The EU Parliament’s proposal for a Regulation on Forest and Ecosystem Risk Commodities - Tackling global deforestation though due diligence - By Enrico Partiti

Editor's note: Enrico Partiti is Assistant Professor of Transnational Regulation and Governance at Tilburg University and Associate Fellow at the Asser Institute. His expertise centres on European and international economic law, sustainability and supply chain regulation. In particular, he studies how private standard-setters and corporations regulate globally sustainability and human rights 

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The recent vote in the Environment, Public Health and Food Safety (ENVI) Committee of the European Parliament on binding legislation to stop EU-driven global deforestation is a watershed moment in the global fight against deforestation, ecosystem conversion and associated human rights violations. The ENVI Committee report, that will soon be voted by the plenary, requests the Commission (as provided in Art. 225 TFEU) to table a legislative proposal for a measure disciplining the placing on the EU market of products associated to forest and ecosystem conversion and degradation, as well as violations of indigenous communities’ human rights. The Parliament’s initiative takes place in a policy context increasingly concerned with deforestation, in the framework of a Commission Communication on stepping up EU action to protect and restore the world’s forests which left a door open for legislative intervention. 

The proposed measure would aim to severe the economic link between demand of agricultural commodities, especially by large consumers markets, and negative environmental impacts - including on climate change. Beef, soy and palm oil alone are responsible for 80% of tropical deforestation, and consequent CO2 emissions. In 2014, EU demand was responsible for 41% of global imports of beef, 25% of palm oil and 15% of soy, as well as large shares of other commodities at high risk for forests and ecosystems such as such as maize (30%), cocoa (80%), coffee (60%), and rubber (25%). Protecting just forests is not sufficient, as it risks to displace conversion to other non-forests ecosystems such as the Brazilian cerrado. In light of their negative impact on both forests and other natural ecosystems, such commodities have been labeled as forest and ecosystem risks commodities (FERCs).

The Parliament motion lays down a rather detailed overview of a WTO law compliant measure that the Commission shall propose and that builds upon the previous EU experience in regulating placing on the EU market of agricultural products such as timber and biofuel crops. However, it goes beyond establishing a requirement of legality of product origin such as under the EU Timber Regulation. Instead, it would require that only FERCs and derived products that do not originate from land obtained via the conversion of natural forests or other natural ecosystems, do not originate from natural forests and natural ecosystems undergoing degradation, and are not produced in, or linked to, violations of human rights can be placed on the EU market. The obligation would apply to economic operators placing on the market commodities and derived products regardless of their EU or non-EU origin. This obligation of result would be operationalised through an obligation of conduct for economic operators placing covered products on the EU market, i.e. they would have to exercise due diligence in line with the human rights due diligence process laid down in the United Nations Guiding Principles on Business and Human Rights (UNGPs). A 2018 feasibility study indicated that mandatory due diligence centred on deforestation criteria would generate the highest impact among all possible regulatory and non-regulatory options.

The alignment of due diligence with the UNGPs represents a notable improvement from the requirements in the EUTR that are limited to performing a risk assessment in view to gather information about timber origin and assessing and mitigating risks of non-compliance. The proposed measure would instead include all relevant steps in human rights due diligence including involvement of affected stakeholders at all relevant moments in the definition and implementation of due diligence, reporting to the public and to enforcement authorities, ensure remediation and establish grievance mechanisms to improve accountability and access to remedy. The proposal in its current draft also contains strict enforcement and sanction provisions building on the national enforcement structure currently in place under the EUTR. As under the EUTR, enforcement will thus be determined by the practices of enforcement authorities at the Member State level. Civil society monitoring would be strengthened as individuals, NGOs and undertakings are given the possibility to challenge non-compliance before national judicial and administrative authorities. Sanctions for non-compliance would include fines, seizure of products, suspension of authorisation to place products on the internal market, exclusion from public procurement and criminal penalties for individuals. The proposal would also establish civil liability and, interestingly, it clarifies a vexed question about the relation between due diligence and liability. It notes that, while operators remain jointly and severally liable for human rights and environmental harm which they caused or contributed to, for harm to which they are directly linked, proper exercise of due diligence would lead to a discharge of liability. As the Regulation would also apply to ecosystem conversion taking place in the EU, a potential tension with the system of liability under the Environmental Liability Directive may arise.

Due diligence will have to focus on specific environmental and social criteria. This measure can therefore be seen as a sector-specific or risk-specific add-up to a future across-the-board human rights due diligence Directive. Notably, the environmental and social criteria against which due diligence is performed go beyond legality of land conversion, testifying to the awareness of the impossibility to arrest ecosystem destruction where countries willingly relax the enforcement of land-use regulations to favour agribusiness. A zero gross deforestation approach is adopted that allows placing on the EU market only FERCs and derived products that originate from areas that have not lost their status as forests and natural ecosystems, under the definitions that will be set forth in the measure, at a designated cut-off date. In addition, covered commodities shall not be harvested, extracted or produced from land obtained or used in violation of human rights and especially indigenous communities traditional land-use rights, free prior and informed consent and access to water. The operationalisation of due diligence obligations would require economic operators to map the entire value chain in question, and acquire information about the status of land of origin, including possible presence of formal and customary right, as well as human rights violations. Operators should ensure full traceability and, where needed, segregation to ensure that only compliant products are traded.

Extending due diligence responsibility to conversion clarifies the close link between human rights violations and ecosystem conversion. Apart from the clear connection between ecosystem conversion and degradation on the one hand, and human rights violations especially suffered by indigenous communities on the other, considerable human rights impacts originate from environmental harm. It is also well established that climate change, to which deforestation and ecosystem conversion greatly contribute, detrimentally affects the enjoyment of various internationally recognised human right. The proposal is also in line with various soft law instruments linking together social and environmental harm in the context of agricultural production, such as the OECD/FAO Guidance on Responsible Agriculture Supply Chains - that includes various social and environmental impacts including deforestation and conversion as part of the expected risk assessment that companies should undertake. Also one of the most high-profile voluntary pledges entered into by the industry together with other stakeholders, the UN New York Declaration on Forests, establishes a clear link between conversion of forests and ecosystems and human rights violations.

The proposal suggested by the European Parliament represents a strong starting point for a legislative process on a regulatory measure disciplining the placing on the EU market of products associated with forest and ecosystem conversion and degradation, as well as human rights violations. The clarification of the environmental component of human rights due diligence is particularly relevant not just as it makes clear what are the expected boundaries of human rights due diligence. It also puts pressure on companies to design, both individually and collectively, effective means to ensure that their supply chains are not associated to detrimental impact, and forces them to step up their so far voluntary and limited efforts towards deforestation-free value chains.

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