On 9 December 2023, the UK Government published further details regarding its Forest Risk Commodities (FRC) regime, introduced through the Environment Act 2021. The FRC regime aims to tackle deforestation by making it illegal for larger businesses operating in the UK to use key forest risk commodities produced on land illegally occupied or used, with in-scope businesses required to undertake due diligence and report on this exercise annually. Secondary legislation to implement these requirements in the UK is likely to be adopted early in 2024. These requirements will sit alongside the EU Deforestation Regulation, which will impose due diligence obligations for the EU market from 30 December 2024 aimed at tackling deforestation and forest degradation (see our previous post and webinar here).
Scope, Obligations and Penalties
The UK Government has confirmed that the full list of commodities in-scope of the FRC regime is as follows: non-dairy cattle products (beef and leather), cocoa, palm, and soy (and any products derived from them). Notably, this list does not include coffee and rubber which are covered by the EU regime. It also does not include timber products which will remain subject to the existing UK Timber Regulations.
Organisations using these commodities in UK supply chains with a global turnover of more than £50m will be in scope of the regime.
These businesses will be banned from using regulated commodities if sourced from land used illegally. They will also be required to undertake a due diligence exercise on their supply chains and to report on this exercise annually for transparency.
Organisations whose use of the in-scope commodities does not exceed the annual volume threshold of 500 tonnes may submit an exemption. There will also be a grace period for organisations (whether directly in-scope or as suppliers or service providers to in-scope organisations) to prepare before the beginning of the first reporting period.
Monetary penalties may potentially be imposed as part of civil sanctions where organisations are in breach.
Next Steps and Business Impact
Secondary legislation implementing the relevant requirements will be published “when parliamentary time allows”, likely in early 2024.
Similar to the EU Deforestation Regulation, the key sectors likely to be affected by the new requirements include retail, food/beverage, apparel and cosmetics. In order to ensure compliance and avoid penalties, businesses will need to: first assess whether they are in scope of the legislation; implement and maintain robust due diligence processes across their supply chains to ensure they are not using regulated commodities sourced from land used illegally; and establish mechanisms to comply with annual reporting deadlines.
More broadly, businesses should continue to be aware of the wider trend towards supply chain transparency and mandatory due diligence obligations in the UK and EU, and their associated obligations in light of expanding regulation.