Environmental Investigation Agency DEF0031
Written evidence submitted by the Environmental Investigation Agency
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 market1.
These recommendations and evidence build on EIA’s extensive experience in monitoring illegal commodities for over three decades. Since the EUTR came into force2, EIA has submitted 15 substantiated concerns in six countries3. EIA has been working to end the trade of non-compliant commodities into UK, USA and Europe, in order to support reform efforts towards effective forest governance in producing countries.
EIA is also part of the UK Forest coalition (UKFC) of UK based NGOs that work together with stakeholders to push for strong policies and actions which addresses global deforestation and rights of Indigenous communities and other local communities4. The UKFC also acts as Secretariat to the APPG (all-party parliamentary group) on Global Deforestation.
Summary
EIA welcomes the UK Environment Act and other measures to reduce global deforestation but finds a more robust will be needed from the new government. In light of climate change and the commitments made at COP26 in 2021, the UK must now show global leadership and ensure pledges translate direct support to communities on the ground. EIA urges the new government to ensure provisions in the Environment Act also protect the rights of Indigenous Peoples and local communities and that financial institutions are also covered. Moreover, the UK must ensure that partnerships with producer countries, in particular with Civil Society Organisations and local communities is strengthened through a multistakeholder approach.
The effectiveness of UK efforts to reduce global deforestation
There is abundant evidence that the consumption of a few key commodities and their derived products are responsible for UK’s global deforestation footprint. Last year, a peer-reviewed scientific paper reported on the top ten UK imported agricultural commodities with the highest deforestation risk. In order these are: palm oil, beef, timber, soybeans, cocoa, coffee, sugar, pepper, rubber, and nutmeg (Table 1, Molotoks and West 20215).
Additionally, a recent NGO report has estimated that 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 timber6).
The UK Government’s own research identifies eight commodities as responsible for the majority of recent and ongoing global deforestation and for 65% of the annual tropical deforestation risk associated with UK supply chains: beef, leather, oil palm, soy, maize, coffee, cocoa and rubber (in that order7).
The is a burgeoning demand for minerals such as iron ore, copper, gold, nickel, cobalt and bauxite which are often found in the world’s old growth natural forests. At least a third of the world’s forests including areas of Amazonia, South East Asia and the Congo Basin are estimated to be impacted by mining already8. There is often a lack of transparency on supply chains and the true origin of such minerals, which remain largely unknown by the end consumer.
Gold mining is responsible in some regions for 90% of deforestation, the impacts are often irreversible to the forest9. It leads to mercury poisoning of indigenous peoples and is threatening to exterminate the last uncontacted tribes of Amazonia10. The UK has historically been at the centre of gold trading and still today is estimated to comprise 70% of global notional trading volume11. Thus it has a responsibility and unique opportunity as a global trading hub to show leadership and sustainability. EIA notes that the JNCC mention that they intend to explore the integration of mining into their research – this is imperative and we urge the new incoming UK government to assess the UKs social and environmental footprint from mining without delay.
The UK government has made some positive progress in developing an indicator to track the overseas environmental impacts of key commodities consumed in the UK through utilising and developing a trade modelling approach to monitor embedded deforestation12. This is vastly preferable to using the proportion of imports that are certified as being sustainable that was originally proposed as the indicator in the 25 Year Environmental Plan, given the shortcomings of certification schemes. EIA notes that the limitations of certification schemes have been widely documented for several commodities such as but no limited to palm oil, (EIA 201513; EIA 201814; EIA 201915, 16) timber17, 18 , soy19.
The monitoring of the UK’s contribution to global deforestation could however be further improved.
The indicator could firstly be improved by updating the study on the deforestation risks per commodity, as the current data is only up until 2017. How much a commodity drives deforestation can change and it is key that data are as current as possible. Secondly, the indicator could be improved by expanding the list of commodities included, such as to minerals. Thirdly, the indicator should be expanded to cover more impacts, beyond just deforestation, such as the monitoring of other biodiverse natural ecosystems, degradation, land rights, etc.
At the moment the indicator relies on a study linking an area of deforestation (x hectares of deforestation in a given country with the production of a particular commodity) and the UK consumption (y percentage of that commodity produced in that country). It is then assumed that the UK is responsible for a proportion of that deforestation by area (i.e., y percentage of those x hectares). However, the model is simplistic, and the UK may be responsible for consuming more or less of the deforestation and might exert different detrimental pressures on different ecosystems within countries.
