New Proposed EU Law to Tackle Global Deforestation Lacks Ambition on Finance and Human Rights

The European Commission's long-awaited draft law designed to curb EU-driven global deforestation is an important step but contains serious gaps and loopholes which risk limiting its impact.

The proposed law, published today, aims to prevent products linked to deforestation and forest degradation being consumed in the EU, such as soy, beef, palm oil, timber, coffee and cocoa by requiring companies and traders to check and mitigate such risks in their supply chains.

The situation is urgent, with deforestation a key driver of the climate crisis - if deforestation were a country, it would rank third in CO2 emissions, after China and the US. The EU has an outsized role in global deforestation in international trade.

Key measures in the proposal include:

• An explicit focus on environmental sustainability of products on the EU market, which doesn't rely on varying national definitions of "legal" or "illegal" deforestation and instead includes all deforestation.
• Due diligence requirement: businesses would be required to show that the risks of deforestation and forest degradation have been mitigated prior to placing a product or commodity on to the EU market.
• Mandatory traceability requirements including geo-localisation of the point of origin of the product, thus allowing identification of where commodities were harvested and produce.
• Enforcement mechanisms, including sanctions to ensure that those responsible for not complying with the law are held accountable.

The Commission has also listened to the evidence and not relied on certification schemes that would have given a green lane for industries to sidestep due diligence obligations.

However, the current proposal contains some critical loopholes, which risk undermining the proposed law. For the regulation to be an effective tool to combat the climate and ecological emergencies we are facing, the European Parliament and Council must address the following problems:

• Human rights and protections for Indigenous Peoples. The draft fails to respect international human rights standards and does not mention protection for Indigenous Peoples' rights and the obligation for operators to obtain their Free, Prior and Informed Consent (FPIC). [1]
• No rules for the financial sector. The draft law does not cover EU financial institutions and suggests that other existing EU tools are "well suited" to address the financing that goes into deforestation. However, those tools have no accountability mechanisms to prevent banks or investors to continuously making problematic deals with harmful agribusinesses. Global Witness's recent investigation, Deforestation Dividends, showed how EU banks and investors have raked in EUR401 million in deforestation-linked revenues off the back of EUR30.6 billion worth of deals with agribusiness companies linked to the destruction of climate-critical forests and human rights abuses. [2]
• No redress for affected communities. The law fails to include mechanisms for communities harmed by non-compliance with the law to claim redress and remedy. The law should include civil liability provisions so that communities whose rights have been violated can bring legal claims against the businesses responsible.
• Omission of key commodities linked to deforestation, such as rubber and maize.
• Exclusion of deforestation in savannahs and peatlands, which could lead to deforestation pressure shifting away from forests and towards these other critical ecosystems.

The publication of the European Commission's legislative proposal comes in the wake of COP26, where global leaders, including the EU, made pledges to stop deforestation. As Global Witness pointed out, many of these pledges lack any accountability and risk amounting to little more than a reiteration of previous failed commitments. The EU had already made promises to stop deforestation with the 2014 New York Declaration on Forests and the 2020 Aichi biodiversity targets, none of which it has delivered on.

In this context, the EU has a unique opportunity to be a global leader and back up its pledges on deforestation with a strong law and there is broad-based support for this. The European Parliament has previously stressed the importance of the inclusion of the finance sector and human rights protections, including for Indigenous Peoples and local communities, in the EU deforestation law. Lots of big agribusinesses and supermarkets have also backed a robust EU deforestation law, and last year almost 1.2 million people told the European Commission they want strong rules to end the EU's complicity in deforestation, including for finance. Civil society has also called on the European Commission to ensure the law is fit for purpose. to ensure the law is fit for purpose [3].

Giulia Bondi, EU Campaigner on Forests at Global Witness, said:

"Just days after COP26, the European Commission has finally set out how it intends to end the EU's complicity in the destruction of the world's forests. However, despite some good elements, the new proposed law isn't ambitious enough and does not heed the calls from businesses, civil society and the public for robust rules to address the EU's consumption and financing of forest-risk commodities.

"The European Parliament and EU member states must now strengthen this law to uphold the rights of Indigenous Peoples and local communities, stop EU financiers bankrolling and profiting from global deforestation and associated abuses, and include key commodities like rubber and maize.

"We cannot tackle the climate crisis without stopping deforestation. If the current gaps and loopholes in the European Commission's proposal are not addressed, it would be a huge missed opportunity for the EU to show global environmental leadership, deliver on the objectives of the European Green Deal and encourage other jurisdictions to follow suit. It's time for the EU to back up its rhetoric with stronger action and put people before profit."