalwitness.org/documents/20061/Beef_Banks_and_the_Brazilian_Amazon_EN_-_December_2020_medium_res.pdf
[6] WWF, 2020 “Riskier Business”. https://www.wwf.org.uk/sites/default/files/2020-07/RiskierBusinessSummaryReport_July2020_revised.pdf
[7] Amsterdam Declarations Partnership, 2018, “Palm Oil” https://ad-partnership.org/commodities/palm-oil/ (2019)
[8] Environmental Investigations Agency, 2019, “Who Watches the Watchmen 2” https://eia-international.org/report/who-watches-the-watchmen-2/
[9] Global Witness, 2021, “Deforestation Dividends” https://www.globalwitness.org/en/campaigns/forests/deforestation-dividends/
[10] WWF, 2021, “Risky Finance” https://www.wwf.org.uk/what-we-do/risky-finance-report
[11] Global Witness & ClientEarth, 2020, “Strengthening corporate responsibility: the case for mandatory due diligence to tackle the UK’s global deforestation footprint” https://www.globalwitness.org/en/campaigns/forests/strengthening-corporate-responsibility-uk-briefing/
[12] Response online and full submission available on request
[13] Global Witness, 2022, “UK Forest Footprint Options Paper”, https://www.globalwitness.org/documents/20338/Global_Witness_Analysis__UK_Forest_footprint_options_paper_-_March_2022.pdf
[14] New Report: Tropical Forests the Size of Denmark Illegally Cleared Every Year for Commercial Crops Consumed Worldwide - Forest Trends (forest-trends.org)
[15] European Parliament, 2022, “Deforestation Regulation” 2021/0366(COD) - 25/07/2022 2021/0366(COD) - 25/07/2022 - Deforestation Regulation (europa.eu)
[16] Global Resource Initiative, 2022, Finance Report, https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/1087635/global-resource-initiative-finance-report-may-2022.pdf
[17] Global Witness, 2020, “Cross party support for UK environment bill to tackle role of UK banks in funding global deforestation with £900m funnelled into forest risk commodities in 2020”, https://www.globalwitness.org/en/press-releases/cross-party-support-for-uk-environment-bill-to-tackle-role-of-uk-banks-in-funding-global-deforestation-with-900m-funnelled-into-forest-risk-commodities-in-2020/
[18] Global Resource Initiative, 2020, “Final Recommendations Report”, https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/876465/gri-taskforce-executive-summary.pdf
[19] Global Resource Initiative, 2020, “Final Recommendations Report”, https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/876465/gri-taskforce-executive-summary.pdf
“The financial sector should also be covered by a similar mandatory due diligence obligation, requiring them to exercise due diligence in order to avoid their lending and investments funding deforestation.”
[20] Business and Human Rights Resouce Centre, 2022, UK: Businesses and investors call for new human rights due diligence law https://www.business-humanrights.org/en/latest-news/uk-businesses-and-investors-call-for-new-human-rights-due-diligence-law/
[21] Including (but not exhaustively) the UN Declaration on the Rights of Indigenous Peoples, including conventions of the International Labour Organisation (including ILO Convention 169), the Convention on the Elimination of All Forms of Discrimination Against Women and the International Convention on the Elimination of All Forms of Racial Discrimination.
[22] See, for example, Fern, 2011, “Fern Statement To The Forest Stewardship Council On Withdrawing Ferns Membership” https://www.fern.org/publications-insight/fern-statement-to-the-forest-stewardship-council-on-withdrawing-ferns-membership-633/
[23] For example, Marc Engel, the supply chain chief of Unilever, one of the largest companies in the FTSE 100, said ‘Certification does not equal the definition of deforestation free’.
[24] CNBC, 2022, “Deforestation in the Brazilian Amazon Hits Tragic Record”, https://www.cnbc.com/2022/07/13/deforestation-in-brazilian-amazon-hits-tragic-record-in-2022.html
[25] An excellent analysis of a clear way forward on this issue is provided by Rainforest Foundation UK in their analysis “Realising the Pledge”, available here: https://www.rainforestfoundationuk.org/media.ashx/realise-the-pledge.pdf
[26] Global Witness, 2021, “Last Line of Defence”, https://www.globalwitness.org/en/campaigns/environmental-activists/last-line-defence/
[27] Please see footnote 21.
[28] Business and Human Rights Resouce Centre, 2022, UK: Businesses and investors call for new human rights due diligence law https://www.business-humanrights.org/en/latest-news/uk-businesses-and-investors-call-for-new-human-rights-due-diligence-law/
[29] European Commission, 2022, “Just and sustainable economy: Commission lays down rules for companies to respect human rights and environment in global value chains” https://ec.europa.eu/commission/presscorner/detail/en/ip_22_1145