UK Due Diligence: A Certification Solution

The UK Government’s Due Diligence proposal is now being officially debated before the UK Parliament. The proposal – which is very likely to become law once it is finalized – will have a significant impact on a number of commodities, including palm oil.

The debate will be marked by two opposing viewpoints. There is the pragmatic view, which is essentially the view of the UK government and many stakeholders in industry. They want the issue of illegal deforestation to be addressed. However, they also want that to be achievable, and they are seeking to use existing solutions which includes national certification schemes such as ISPO, as well as existing voluntary schemes. This viewpoint has essentially settled on a legality standard as the best approach.

Then there is the view of some UK MPs and a large number of NGOs. They are arguing for a wide-reaching law that will incorporate not just deforestation, but also regulations covering human rights, labour and other aspects of international law. They are also arguing against existing certification schemes.

Over the past two weeks, many of these MPs and NGOs have asked questions and made submissions regarding the due diligence regulation.

The most notable is the move by UK Labour MP Kerry McCarthy. McCarthy’s efforts would go in the opposite direction of the UK Government. McCarthy has stated the UK Government’s plan ‘lacks ambition’.

McCarthy’s proposal would introduce far more administratively complex and burdensome rules, and would discriminate against farmers in Indonesia and elsewhere in the developing world.

McCarthy is seeking to significantly expand what due diligence on deforestation should entail, incorporating human rights, labor and other additional requirements, well beyond deforestation. McCarthy’s approach is much closer to that of what the EU is referring to as mandatory human rights and environmental due diligence (HREDD), and which will be part of an EU legislative proposal next year.  

The Forest People’s Program has made a specific reference to McCarthy’s amendments in its submission on the Environment Bill.

Lord Goldsmith, Minister of State (Pacific and the Environment), appears to be largely in favour of McCarthy’s position, and for a Due Diligence standard that may simply be unworkable, particularly if it singles out palm oil.

Lord Goldsmith has often focused his criticisms on Indonesian palm oil and conservation in Indonesia

The environmentalists have pushed for an extreme approach modeled after a proposal from the Global Resource Initiative (GRI) who released its recommendations earlier this year.  

Their proposals are a bad idea for several reasons – it doesn’t work under international trade rules, it would be bad for the UK’s bilateral and multilateral relations, and it would be complex to the point of being unworkable and anti-business.

It is not possible to discriminate between products, forest types and human rights under international trade rules. If the UK’s laws require greater checks on palm oil, they must also be applied to other oils. If there are concerns over tropical forests and biodiversity, these must be applied to other forest types also. If human rights are of a concern in Indonesia, the same checks must also be applied to products coming from Ukraine, for example.

By making the Due Diligence regulations more complex, it would actually move the proposal further away from what the UK wants to achieve: an end to illegal deforestation.

Indonesia and others have already made clear their opposition to unilateral and disproportionate measures – the reaction to the EU’s RED discrimination was clear for all to see and the UK does not want its newly-formed Trade Ministry to be facing such an avoidable trade dispute.

Consequently, the UK government’s proposal has chosen to follow the route of the legality standards. This is a more collaborative and achievable approach to Due Diligence, rather than the unilateral approach sought by GRI and McCarthy that would position the UK very badly with trade partners around the world, especially in ASEAN.

The recent consultation leaned very heavily on the idea of legality, as opposed to attempting to remove deforestation from supply chains entirely, or supporting sustainability without international benchmarks, or requiring traceability in countries where such a move may be near impossible to meet.

A legality standard would be a world-first and sets a strong platform to ensure illegal deforestation is removed from supply chains without undermining international trading rules and norms.

This pragmatic move has been driven by the UK Department of International Trade (DIT), which understands that many of the aspects of due diligence that MP McCarthy is talking about would provoke a negative reaction from the UK’s trading partners, and would weaken the UK’s competitive position overall, especially in southeast Asia.

The position of DIT has the advantage of being legally accurate and achievable, and backed up by clear evidence including from the engagement by producing countries with the UK’s consultation process.

The legality standard can be built upon: for example, by formal UK recognition of existing standards. The standard for Indonesian palm oil – Indonesian Sustainable Palm Oil (ISPO) – is an existing platform that should be recognized as a guarantee of such due diligence for UK firms purchasing palm oil from Indonesia.

ISPO provides the baseline for Indonesian laws and regulations, as well as Indonesia’s international treaty obligations, when it comes to the legality and sustainability of palm oil within an Indonesian context.

The ISPO standard could also serve as a suitable benchmark for an arrangement similar to FLEGT for timber, for Indonesian palm oil going to the UK.

This would serve a number of purposes.

  • First, it would provide UK policymakers and consumers with certainty that the palm oil and palm oil products they are consuming are legal and sustainable.
  • Second, it would provide the UK with a basis for meeting its sustainable palm oil commitments under the Amsterdam Declaration.
  • Third, it would provide the UK with major political and economic inroads into the largest consumer market in Southeast Asia: Indonesia.

There is clarity here because the proposal is narrow in scope. The coming Parliamentary debate will attempt to broaden that scope into an unworkable, anti-developing country regulation so that it will be a panacea for the extreme environmental movement. This has been one defining feature of many other environmental debates: they can become a platform for every problem, rather than trying to solve the core problem.

The advice for UK lawmakers here is simple: the legality standard is a world-first and has widespread support. Don’t let the perfect become the enemy of the good.