Retailers urge UK to swiftly implement due diligence for deforestation-linked commodities
The previous UK administration failed to enact the promised Forest Risk Commodities (UKFRC) secondary legislation, a key component of the Environment Act 2021. The RSG is urging the new UK goverment to do so.
In 2021, the UK's Department for Environment, Food and Rural Affairs (Defra) announced that provisions under the Environment Act would introduce a due diligence requirement on certain forest risk commodities.
This would prohibit larger companies from using agricultural commodities that have not been produced in line with local laws in the countries where they originate. This followed two government consultations in both 2020 and 2021.
UK risks becoming leakage market
Continued inaction risks the UK becoming a dumping ground for commodities linked to deforestation, according to the RSG, which is an independent coalition of food retailers promoting sustainable soy.
In a letter addressed to Steve Reed MP, secretary of state for environment, food, and rural Affairs, the RSG—represented by 3Keel Director Will Schreiber—highlighted the imminent enforcement of the EU Deforestation Regulation (EUDR).
With less than six months before that regulation takes effect, the UK must swiftly adopt equivalent legislation to prevent deforestation-linked products from entering the UK market, thereby safeguarding the ability to export UK-made products to Europe, argued the retailer coalition.
The RSG outlined five key recommendations for the new government:
- Implement the UKFRC legislation within the first 100 days in office.
- Clarify whether UKFRC will be the sole applicable legislation in Northern Ireland or if both UKFRC and EUDR will apply, providing clear guidance on compliance requirements.
- Facilitate seamless trade between the UK and its key partners by recognizing EUDR compliance as sufficient under UKFRC and rejecting mass balance accounting systems where more detailed traceability is feasible.
- Issue clear, scenario-based guidance to ensure consistent and effective regulation implementation.
- Collaborate with retailers to identify areas where further clarification can expedite supply chain transformation.
Divergence between EUDR and UK regulation
Schreiber told us that the divergence between EU and UK implementation requirements are not only causing confusion but could also increase compliance costs for companies operating in both markets, particularly for those in Northern Ireland:
“The biggest difference is that the EU has a point in time where they will not allow deforestation to take place, regardless of whether the producing nation considers it protected land or not—December 2020. The UK does not have any such date (‘cut-off date’) in the Environment Act and therefore any deforestation that is legal is permitted. This means that a product may be compliant with UK law, but not compliant with the EU.”
From an implementation standpoint, the EU mandates farm-level traceability and the use of polygons to prove compliance, with all importers required to submit documentation through due diligence statements (DDS). In contrast, the UK does not explicitly require farm-level traceability and will not establish an importer register, he explained. As a result, the paperwork required to demonstrate compliance with the UK's proposal will vary significantly, depending on what companies consider adequate due diligence, said Schreiber.
This means that UK companies may struggle to access the necessary information to export to the EU, as the UK lacks the infrastructure and verification systems to consistently ensure that products are deforestation-free, he continued. Furthermore, the scope of products covered by each regulation differs, with the UK's regulations being broader but less clearly defined than the EU's, said the RSG representative.
Is alignment with EUDR on the cards?
Prior to the UK election Defra said it would not align the UKFRC with the EUDR. But Schreiber believes there is hope for a change in that stance due to the new government looking to foster closer ties with the EU.
“We are not aware of any discussions occurring on deforestation right now, as it is not one of the five priorities highlighted by Steve Reed for the department. This is one of the reasons why retailers issued this public letter.”
The rules around Northern Ireland remain unclear. There has been no guidance on what is needed to be done in this market yet from either the UK government or the EU Commission, stressed Schreiber.
In June, following the official announcement of the UK election date, feed industry representative body, the AIC, updated its FAQs on the Forest Risk Commodity Regulation.
Clear guidelines needed
Defra has committed to providing detailed guidance on the evidence required for businesses in their annual UKFCR compliance reports.
Schreiber emphasized that clear, scenario-based guidance is crucial for consistent and effective UKFCR implementation. Each company in the supply chain needs a clear understanding of what is expected to ensure compliance. Without this clarity, companies may set their own standards for due diligence, leading to fragmented requirements, inconsistent data, and costly paperwork that fails to meet the goal of eliminating deforestation-linked commodities.
Retailers have invited Defra to collaborate on addressing these regulatory concerns. According to a report accompanying the letter to Steve Reed, urgent clarity is needed regarding UKFCR data exchange expectations, commercial confidentiality, certification roles, SME inclusion, and downstream industry expectations.
Schreiber believes the UK government can help by clearly distinguishing between commercially sensitive data and data required for UKFCR compliance. Specifically, origin information for indirect supply chains, as required by the EUDR, should be explicitly defined as not commercially sensitive due to the significant distance between soy production and UK companies.
Role of certification
Schreiber said it would also be beneficial if the UK regulators could clarify whether certifications can serve as a substitute for detailed data exchange. “The use of segregated certification schemes can help reduce risk. However, it's important to clarify certification supply chain mechanisms, such as mass balance, to avoid confusion with EU regulations, which explicitly exclude mass balance supply.”
Providing examples can illustrate how segregated certification complements other elements of transparency and monitoring within a due diligence system, he said.
Looking to the potential benefits and drawbacks of relying on certifications as a primary tool for demonstrating compliance, he said certification systems rely on auditors, which means that there is a physical assessment of both the production process and the chain of custody for the material. However, he noted that this approach also has two key dependencies: the availability of certified material and the quality of the audits conducted for verification.
“Currently, less than 3% of global soy is certified, so even if certification is accepted, the volume of supply and the availability of auditors are insufficient in the short term to meet the demand.”
Certification should certainly play a role in risk mitigation, but it's important to clarify what additional measures need to accompany it, as it is not a comprehensive solution on its own, said Schreiber.
SME exclusion
For now, the UKFRC proposal excludes all SMEs, that is companies with revenue under £50m (US$64.4m)
While this sounds like a benefit for smaller actors, the problem is that the absence of any requirements on such actors to collect or supply information may limit their ability to sell products, outlined Schreiber.
“If there isn't a regulatory requirement for SMEs to have a clear role in the supply chain to provide basic transparency information for where their raw materials are coming from, there is a significant risk that their own customers may choose larger companies that are able to do so. The legislation could address this point more easily, but we still don't know what is specifically in it since it has not been tabled by any government yet.”
Importer compliance
As regards whether it is possible to put mechanisms in place to ensure that importers are able to effectively demonstrate UKFRC compliance, and thereby facilitate compliance for other downstream actors, Schreiber said the UK's guidance should make clear there is the same expectation of importers as the EUDR: that they have a system in place with farm-level traceability for 100% of their materials entering the country alongside a due diligence process to verify that these farms are legally producing soy deforestation free.
Clearly defining this as a minimum expectation will reduce uncertainty for importers about their obligations, he remarked. Currently, the requirements are flexible, and there is no clear indication that farm-level traceability is a mandatory component of any due diligence system, as importers may argue that it is impractical, he added.