The monitoring could be further improved by requiring companies to trace and submit the geolocation boundaries of all the areas they source from and analysing deforestation rates within these areas. This would enable actual analysis of the deforestation rates in UK supply chains per commodity in much more real-time using satellite data.
Many companies already do such tracing of their suppliers to help them meet their own deforestation commitments. For example, Nestle already identifies the areas it sources from and utilises a satellite monitoring system called Starling to identify the deforestation20.
EIA welcomes the progress made by the Government to include within the Environment Act 2021 a section on due diligence and products produced through deforestation. Nonetheless, the proposed regulation falls short in a number of areas. To be as effective as possible the shortcomings should be addressed by the upcoming secondary legislation. These include:
3.1 The limit to only legality, i.e. only illegal deforestation is covered by the regulation. The need therefore for a clear definition of legality.
It is not possible to distinguish and assume that only illegal deforestation is problematic and detrimental. Political instability around the world especially in Myanmar21, Brazil22 and Indonesia23 has led to weakened enforcement of existing policies and to the deregulation of several environmental legislative frameworks. For example, permits can be issued to grow palm oil whilst at same time not meeting full legal obligations as they may not be issued in the correct order or by the correct authority24.
For the legality approach to be effective it must carefully consider what is considered legal and illegal. The scope of laws needs to be clearly articulated - a non-exhaustive list of category of laws should be included in secondary legislation. Categories can include for instance rights or protections for specific populations, laws relating to land use, environmental protections, fraud, corruption and bribery. The Guidance should then detail specific laws as relevant on a country-by-country basis and the legal obligations that fall under them. It is vital that there is clear communication with all producer country stakeholders. The multistakeholder process for testing the regulatory details and enforcement infrastructure must include all relevant stakeholders, including smallholders, NGOs, Indigenous Peoples and relevant local communities and companies, and be based on objective analysis.
The proposed EU regulation has gone beyond legality and has also clearly included the right of Indigenous Peoples and the need for international human rights to be respected25, regardless if the country in question has ratified them or not, thus ensuring a minimum level of protection for peoples that depend and protect forests worldwide. The EU has recognised the need to respect customary tenure rights, the right to free, prior and informed consent (FPIC). EIA urges the UK Government to adopt a similar approach.
3.2 The scope of products, must extend to all forest risk commodities and consider extending the scope to mining for instance.
The UK should ensure that all relevant forest-risk commodities are in scope. EIA urges the UK to regulate all relevant forest risk commodities (beef and leather as “cattle”, palm oil, soy, cocoa, maize, coffee and rubber) in the first instance. There should be a regular evaluation of the commodities in scope, including the evaluation of other non-agricultural sectors like mining.
3.3 The scope of companies
All companies that utilise the forest-risk commodities need to be regulated by the regulation to create a level playing field and avoid loopholes. The government’s proposals to date have suggested only large companies with a UK turnover of £50 million or more will be covered on the assumption that most forest risk commodities end up being used by large companies.
However, this has several flaws:
- It would exempt 99.9% of UK companies which are SMEs (small-to-medium enterprises) from the regulation. Just including 0.01% of UK companies will not be effective, it is not sufficient.
- Many of the largest global companies using and trading extensively in forest-risk commodities have much smaller UK turnovers compared to their global turnovers and so the proposed threshold would miss a lot of these companies.
- There are many SME companies who specialise in using a particular forest risk commodities (and often supply to other SMEs) that would not be covered by a £50 million turnover threshold.
- EIA recommends that there should also be therefore a volume-based threshold, where if a company uses over a certain amount of the forest-risk commodity it is also included in the scope of the regulation.
3.4 The penalties must effective, proportionate, and dissuasive and enforcement adequately resourced
The enforcement authority should be well resourced as recommended by the GRI (see question 4). Other activities should include:
- Assessing company due diligence reports based on indicators of non-compliance risk. Reports should be submitted digitally and made publicly available.
- Assessing annual reports based on indicators of non compliance risk, developing a risk based monitoring programme to check at least 10% of companies and 10% of trade volumes for each commodity (noting that the EU Parliament is considering 20% minimum checks for commodities from high risk areas26)
- Operating an accessible and transparent mechanism for the public to submit complaints and concerns about potential non-compliance.
