The saying goes that elections have consequences, and that’s particularly true for deforestation compliance. The European Parliament elections held at the start of June and the UK general election on 4 July have delivered a reversal of fortunes when it comes to a critical part of ESG – deforestation compliance and reporting.

What is the EU’s deforestation compliance regime?

In June 2023, a quite different European parliament approved the Deforestation Regulation (EUDR), due to come into force on 30 December 2024. From that date, a number of relevant products including palm oil, soya, wood, coffee, cattle and rubber would have required conclusive and verifiable proof these products were not linked to deforestation, up and down the supply chain.

This regulation was supposed to require companies involved in these products’ supply chains to ensure the raw materials were traceable to the plot of land they were harvested in, and that plot was protected from deforestation. The onus was on EU companies to ensure those plots of land complied with all local laws (including labour and human rights), and that each batch of products was covered by a due diligence statement. This statement was to be submitted to the EU by the operator or trader once a full due diligence audit on the source materials had been carried out. 

Adding to this complexity, companies importing these products would have to consider the risk rating applied by the EU, which was to classify every country as high, standard or low risk for deforestation. 

Why has the EUDR been delayed?

However, following the European Parliament elections in June 2024, it seems likely the deforestation regulation will be postponed from coming into force at the end of 2024 until at least 2027. This delay comes amid the decimation of the Green bloc in the elections. The centre-right European People’s Party (EPP) remains the largest bloc, but have taken on the collapse of environmental-focused MEPs to reframe the EU’s flagship ‘Green Deal’ as a ‘Green Deal for Growth.’

What are the UK’s plans for deforestation compliance?

Meanwhile the election in the UK delivered a strong Labour majority, who look set to develop their own Forest Risk Commodity (FRC) regime. The UK’s FRC was built along similar lines to the EUDR. It prohibits companies from using illegal produced forest risk commodities, including raw materials and derived products. It requires companies to establish a due diligence system for each regulated commodity, and that firms report annually on their due diligence efforts.

Only UK companies with a global annual turnover of £50m are required to comply, and there is an exemption application process for businesses suing 500 tonnes or less of each commodity per year. There is an ongoing discussion in government about whether the financial services sector should be in scope, although they were excluded from the delayed EUDR. 

What are the differences between the EU and UK deforestation regimes?

The proposed UK regime is slightly less onerous than the EU’s one. Under the UK FRC, only deforestation that is illegal in the local jurisdiction is covered. Whereas the EU’s regime would have covered all local laws, including labour and human rights. 

While the UK’s Forest Risk Commodity regime focuses on illegal deforestation only and the EU’s one also covered the risk of legal deforestation and human rights in the supply chain, the UK’s regulation will be implemented far sooner. Enabling legislation is already in place via the Environment Act 2021, and the UK FRC can be implemented via secondary legislation. 

Meanwhile in Brussels, political cattle trading to secure a second term for European Commission President Ursula von der Leyen looks likely to set deforestation due diligence several years back, if not see the regulation fully chucked onto the sacrificial pyre of the Green Deal set alight to appease the new hard right faction in Strasbourg.