Amid mounting concerns the European Commission will delay a “long awaited” legislative proposal on tackling deforestation risks in European supply chains, a group of NGOs has outlined a raft of policy recommendations including stricter due diligence requirements for banks and companies, as well as possible criminal penalties.

Over the past year, politicians in Brussels have increasingly flagged a lack of regulation for companies bringing products to market in the EU that have potential ties to deforestation and forest degradation globally.

In an October resolution, the European Parliament called on the Commission to propose an “ambitious new policy approach” for companies selling certain commodities and related products in the bloc.

“There is currently no EU legislation prohibiting products that contribute to the destruction of forests outside the EU from being placed on the EU market. Subsequently, European consumers do not know whether the products they buy contribute to deforestation,” the Parliament said in a release at the time.

“It is estimated that EU consumption represents around 10% of global deforestation with palm oil, meat, soy, cocoa, eucalyptus, maize, timber, leather and rubber among the main drivers of deforestation,” it added.

Having gathered feedback for much of 2020, the Commission was expected to issue a proposal on minimising the risk of deforestation and forest degradation associated with products placed on the EU market by Q2 this year.

However, that process now appears to have stalled, with the Commission removing the proposal from its timetable of upcoming legislative packages.

Campaign group Global Witness, which said in early May it was awaiting the launch of the “long awaited proposal” by June, says the prospects of a policy plan from the executive body are now unclear.

“We don’t know what’s happening and the reasons for this change of plans, but we hope this initiative still remains a priority for the Commission as any further delays will have detrimental and irreversible impacts on the future of world’s forests and the people depending on them,” says Giulia Bondi, an EU campaigner for forests at the organisation.

“Consumers and the general public are waiting for this to be published – and to be an ambitious plan – so the Commission cannot step back on its commitments and must act quickly.”

The Commission couldn’t be reached for comment on the omission of the legislative proposal, or when it will likely be published.


Mandatory due diligence and penalties?

Global Witness is among a cluster of activist and campaign groups behind a briefing released in early May, which argues that any future proposal must meet certain minimum requirements if future EU regulation is to affect “real change”.

Greenpeace, WWF, ClientEarth, and Fern are some of the other organisations behind the report, which calls for a new “mandatory due diligence framework” and an effective enforcement network for companies and financial institutions alike.

The report suggests companies with exposure to high-risk commodities such as beef, soy, palm oil or timber should be required to carry out “comprehensive, effective and ongoing due diligence” and “map their entire supply chain”.

The NGOs add that businesses of all sizes should collect information such as the country of origin of “forest and ecosystem risk commodities” and use satellite data to ascertain how goods were harvested or produced.

There should also be “equivalent” due diligence requirements for European financial institutions as well as importers, they say.

A number of renowned European banks have been caught out in recent years for allegedly supporting some of the most harmful agribusiness companies in terms of deforestation.

For instance, Global Witness argued in a December report that three meat traders which have continued to source cattle from ranches with links to deforestation had been financed by major international banks – including Santander and Deutsche Bank.

The NGOs say in the May report that generalised financial services by banks remains an ongoing concern, with a lack of accountability around the provision of general corporate loans, shareholdings, revolving credit facilities and bonds.

They are argue that “at a minimum” financial institutions should be required to carry out due diligence on whether clients’ wider corporate group carries any risk of contributing to deforestation, and regularly update that information as the situation changes.

Though banks already face a significant compliance burden around due diligence for financial crime reasons, developments in technology have been touted as a cause for hope in tackling the deforestation crisis.

Earlier this year, Grant Rudgley, project manager for the Cambridge Institute for Sustainability Leadership’s (CISL’s) Banking Environment Initiative, told GTR that technological developments could significantly improve banks’ oversight of their customers’ activities and supply chains.

“Historically, financial institutions’ supply chain due diligence needed to rely on self-reporting, sometimes backed up by certification,” said Rudgley.

“Today, those institutions don’t have to rely on one or two sources of information. They can use different methodologies to triangulate around the actual reality of what’s happening on the ground, using technology like satellite data or remote sensors in the field.”

Elsewhere in the May report, Global Witness and the other NGOs recommend that a new mandatory due diligence framework should be reinforced by the threat of civil, or even criminal, penalties.

Meanwhile, the briefing also calls for any EU legislation to develop a network of well-resourced and competent authorities that proactively carry out checks and controls.

If the Commission does publish a legislative proposal, the European Parliament and Council would then have the opportunity to weigh in and negotiate what the final package could look like, Global Witness’ Bondi says.