- Publishing guidance to support company compliance.
- Publishing an annual report on enforcement actions taken, including complaints/concerns received and actions taken in response, and investigations conducted.
- Maintaining a public list of non-compliant companies. Additionally, it should develop and maintain a public searchable online register of key information (the Central Information System) supporting compliance and enforcement.
- Full range of powers of investigation, including powers of entry, inspection, examination, search and seizure. Full range of powers to sanction (civil and criminal).
- Requiring companies found to be non-compliant to pay for the cost of their investigation and prosecution including storage and testing of products.
- Developing and maintaining a network of agencies, an inter-agency group to ensure the regulation enforcement is coordinated closely with agencies such as Defra, OPSS, Kew, CPET, FCDO and Customs and include the possibility of having expert group meetings with all relevant stakeholders including civil society organisations like the EU Expert Groups that occur or the US Lacey Interagency Group.
Civil sanctions should be effective, proportionate and dissuasive, and include the full range of potential sanctions available (fines, discretionary requirements, stop notices, enforcement undertakings).
Civil fines should be fixed as a percentage of annual global turnover not as a fixed maximum. This is particularly important if the scope of companies is already to be limited by volume or turnover – the suggested fines of max £250,000 for the Environment Act are simply not dissuasive for very large companies. Some examples of this approach include the Data Protection Act which has a maximum of £17.5 million or 4% of annual global turnover (whichever is greater). The EU Parliament is considering 8% of annual turnover and can be increased to ensure penalty exceeds the potential economic advantage gained27.
Other examples include anti money-laundering laws (Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017) which provide for unlimited fines for businesses that don’t comply with the risk assessment and reporting.
3.5 Due diligence and Transparency;
The due diligence obligations contained within the secondary legislation must establish clear minimum requirements regarding the information that must be obtained from companies, risk assessment criteria, level of acceptable risk, and risk mitigation. Details should include the geolocation of harvest and production in addition to the need to identify and locally relevant laws.
Information must be published for independent scrutiny. Companies should have to be proactive in presenting their due diligence and annual reports, rather than relying on inspections by an authority. There has been much criticism of the modern slavery statements that companies are required to publish under the Modern Slavery Act 2015, including poor content and companies not publishing them at all, with no sanctions on this. It must be ensured that the annual reporting as envisioned specified under the Environment Bill does not have the same fate.
For additional details on EIAs recommendations for the secondary legislation please see our submission to the Defra Public Consultation from March 202228.
EIA participated in the GRI taskforce and has contributed to associated discussions via its membership in the UK NGO Forest coalition.
The first GRI report29 clearly set 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 recommended 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.”
The report also noted that the “government should ensure sufficient resources are made available to ensure proper enforcement with an appropriately strong penalty regime”.
Whilst we were pleased to see Schedule 17 of the Environment Bill attempt to address the former recommendation, however the UK’s approach is limited to illegal deforestation and misses out crucial elements such as protections for Indigenous Peoples and rights of forest dependent peoples (see our response to question 3 above), as well as financial institutions. The Governments response is piecemeal and not in line with the level of ambition pledged at COP26’s Glasgow Leaders’ Declaration on Forests and Land Use30. We are still waiting for a comprehensive and transparent response to the new partnership approach and to the other recommendations expressed by the GRI.
Certification is not a robust method for tackling either illegalities or deforestation. The Roundtable on Sustainable Palm Oil (RSPO), the most well-known certification scheme for palm oil, has itself said its standards “do not extend to enforcing or confirming the legal standing of a company’s use of land (which is a mandate only held by the national authority)” 31.
Deforestation and illegalities can exist in certified produce due to weak standards and assessments, fraudulent audits, a lack of penalties for complying with voluntary standards, and conflicts of interest, as detailed in reports by EIA’s and others32.
In addition, certification schemes allow uncertified produce to be mixed with certified produce (known as the Mass Balance model) meaning deforestation and illegalities can still enter supply chains and end up in the UK33.
The European Commission has recognised the limits of certification schemes stating: “There is abundant literature on certification schemes shortcomings in terms of governance, transparency, clarity of standards, reliability of monitoring systems, etc.” with its own study confirming these findings34.
