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UK’s Sensible Approach to Due Diligence Continues

The UK Government continues to push its Due Diligence legislation, aimed at removing products linked to illegal deforestation from the UK market. The legislation has now passed the House of Lords (on 13th October).

The legislative process should be completed before the end of 2021. This means that, if it stays on track, the UK will be the first major economy to introduce such Due Diligence rules for deforestation-linked products. In this sense, London will be an example for others to follow.

This is doubly important because the approach taken by the UK Government is sensible, proportionate and looks for a cooperative with producing countries such as Indonesia, instead of an antagonistic one.

The Indonesian view remains that the UK’s legality standard is the best way to approach Due Diligence. The legality standard means that importers must have proof that local laws on environment, forests and sustainability were all met by the companies and farmers involved in the supply chain. What it does not do, is introduce new discrimination or arbitrary criteria on palm oil or other commodities.

There remains pressure from some quarters for the UK to follow a more adversarial approach, including new arbitrary criteria or standards, but to date UK Minister Lord Goldsmith, and Minister Rebecca Pow, have stood firm with the legality approach.

The UK may be the first, but other Western markets are also lining up Due Diligence proposals and restrictions. The EU will shortly publish a proposal that is expected to go much further – in a negative sense – than the UK legislation. There is a chance that some countries will be blanket-labelled as ‘high risk’. The EU’s track record of discriminating against Indonesian palm oil, is clear, and so this legislation is a significant concern for 2022.

In the U.S., Senator Schatz has introduced a proposed ‘FOREST Act’, which would be a U.S. equivalent to the proposals already underway in London and Brussels.  In both Washington and Brussels, palm oil has already been singled out in media reporting, and by legislators, as a focus for potential restrictions. The FOREST Act is also likely to be considered and voted throughout 2022, a similar timeline to Brussels.

The best approach that both capitals could take, would be to follow the UK route of a legality standard, and cooperation – instead of conflict – with producing countries.

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