The Environment Act 2021 provides a general framework for a new regime (see Schedule 17) that would prohibit regulated persons (those carrying on commercial activities above a to be decided turnover threshold) from using a "forest risk commodity" (also to be defined) or a product derived therefrom in their UK commercial activities unless relevant local laws had been complied with in the growing, raising and cultivation of such a commodity. The rules would also require such persons to establish and implement a due diligence system to ensure such commodities are not used and to report on their activities annually. The specifics of the regime (including enforcement) are to be determined by regulations made under the Environment Act 2021.
On 3 December, the Department for Environment, Food and Rural Affairs (Defra) published a consultation on the implementation of this regime. The consultation closes on 11 March 2022 and will feed into the development of the necessary regulations and accompanying guidance.
Some of the key points being consulted on include:
- The scope of "forest risk commodities". It is proposed this will initially include seven commodities estimated to be responsible for 65% of annual tropical deforestation risk associated with UK supply chains. These are: cattle (beef and leather), cocoa, coffee, maize, palm oil, rubber and soy. Timber will not be included as this is subject to a separate existing regime.
- Phasing in. The seven proposed commodities will not be regulated at the same time. Instead Defra intends to introduce the regulations in phases and is seeking views on factors to be considered in determining this sequencing and how many commodities to regulate at once.
- Which businesses should be in scope. The regulations are intended to focus on larger businesses that have a greater influence on forest risk commodity supply chains. The regulations will operate based on a turnover threshold but Defra is seeking views on the level of the threshold, what turnover to consider and how to regulate non-UK based businesses with operations in the UK. Defra is also consulting on an exemption threshold for each of the relevant commodities.
- The nature of the due diligence obligation and associated guidance. Defra is consulting on the level of risk mitigation the due diligence obligation should achieve. This is proposed to be "eliminat[ing] risk or reduc[ing] risk to as low as reasonably practicable" , which will be supplemented by guidance to set expectations on what constitutes reasonable steps and best practice. The consultation also seeks views on certification regime guidance and currently available information that can be factored into the guidance.
- Annual reporting. The regime provides for annual reporting on due diligence activities. The consultation seeks input on what information should be required to report to support accountability and decision-making.
- How the requirements will be enforced. The Environment Act 2021 sets out a framework for the enforcement regime but does not specify an enforcement authority. Defra is consulting on the criteria an enforcement body should fulfil. Part of the enforcement regime will include the imposition of variable monetary penalties, with Defra proposing a maximum penalty of £250,000.
A lot of the details are still to be decided but the publication of the consultation so soon after the passing of the Environment Act 2021 shows the continued desire of the UK government to push through this regime - no doubt hastened by the EU's own efforts on something similar (see here) and the commitment made at COP26 (see here) to halt and reverse forest loss by 2030.