The Government Buying Standards (GBS) place an over reliance on using certification schemes to ensure sustainability, despite the widespread evidence that such schemes are not robust or reliable (see question 2 above).
The proposed changes to the GBS for Food and Catering Services, consulted on in 2022, are welcomed including the coverage of more commodities. However, they still overly rely on certification by suggesting certification is adequate to ensure legality and sustainability, such as for palm oil and soy35.
The GBS should reference and reinforce the due diligence requirements in the Environment Act 2021 and make it clear certification alone cannot be relied upon to ensure compliance with the Act is met. It also should make it mandatory that companies can trace the products they source back to the farm level. Only by knowing exactly where a product is produced can it be ensured that supply chains are free from deforestation and other illegalities.
The UK needs to work with producer countries, including governments and other stakeholders, like civil society and the private sector, to establish practices and tools to verify legality and no deforestation independently of voluntary certification schemes.
Working with international partners to tackle deforestation
It is positive that the UK government has engaged with international partners through mechanisms like the FACT dialogues and the pledges made at COP26 in Glasgow. However, it needs to go much further to turn these pledges into reality.
Taking lessons learned from the Forest Law Enforcement Governance and Trade (FLEGT) regulation and its Voluntary Partnership Agreement (VPA) process, which EIA has been involved with since its inception, there needs to be a multistakeholder approach. A VPA centres around a definition of legality that has been agreed through participatory processes in country involving stakeholders from government, the private sector and civil society.
Currently, civil society, especially those in producer countries, have not been well involved in the approaches to tackle deforestation and the FACT dialogues. The FACT dialogues have lacked transparency, and clear timelines, targets and outcomes, which needs to be addressed.
The Glasgow Leaders Declaration on Forests and Land Use, while very much welcomed, is non-binding and there have been such commitments before. For example, the New York Declaration on Forests in 2014. To make it effective there needs to be multi-stakeholder approaches developed on how each country will tackle deforestation with clear targets, linked to other commitments such as those under the UNFCCC. It is also of concern that the pledge does not commit countries to protecting and expanding natural forests, but instead focuses on maintaining forest cover that could be achieved by the expansion of timber plantations instead.
The financial commitment made by the UK needs to safeguarded and well spent. This includes funds being made directly to civil society and local communities on the ground rather than just going to governments and international organisations.
The UK government also needs to commit further to its Forest Governance, Markets and Climate (FGMC) programme that is currently due to end in 2022.
The impacts the UK’s measures will have on producer countries, indigenous peoples and local communities will depend on the level to which the incoming new PM and her government commit to combatting UK’s deforestation footprint, to tackling climate change, to implementing the Leaders’ declaration pledges made at COP26 and the GRI recommendations.
The Environment Act failed to directly recognise the rights protections for indigenous peoples and local communities. As described in question 3 above, it is not always possible to rely on local laws which may not exist, may not be enforced or simply weak. Therefore, most crucially the UK Government must ensure the scope of laws covered by Environment Act schedule 17 includes international human rights including respect for customary land tenure rights and the right to free, prior and informed consent (FPIC).
Additional measures not listed above should also include cross sectoral communication and collaboration to implement effective enforcement. This includes within UK agencies as listed in question 3 above but also with other countries, for instance on sanctions.
For example, EU Member States and the European Commission developed a common position that imports of Myanmar teak cannot comply with the requirements of the EUTR, which was concluded in 201836. EIA has continued to document illegal imports of Myanmar teak into the EU in 201937 and 202038 despite this. In June 2021, the Council of the European Union and the UK government announced a new wave of financial sanctions against the brutal military regime in Myanmar39. Nonetheless timber auctions have continued in Myanmar with teak exported to international markets using hard currency much needed by the Burmese Junta40. It is essential that the UK links financial sanctions such as those imposed on Myanmar with associated deforestation and the well documented human rights abuses.
Such links and cross communication should also extend to include comprehensive financial investigations, i.e. enquiries into whether there has been fraud, sanctions or money laundering breaches as a result of the illegally deforested commodity importation. This would increase greater deterrence for those acting illegally and greater combined enforcement actions means local communities and indigenous peoples are better protected and there is fairer access to markets.
September 2022
References
https://environment.ec.europa.eu/publications/proposal-regulation-deforestation-free-products_en