Analysis: Should The UK’s Due Diligence Be Broad Or Narrow?
The consultation for the UK’s due diligence regulation is continuing apace. NGOs and UK Members of Parliament have taken to social media in a major way, with both sides of politics in the UK commending the move to ‘remove deforestation’ from supply chains.
But some unusual elements are likely to crop up in the consultations that are likely to complicate how the regulation goes forward.
UK MPs have said that they are seeking to reduce deforestation in UK supply chains, and they appear to be expecting due diligence regulation to fulfil that objective.
But does that mean deforestation is the only objective? And does this mean that deforestation is the only thing that matters?
Complications in a broad approach
Any legality benchmarks in the regulation are also likely to include provisions on taxation, labour, land tenure and other environmental regulations. Some NGOs are already proposing that human rights needs to be included.
But if these benchmarks are only going to apply to ‘forest risk commodities’, why shouldn’t they apply to all other commodities – particularly if those products are competing with palm oil?
The Italian agriculture sector has been plagued with accusations of illegality, most notably around labour exploitation and the use of undocumented workers. Italy is the EU’s largest producer of soy, and sixth-largest producer of oilseeds in the bloc. So, will a UK legality test also apply to labor exploitation in the EU?
Labor rights have been a key criticism of the palm oil sector, particularly in Malaysia. These accusations against Malaysia have come up again in the past week, specifically around potential use of prison labour for plantations, although the actual proposal has not been finalized or even tabled.
But where will this end? For example, will undocumented workers in the US soybean sector or US prison labour be included?
Finally, Poland has consistently come under fire for illegal logging within its boundaries, and has been a contentious issue between Warsaw and Brussels. Poland also happens to be the third-largest producer of oilseeds in the EU. How will this illegal logging risk figure into the EU’s matrix?
A narrow approach isn’t necessarily simpler
This point on illegal logging and deforestation brings us back to a specific issue when it comes to trade. The objective of the regulation from the outset appears to be to halt deforestation. The way it is being discussed by DEFRA, and being promoted by MPs in the UK parliament are all directed at deforestation.
But, there are specific points within the WTO framework that state that any measure designed to address a particular technical problem should be ‘least trade restrictive’ and also ‘necessary’.
When it comes to deforestation, a narrow measure would only include points related to deforestation, and not include other broader issues. But if that is the case, is a prohibition on products that have come from deforestation the ‘least trade restrictive’, and also ‘necessary’?
It’s arguable that the problem would be better tackled directly, with improvements to governance in countries where deforestation is considered a problem. A drop in demand for a particular product in the UK won’t stop deforestation. It will simply divert it to other markets.
Is a VPA realistic?
UK advocates are pointing to the FLEGT program for timber and the Voluntary Partnership Agreement (VPA) signed between Indonesia and the EU as a way forward. The VPA provided a means to negotiate, develop and implement a standard for timber legality for a narrow class of products.
This was, however, a special set of circumstances. The Indonesian government was losing significant revenue from illegally logged and illegally exported timber. Indonesia’s motivations were financial as well as environmental.
This isn’t the case with the UK’s due diligence measure. The UK would have to consider the greatest sources of deforestation (i.e. beef and soy) first, and negotiate and develop standards for these products with exporting countries.
Is the UK prepared to do this? Given that in the case of Indonesian timber it took more than a decade to have an operational FLEGT system for one country and one product, it seems unlikely. The clearer path will be for the UK to adopt due diligence without a parallel VPA. In all likelihood this will come back to the risk assessments for each product.
This means that DEFRA has some large decisions to make. They can take a broad approach that attempts to cover land legality, labour and other issues, which will risk putting other trade partners offside. Or they can keep it narrow, concentrating on deforestation, which will open up to international legal challenges.
The third way, of course, is the path that DEFRA appears to be quietly pushing, and will have the support of exporting countries: legality. This will mean an acceptance of national standards, ISPO, MSPO, and major voluntary certification programs such as RSPO.
This will not be enough for NGOs and some UK MPs. But this is the battle that DEFRA will need to have.