Government consultation on due diligence and reporting requirements for forest risk commodities

The Environment Act 2021, which received Royal Assent on 9 November 2021, sets out a new regime in relation to the use of “forest risk commodities” in UK commercial activity. Under the new regime, it will be illegal for larger businesses to use, in their UK commercial activities, forest risk commodities that have not been produced in accordance with local laws. Due diligence must be undertaken to mitigate the risk and companies will be required to report on the steps taken.

The aim of the provisions, which were consulted on in August 2020 with a response published in November 2020, is to protect rainforests and clamp down on illegal deforestation.

Much of the detail of the regime will be set out in regulations and the Department for Environment, Food and Rural Affairs has now published a consultation which will inform the drafting of secondary legislation and related guidance. The consultation, which closes on 11 March 2022, seeks views on a number of proposals including:

• In-scope commodities – The consultation proposes that the due diligence requirements apply, in a phased approach, to the following commodities: cattle (beef and leather), cocoa, coffee, maize, palm oil, rubber and soy. As and when evidence shows that other commodities are key drivers of deforestation they will be added to the list. (Timber and timber products are not included as they are already covered by separate regulations.)
• In-scope companies – The consultation proposes using UK turnover (as defined in the Companies Act 2006) as the relevant metric for determining which UK businesses are in-scope. For non-UK based businesses, the options are either to consider only turnover related to UK activity or to look at global turnover. The actual turnover threshold will be set between £50 million and £200 million on a commodity by commodity basis.

• Reports on due diligence systems – Under the proposals, in-scope companies will be required to eliminate, or reduce to as low as reasonably practicable, the risk of using any regulated commodity grown on land illegally used or occupied.  There will also be guidance on establishing an effective due diligence system with an expectation that what is reasonably practicable to assess and mitigate risk will evolve over time. In-scope companies will be required to report annually on their due diligence exercise, including how they have assessed and mitigated risk.
• Enforcement and sanctions – Fines of up to £250,000 are proposed, with criminal sanctions for offenders who fail to comply with civil sanctions or fail to assist the enforcement authority.

For further information please see our briefing here.