The proposals were first made earlier this year by a panel of business leaders led by Sir Ian Cheshire that was commissioned by Defra to examine how the U.K. can improve its land-use strategy.
However, Defra rejected a call by the panel for the financial sector to also be covered by a similar mandatory due diligence obligation, in order to avoid their lending and investments funding deforestation.
Instead, the rules will only apply to “a relatively small number of larger businesses” who are most likely to impact on producers, a spokeswoman for the department said.
As the host of the next United Nations global climate summit, known as COP26, the U.K. is also seeking to show environmental leadership in the international arena.
The policy may pile further pressure on the Brazilian government, which as already faced calls from institutional investors managing about $3.7 trillion to abandon a proposal they say will add to deforestation and violate the rights of indigenous groups in the Amazon.
Deforestation accounts for 11% of greenhouse gases, and the vast majority of it is caused by the production of agricultural commodities, Defra said. In some countries, as much of 90% of forests are cut down illegally.
In the U.K., supermarkets including Tesco Plc have come under renewed pressure to be more transparent about their supply chains.
However, campaigners at Greenpeace said the new government plan is “seriously flawed” as local environmental laws can be inadequate, particularly in Brazil.
“There is also nothing to address the fact that some commodity producers may have one ‘sustainable’ line but continue to destroy forests elsewhere which just shifts the problem into someone else’s backyard,” said Elena Polisano, forests campaigner at Greenpeace U.K.