Our key takeaway: The European Parliament is taking deliberate steps to ensure that human rights are incorporated in the European Commission’s legislative proposal for an EU Deforestation regulation. The amended text—adopted earlier this week by the European Parliament Committee on the Environment, Public Health and Food Safety—clearly points out the links between human rights and a healthy deforestation-free environment, reflecting an emerging global understanding. It would expect companies and financial institutions to conduct due diligence accounting for commodity-driven deforestation’s impacts on human rights, including indigenous rights, and consider the right to remedy, in order to gain access to EU markets.
On 13 September 2022, the Committee on the Environment, Public Health and Food Safety of the European Parliament voted to adopt changes to the European Commission’s legislative proposal aimed at curbing deforestation and forest degradation driven by specific commodities, including cattle, cocoa, palm oil, soy and wood (tabled on 17 November 2021). The full text of the proposal, including amendments can be found here; for an overview of the proposal and its scope, plus a summary of external stakeholder views, refer to the European Parliamentary Research Service’s briefing. The amended text of the EU Deforestation regulation proposal has now been adopted by the European Parliament in plenary for further negotiation with EU member states in the European Council, who adopted their negotiating position (general approach) in June of this year. The law - in its final text - will be approved after these discussions and include any amendments made by the Council. Some key changes include:
- Centering of human rights and indigenous rights alongside environmental considerations: Some of the most important amendments to the proposed legislation are explicit references to human rights and indigenous rights as core to the issue of deforestation—both as a means of preventing deforestation and as a matter of the fundamental interlinkage between human rights and the environment. For example, the amended Recital 29 emphasises that the regulation should “promote deforestation-free supply chains, as well as to promote the protection of human rights, and the rights of indigenous peoples and local communities, both in the Union and in third countries.” [Emphasis is original, denoting changed text]. The proposal has also added Recital 29a: “When assessing the risk of noncompliance of relevant commodities and products intended to be placed on or exported from the Union market with the requirements of this Regulation, violations of human rights that are associated to deforestation, forest degradation and forest conversion, including rights of indigenous peoples, local communities and customary tenure rights holders, should be taken into account.” This accounting for human rights within the issue of deforestation is also echoed in a new Recital 38a, which points out that “There is a direct link between deforestation and the conversion of ecosystems and violations of human rights, in particular those of indigenous peoples and local communities. Special attention should be paid to their needs and their full inclusion in the implementation of this Regulation.” The text goes on to specify that international standards should also be promoted, including: the UN Declaration on the Rights of Indigenous Peoples, customary tenure rights, the right to free, prior and informed consent (FPIC), labour rights as enshrined in International Labour Organisation fundamental conventions, women’s rights, the rights to environmental protection and the right to defend human rights and the environment. What’s more, the amended legislative proposal (Recital 40b) adds in the right to an effective remedy: “The right to an effective remedy is an internationally recognised human right, … and Member States should therefore ensure that members of the public concerned or affected by a violation of this Regulation have proper access to an effective remedy.”
- Inclusion of financial institutions within legislation’s scope: Recital 27a notes that “Financial institutions should be covered by this Regulation as their services could lead to support activities linked directly or indirectly to deforestation, forest degradation and forest conversion. All banking, investment and insurance activities of financial institutions should therefore be included in the scope of this Regulation in order to prevent them supporting projects directly or indirectly linked to deforestation, forest degradation or forest conversion.” A new Article 3a specifies the scope of responsibility for financial institutions to conduct due diligence: “Financial institutions shall provide financial services to customers only when the financial institutions conclude that there is no more than a negligible risk that the services in question potentially provide support directly or indirectly to activities leading to deforestation, forest degradation or forest conversion.”
- Heightened due diligence expectations of companies: Recital 33 calls for a fourth due diligence step for companies in scope to demonstrate their compliance with the law, adding “reporting obligations” to “information requirements, risk assessment and risk mitigation measures.” Under this addition, companies would be expected to publicly report on their due diligence system and steps undertaken on an annual basis. In addition, companies must be able to show that not only has the country of production complied with the legality requirement, but also “with international human rights law, including the right to prior, free and informed consent." For smallholder companies, who may struggle to apply assurance mechanisms like geolocation technology, “guidance as well as technical and financial support should be provided where relevant.” Further, the amended proposal clarifies that the deforestation regulation should align with the forthcoming EU Directive on Corporate Sustainability Due Diligence, and asks that “[t]he Commission should issue clear and easy to understand guidelines to help operators and traders, in particular SMEs, to comply with the requirements of this Regulation with the aim to minimise the administrative and financial burden. The guidelines should also support operators to fulfil their due diligence requirements in an effective manner when they fall under the scope of other overlapping legislative instruments setting out other due diligence requirements.”
