Environment Bill

Baroness Sheehan Excerpts

Committee stage
Monday 12th July 2021 Lords Chamber

[Baroness Sheehan (LD)]

My Lords, I will speak to the five amendments in the group which either appear in my name or to which I have added my name. I will confine my remarks to them in the interests of time, but I register my strong support for all the amendments in the group, with perhaps a question mark over Amendment 265 in the name of the noble Lord, Lord Lucas. It has not been explained in the amendment how relative product advantage would be measured.

I am fortunate to have been preceded by the noble Lords, Lord Randall and Lord Lucas, and by the noble Baroness, Lady Meacher, who spoke about why these amendments needed to have been tabled, so I can say a lot less. I am sorry to have to speak before my noble friend Lady Parminter, in whose name Amendment 265A appears. This is an important amendment, which—given the UK’s position as a leader in financial services—in many ways goes to the heart of our leadership on both climate change and human rights issues. It has my strong support.

I will address Amendment 264ZA in the names of the noble Baroness, Lady Jones of Whitchurch, and my noble friend Lord Oates, and to which I have added my name also. The amendment has been tabled to draw attention to the current situation in which human rights abuses of indigenous peoples abound, sometimes leading to death, and to offer a remedy of sorts. In order to make local laws fit for purpose, it is critical to ensure that the UK requires businesses to have evidence that the free, prior and informed consent—FPIC—of indigenous peoples in forest communities has been obtained in the production of forest risk commodities on their land and local area.

There is a strong body of evidence which shows that FPIC reduces deforestation, reduces attacks on forest custodians and develops strong, commercially productive relationships. This is particularly important for the 80% of indigenous and community lands that do not yet have secure legal rights. FPIC is defined under international law, and commitments to full or partial FPIC are included in a diverse array of industry standards, OECD guidance and company commitments. It should be specifically included in Schedule 16 to underscore our global leadership on both climate change and human rights. I also point out that the Global Resource Initiative task force—commissioned by BEIS, Defra, and the FCDO, so this is the Government’s own body—in its report of March 2020 specifically recommended that the UK Government urgently introduce a mandatory combined human rights and environmental due diligence approach to forest risk commodities.

Schedule 16 is the UK’s first due diligence process with respect to forest risk commodities, yet it makes no mention whatever of mitigating human rights abuses through free, prior and informed consent. This is a moral and practical oversight and I look forward to the Minister’s response about how this omission can be justified.

Amendment 264A, in the name of the noble Baroness, Lady Meacher, and the noble Earl, Lord Sandwich, which I support, seeks to address the potential gaping loophole that would be set up by differentiating between legal and illegal deforestation. Does the Minister accept that the British public do not want these tainted goods? I cite the remarkable outcome of the Government’s public consultation on due diligence on forest risk commodities: over 99% of respondents supported the introduction of legislation to reduce all deforestation. When can we expect a response to the consultation?

I tabled Amendment 264B to paragraph 3 of Schedule 16 on the due diligence system as a probing amendment to see what estimation the Government have made of the acceptable level of mitigation of risk by businesses operating forest risk commodities. If the objective of Schedule 16 to avoid products consumed in the UK contributing to deforestation abroad is to be met, UK businesses must be confident that there is no more than a negligible risk that their products are linked to deforestation. Does the Minister agree that a requirement to mitigate risk without specifying the extent to which risks must be mitigated is rather vague and subjective? What consideration have the Government given to the question, as an unqualified requirement to mitigate risks leaves businesses open to legitimately take the least action required to achieve the most minimal reduction in their assessment of risk rather than the action required to genuinely minimise the level of risk? What would stop this happening? In the way that Schedule 16 is currently drafted, it is not clear to me; maybe the Minister can enlighten me. I would appreciate a thorough response from him on this amendment, maybe in writing.

Amendment 265ZA in my name would require the Secretary of State to consult stakeholders when making regulations on the content and form of annual reports on the due diligence system, and on how such reports are to be made publicly available. The amendment is, I suppose, inspired by lessons learned in the implementation of Section 54 of the Modern Slavery Act 2015, which introduced a requirement on businesses above a certain size to publish a slavery and human trafficking statement every year. It has become apparent that changes are needed. The Commons Foreign Affairs Committee recently published a report which concludes that the MSA is too weak and the criteria for producing the statements are in need of reform. The implication for this part of the Environment Bill is that it is important to ensure that the form and arrangements for publishing reports by a regulated person should be informed by public consultation so that lessons such as those from the Modern Slavery Act can be properly factored in. I look forward to the Minister’s reply.

