Due diligence on forest risk commodities

Due diligence on forest risk commodities

Consultation response· By Timber Trade Federation · 5 October 2020

The TTF welcomes the Government’s proposal for mandatory due diligence legislation on key forest commodities to remove products with illegal deforestation risks from the UK market.

Timber is not the primary driver of deforestation. When sustainably harvested, timber helps support forests to grow – as has occurred in Europe where forest cover is expanding. The greatest global deforestation threat is the permanent conversion of forest for the expansion of commodities such as palm oil, soy and beef, and the Government is right to seek to address these risks.

Many businesses are already tackling deforestation in their supply chains through voluntary commitments. With the addition of complementary demand-side regulation, or by changing this one ‘variable’ in the system, we can accelerate transformations across industries and drive innovative solutions toward this complex problem.

Timber is a forerunner when it comes to due diligence. TTF has been working with its members to develop and calibrate due diligence measures since before the launch of the EU Timber Regulation in 2013, and has witnessed various lessons and challenges for businesses both in the UK and deep in the supply chain. The new proposed legislation follows a similar mechanism with the EUTR.

Therefore, we provide the below considerations and recommendations for the government based on the experience of the UK timber industry;

A ‘butterfly effect’ can be cascaded along the supply chain: Though the due diligence obligation is aimed at the larger businesses, ‘evidence’ that can ‘demonstrate compliance with local laws’ will inevitably be required from suppliers up the supply chain, both in the UK and in the producer countries. There is a risk that companies, at varying positions of the supply chain, seeking a quick-and-easy approach to simply move away from those who cannot provide hard evidence, which can have a detrimental effect on the local communities and environment the legislation is intended to support. It needs to be recognized that such evidence may not be easily accessible or simply may not exist due to gaps within the law. Working with suppliers to understand the complexities on the ground and assist with the transition is vital to ensure companies can bring about real change.

Recommendation: Ensure active supplier training, capacity building and engagement that involves local communities and stakeholders are considered as key components in due diligence when tackling deforestation.

The devil that lies in the interpretation of ‘legality’: The determination of ‘relevant laws’ and its status of compliance is not straight forward in many countries of production, e.g. in cases where land tenure/land title does not exist due to poor law enforcement at a regional level. And, as already mentioned by NGOs, the most extensive land-clearing is very often conducted within ‘relevant laws’. The expectation on ‘legal compliance’ therefore could be understood very differently among different stakeholders, from producers, government and NGOs in the country of production to companies and enforcement bodies here in the UK.

Recommendation: Provide implementation guidance of the legislation to assist in the identification of illegal land conversation. Establish platforms for dialogue to calibrate understanding and practices between businesses (in the UK and producer countries), NGOs and enforcement bodies.

A benchmark for evaluating ‘robust’ due diligence: The legislation enables the government to levy fines and civil sanctions against businesses that do not have a robust system of due diligence in place. Due diligence is an evolving process. It needs to be clarified what constitutes a realistic expectation of robust due diligence and a feasible set of verifiers that allows for a coherent evaluation of progress and outcomes, both along supply chains and across companies of the same commodity. For companies with mega-complex supply chains, a risk-based / prioritization approach may be more impactful than focusing on a larger number of cases at the same time, in such cases due diligence progress needs to be measured over time.

Recommendation: Provide clarity on the key criteria for due diligence along with standardised processes for evaluation, including reporting requirements and templates. Allow a risk-based approach to reduce unnecessary burdens for companies and allow the most effective deployment of resources.

Build a healthy environment for feedback loops to assist continual improvement: This includes; (1)  availability of data, tools, and guidance to assist better understanding of risks (i.e. judging legal compliance), mapping of supply chains, identification and delivery of mitigation, and monitoring and tracking of performance; (2) active collaboration of NGOs with companies in the due diligence process beyond advocacy, e.g. in providing technical support during mitigation; and ensuring information accuracy, and (3) consistent and strong enforcement mechanisms.

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