Last week I published a post on the UK Department for Environment, Food & Rural Affairs' consultation on whether to introduce mandatory due diligence in relation to "forest risk commodities" (e.g. palm oil) and the subsequent call by an investor coalition for similar action to be taken by their investee companies.
That consultation closed on 5 October and yesterday, the UK Government published its response committing to the introduction of a mandatory due diligence requirement on companies using "forest risk commodities". What the legislation will look like (other than being an amendment to the Environment Bill) remains to be seen and will also be the subject of further stakeholder engagement and a formal consultation.
Some key takeaways from the UK Government response however are the legislation will:
- adopt a legality-based approach, meaning that those in-scope will be prohibited from using commodities not produced in line with the laws in the countries in which they originate;
- incorporate an obligation on in-scope companies to undertake due diligence on their supply chains to check for risks of illegal deforestation AND report on that due diligence exercise publicly; and
- apply to "larger" businesses as defined by a turnover threshold (and not an employee count metric).
Choosing not to follow the more expansive approach adopted elsewhere (e.g. the EU Parliament's initial proposal for a mandatory due diligence regime, the UK Government rejected respondents' calls for the regime to: (i) include human rights impacts within it's scope; and (ii) impose an obligation on the financial sector to conduct such due diligence in respect of their lending and investment activities (although did acknowledge both points as worthy of their own regimes...).
The developments around corporate reporting, transparency and due diligence continue to come thick and fast. What's next remains to be seen, but everyone (both those likely caught by this development and those not) needs to keep an eye on what is an ever-changing landscape.
The proposed new legislation would prohibit larger businesses in the UK from using forest risk commodities that have not been produced in line with producer country laws. It will also require companies to demonstrate that they have undertaken due diligence on their supply chains, and to publish the results