The final amendment in my name, Amendment 265AA, aims to strengthen the enforcement of Part 1 requirements and Part 2 regulations through a civil sanctions regime. As drafted, Schedule 16 states the potential for civil sanctions to be issued for failures to comply with the Schedule’s requirements, except where a regulated person

“took all reasonable steps to implement a due diligence system”.

However, “reasonable steps” is not defined; it could mean any number of things. The exception to liability is too broad and potentially undermines the effectiveness of the due diligence obligations. Would it not be far clearer to instead mandate a regulated person to take the steps necessary to implement an effective due diligence system, as my amendments suggest? My final question to the Minister is: why do the Government not do that? It would be far more effective to state what they actually want rather than a woolly form of words that is an open invitation to those with, shall we say, creative minds.

I will end with this reflection: deforestation is the second largest contributor to global warming, second only to fossil fuels. What happens to rainforests matters to us all. The Government should seize with both hands the opportunity presented by this Bill to play their part in stopping the wanton destruction of all rainforests, especially in this seminal year, when they hold the presidency of COP 26.

[Baroness Parminter (LD)]

My Lords, I rise to introduce Amendment 265A in my name, for the support of which I am grateful to the noble Lord, Lord Randall of Uxbridge, the noble Earl, Lord Sandwich, and the noble Baroness, Lady Jones of Whitchurch.

Like other Peers, I welcome the inclusion of Schedule 16 and its introduction into law of an essential means of combating the deforestation associated with the consumption of forest risk commodities in the UK. Yet the trade in these commodities is only the final stage of the supply chain; their production must also be financed and, because the UK is such an important global source of capital, British banks and financial institutions currently supply a considerable proportion of this investment.

As Global Witness reported, in 2020, UK banks channelled over £900 million into over 300 major companies involved in forest risk commodities such as palm oil, soya and beef. Between 2013 and 2019, UK-based financial institutions were the single biggest source of international finance for six major agribusiness companies involved in deforestation in the climate-critical forests of Brazil, the Congo basin and Papua New Guinea, providing £5 billion over this period. I am not claiming that all this investment financed illegal activities, but, almost certainly, some of it did. As Forest Trends reported earlier this year, over the period of 2000-2012, 49% of tropical deforestation for agricultural commodities was thought to be illegal; between 2013 and 2019, the proportion rose to at least 69%. Illegal conversion of forests for agriculture is destroying an area of forest the size of Norway each year.

The point is that these banks do not have adequate systems in place to ensure they are not funding illegal deforestation. Extending the same requirements for the exercise of due diligence to banks as this Bill would impose on importers is a sensible move. This is not merely my view. That was the conclusion of the Global Resource Initiative Taskforce of sustainability leaders from finance, business and civil society, which was established by this Government in 2019. It was chaired by Sir Ian Cheshire, who was at that time chairman of Barclays UK. In its report last year, it concluded:

“Financial institutions provide enabling financial services across the commodity supply chain and so should be obligated to exercise due diligence with regard to their lending and investments.”


No other mechanism currently requires banks to carry out due diligence for illegal deforestation. The Government have argued, in their response to the Global Resource Initiative report, that the requirements for reporting on climate-related financial information that they intend to introduce will tackle the problem—but in reality they cannot. These reports will focus only on annual carbon emissions and are not suited to identifying the links between the provision of finance for agricultural crops growing on land cleared of forest several years before; they will also not require any assessment of the legality of the forest clearance.

The reports the importers of these commodities will be required to issue on the actions they have taken to establish their due diligence systems will provide helpful information but, again, they will relate to the final stages in the supply chain—the trade of the commodities. Far better, surely, to require banks to conduct due diligence on their lending and interventions at the start of the process when the initial finance is provided.

The financial sector is one of the British economy’s greatest strengths, but it will fail to remain so if it continues to fund activities which contribute to the climate and nature emergencies. I recognise and applaud the many steps that individual banks and financial institutions are already taking to green their activities. Requiring all of them to conduct due diligence to avoid their lending contributing to illegal deforestation is hardly a radical move. Indeed, it is the minimum we should expect.