Elsewhere, due diligence moves forward

10 juin 2021

Elsewhere, due diligence moves forward

A spoke may have been put in the wheels of the EU’s due diligence proposals, but globally the topic is gaining momentum.

In the UK, proposals are simultaneously a step ahead and behind the EU. While European proposals are yet to be made public, the UK’s has been included in the Environment Bill – designed to fill the legislative void left by the UK’s departure from EU regulation – currently making its way through the chambers of Parliament. However, the draft regulation is let down by its scope – focusing only on illegal deforestation and neglecting to address human rights and the role of finance.

The UK Government sadly turned down a chance to strengthen the provisions in a vote in the House of Commons, 26 May 2021. An opportunity to address its shortcomings still exists, however, as the Bill is now undergoing further scrutiny with the possibility of amendment in the House of Lords. The legislation should be strengthened to oblige companies to ensure that imported commodities are not linked to any deforestation (not just illegal), or to human rights violations; it should also prevent financial institutions from funding the production of tainted commodities. More detail about strengthening the Bill is available here.

More broadly, G7 countries have expressed support for developing regulatory frameworks, including the introduction of due diligence requirements, to tackle deforestation in supply chains. The statement appeared in the G7 Ministers’ Communiqué on climate and environment, agreed in London, 21 May 2021. As a next step, it said G7 Trade Ministers would undertake discussions about facilitating sustainable supply chains.

Although G7 member states France, Germany, Italy (via the EU) and the UK have already developed or are developing such regulations, the statement is the first time the United States, Canada and Japan also have expressed support for such approaches.

If sincere, the G7 communiqué marks an important step toward a harmonised approach from major consumer countries of forest- and ecosystem-risk commodities. A global approach is key for the success of supply-chain regulations like the EU’s and UK’s: without this, environmentally destructive production will still continue, simply re-routing exports to consumer markets with lower regulatory standards.

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