A new logistical challenge lurks on the horizon. The delayed Environment Bill has once again been confirmed as part of the Government’s legislative programme in the recent Queen’s Speech in May 2021.
Background to the Environment Bill
The Environment Bill (“Bill”) has been in the works for some time now. A combination of factors such as Brexit, the December 2019 general election and the impact of the COVID-19 pandemic has seen various iterations of the Bill being introduced, delayed, and introduced again.
In August 2020, the Department for Environment, Food & Rural Affairs revealed proposals for ‘world-leading new law’ to protect rainforests and clean up supply chains by prohibiting businesses operating in the UK from using products grown on land that was deforested illegally. The proposals followed the launch of the Global Resource Initiative taskforce (“GRI”) in July 2019, which was tasked to consider actions the UK could take to improve the environmental sustainability of its international supply chains. As part of the GRI’s report, it recommended that the Government should introduce mandatory due diligence requirements into legislation.
At the time of writing, the Bill is in the Lords for yet another day of committee stage scrutiny.
Retailers and manufactures will need to start preparing now by identifying products which may use potentially at-risk commodities.
What is in the Bill?
The current iteration of the Bill is divided into several parts. Part 1 focuses on environmental targets and governance, with the intention of establishing an Office for Environmental Protection (“OEP”). The OEP will act as an environmental watchdog that will be responsible for taking action in relation to breaches of environmental law and will serve as the domestic replacement for the scrutiny function of the European Commission and the European Environment Agency. Other parts of the Bill focus on waste and resource efficiency, air quality, water and nature and biodiversity.
Of particular importance to retailers and manufacturers are the requirements under ‘Part 6: Nature and Biodiversity’. It is here where the GRI’s recommendations (as mentioned above) have been incorporated into the Bill (Schedule 16). Based on current language, businesses will be required to implement due diligence systems if ‘forest risk commodities’ are used by ‘regulated persons’. Or to put it another way, businesses who rely on the use of certain commodities (or products derived from those commodities) for their trade will be required to account for where those commodities have originated from and to confirm that that those commodities have been produced in line with local laws protecting forests and other natural ecosystems. Whilst the definition of what constitutes a ‘forest risk commodity’ has not been revealed as of yet, it is anticipated that it will include commodities such as beef, cocoa, leather, palm oil, pulp and paper, timber, rubber and soya.
The Bill indicates that the due diligence system will require businesses to identify information about the commodity, assess the risk that relevant local laws were not complied with in relation to that commodity and to mitigate that risk. The business will then be required to provide the relevant authority with a report on the actions taken by it to establish and implement a due diligence system in relation to the commodities that are being used for their commercial activities.
What might this mean for retailers and manufacturers?
Although the Environment Bill is not expected to Royal Assent until Autumn 2021, retailers and manufactures will need to start preparing now by identifying products which may use potentially at-risk commodities. The Bill indicates the onus will very much be on retailers and manufacturers to ensure that their products for sale in the UK meet the necessary requirements and therefore an in-depth review of supply chains is likely to be needed. Whilst there are likely to be exemptions to the requirements (if certain criteria are met), there will also be sanctions, both civil and criminal, for non-compliance. As the world becomes ever more environmentally conscious (and rightly so), there will also be potentially damaging reputational issues for those who fall foul.
Other green issues for retailers to consider
And it’s not just the Bill that is causing retailers to take stock.
Retailers should keep an eye on the Competition and Markets Authority’s (“CMA”) ongoing consultation on misleading green claims. In November 2020, the CMA announced that it was investigating the impact of green marketing on consumers due to a concern that a surge in demand for green products and services could incentivise some businesses to make misleading, vague or false claims about the sustainability or environmental impact of the things they sell.
In May 2021, the CMA announced that it was seeking views on draft guidance for businesses about green claims, in light of finding that 40% of green claims made online could be misleading. At the time of writing, six provisional principles have been drafted and the CMA intends to publish final guidance for businesses on making environmental claims by the end of September 2021.
There has been a reinvigorated emphasis on tackling environmental issues, no doubt aided by a change of direction in US politics, and many onlookers will be watching closely as the UK hosts the 26th UN Climate Change in October this year.
Retailers and manufacturers must take this reinvigorated emphasis on the environment into account or potentially face sanctions and reputational issues.
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This article was also published in The Retailer, our quarterly online magazine providing thought-leading insights from BRC experts and Associate Members.