The UK government’s package of measures in response to recommendations from an international panel of business and environmental leaders contains a proposal for new, mandatory due diligence legislation that would prohibit large companies from importing commodities grown on illegally converted forest land.
It is the cornerstone of national efforts to tackle climate change and is in many ways genuinely world-leading. Launching the response, ministers for the environment and for climate change wrote: ‘We want to ensure that farmers who are working hard to do the right thing are rewarded with access to growing markets.’
But while such measures may tackle the carbon emissions from deforestation, they may also have unintended consequences for some of the poorest people in the developing nations where these forest commodities are produced.
Agriculture driving deforestation
Around 80 per cent of global deforestation is driven by agriculture, much of it to produce commodities like palm oil and cocoa used on a daily basis in the developed world. In 2019, the Global Resource Initiative Taskforce (GRI) brought major businesses such as Tesco and McDonalds together with the WWF, Green Finance Institute, and others to consider how the climate and environment impacts of key UK supply chains might be reduced.
Its report published in July 2019 featured 14 recommendations, including the imposition of a mandatory due diligence obligation on business to ‘analyse the presence of environmental and human rights risks and impacts within their supply chains, take action to prevent or mitigate those risks, and publicly report on actions taken and planned.’
The UK government response to the GRI’s recommendations sets out new measures designed to help the UK transition away from supply chains that contribute to illegal deforestation and land conversion. A proposed new due diligence law would require bigger businesses using ingredients such as soya, palm oil, timber, beef and cocoa to prove their supply was produced in line with local laws designed to protect forests. While this is narrower in scope than had been recommended, which was to encompass all environmental and human rights impacts, it is an important step.
Challenges for mandatory market requirements
Other nations appear to be on a similar path, as evidence mounts that voluntary commitments have only limited efficacy in tackling deforestation-driven climate change. A draft bill with similar objectives will soon be presented to Congress in the US. So, are mandatory market requirements to avoid illegal deforestation the magic pill?
Perhaps, but such legislation faces three challenges, the first of which is enforcement as the UK and US constitute only a small percentage of global demand for these commodities. While the EU has been discussing potential new legislation in this field for years, there is no sign of such regulations developing in the fastest growing global markets of China, Brazil, and India. The risk is that companies in regulated markets will simply import the demonstrably ‘legal’ supplies while illegal products will flow to rapidly growing markets without regulatory requirements.
A second difficulty is who bears the cost of compliance. While soy is extracted almost exclusively on a commercial scale extraction, cocoa and coffee are produced largely by micro enterprises, and estimates place the quantity of the world’s coffee produced by smallholders at between 70 and 80 per cent.
The extent to which such smallholders are implicated in illegal deforestation differs. In Laos, for example, approximately 51 per cent of deforestation linked to commercial agriculture is estimated to be driven by large concessions, and 22 per cent by smallholders. By comparison, small-scale agriculture and cattle ranching are estimated to be responsible for 75 per cent of deforestation in Peru.
Even when such micro enterprises are operating on legally converted land, an upswing in bureaucracy and cost could bar them from accessing international markets, rendering them even less able to participate in a greener economy or pull their families and communities out of poverty.
The proposed due diligence law would leave farmers obliged to provide documents verifying their rights to the production land, its forest status, and compliance with any other local laws that are included in scope. However, these smallholders often don’t have secure land rights and participate on the fringes of the formal economy with limited formal education, access to support or investment.
The final hurdle is the extent to which the aim of protecting forests is shared by governments around the world. As the proposed UK legislation hinges on the forest laws of producer countries, this requires businesses importing into the UK to ensure they have been met – a concept which will only achieve the aim of protecting forests if the producer country in question is committed to tackling deforestation locally, and both willing and able to legislate to that effect.
Legality-based vs sustainability approach
For that reason, some NGOs criticize this ‘legality-based’ approach, preferring instead a zero-deforestation or ‘sustainability’ approach which forces companies to use only those commodities proved free from the taint of any deforestation, or which are linked solely with sustainable deforestation and less vulnerable to the ‘rollback’ of environmental protections that have happened in the Amazon and South East Asia in response to COVID-19.
The UK government defends their approach, saying: ‘We believe that supporting national governments’ own efforts provides the best path to long-term sustainability.’ Indeed, where zero-deforestation approaches could prove punitive on farmers not yet equipped to meet such standards, this legislation could not only protect forests but enrich developing economies where appropriate legislation is in place.
But in order for this to be the case, it is imperative that demand-side policies such as the UK’s due diligence legislation are developed alongside supply-side incentives that focus clearly on the needs of smallholders. Ultimately, a legality-based approach has the potential to support developing countries in upholding their existing forest regulations and expanding their own good governance practices.
In the end, this must be the goal. Developed nations cannot end the destruction of tropical forests until both the commitment to do so, and the means through which to achieve this, are embedded in those nations that have been granted the guardianship of them.
To help ensure the needs of producer countries are addressed, Chatham House is convening two roundtables on 2 and 16 December, focusing on the implications for producer livelihoods in the cocoa and coffee sectors.