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Supply Chain Risk

UK plans mandatory due diligence for forest risk commodities

A group of large food companies have written to the Secretary of State for the Environment, Food and Rural Affairs to argue that the government’s plans for a new law to protect overseas forests and natural land do not go far enough.

Defra’s consultation on mandatory due diligence rules for ‘forest risk commodities’ (agricultural and forestry commodities consumed by UK consumers which may be driving illegal deforestation) proposes making large businesses responsible for ensuring that the commodities in their supply chains are not derived from illegal deforestation and land clearance for agriculture. There are a set list of proposed forest risk commodities for which due diligence would be necessary: beef and leather; rubber; pulp, paper and timber; soya; palm oil; and cocoa.

But at the close of the consultation period, a group of large companies have written to the Secretary of State to argue that all deforestation should be covered, not just illegal deforestation, and that the rules should also apply to smaller companies. The intervention will no doubt be picked up by those who argue that the government’s plans for mandatory due diligence do not go far enough and that the business community is able (and willing) to go further.

The supply chain due diligence approach is not novel: similar rules exist or are being developed for other environmental and social issues such as hazardous chemicals, conflict minerals and modern slavery. We know from practice that forcing UK suppliers and retailers to shine a light on the supply chain can be a powerful force in changing behaviours. Often, for the bigger brands, the reputation risk is a greater concern than the financial impact of sanctions or penalties, although the threat of criminal sanction can be a strong deterrent too.

However, influencing the supply chain and obtaining quality information is undoubtedly a challenge (especially during the current COVID-19 pandemic, as we commented in an earlier article). Businesses need to have robust systems in place and strong contractual protection for dealing with intransigent or disingenuous suppliers.

With the backing of some of the UK’s biggest food businesses and ever-mounting pressure on protecting the natural environment, it is almost certain that mandatory due diligence for forest risk commodities is coming down the track. The only real questions are: how far will it go, and who will be caught within its scope?

McDonald’s among food firms urging tougher deforestation rules

https://www.bbc.co.uk/news/business-54408544

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