Biodiversity: The New Rules & Realities of Ingredient SourcingFebruary 2012

Innovation from trade in natural ingredients

A history of innovation from trade

Especially in the personal care industry

● According to the Union for Ethical BioTrade, the cosmetics sector is one of the leading sectors when it comes to patent activity based on natural ingredients. Top patent assignees for cosmetics and perfumes involving extracts and ingredients:

● Unilever● Beiersdorf● Colgate● J&J

● Firmenich ● Givaudan● Avon● Pola

● According to Kline & Company the natural, organic market is one of the fastest-growing segments of the personal care products industry.

● L’Oreal● P&G● Kao● Shiseido

While biodiverse governments seek to counter alleged “biopiracy”

“The African Centre for Biosafety (ACB), a non- profit activist organization based in South Africa,has today released a report documenting 7 new cases of suspected biopiracy … The patent claimants include Christian Dior…”

Consumers are increasingly tuned in

United States & Europe● 23% of consumers have heard of biopiracy● 81% of personal care and cosmetics consumers say

they would boycott a brand engaged in unethical sourcing

Brazil● 73% of consumers have heard of biopiracy● 94% of personal care and cosmetics consumers say

they would boycott a brand engaged in unethical sourcing

Source: Union for Ethical BioTrade.

Countries mean business and are imposing serious fines

… including patent invalidation and even imprisonment

IndiaImprisonment for up to five years, fines, and/or invalidation of your patent if you apply for a patent – IN OR EVEN OUTSIDE INDIA – using any research based on biological resources obtained from India without previous approval by the National Biodiversity Authority.

BrazilFines, suspension of the sale of products, closing of establishments, suspension or cancellation of the patent/licenses

United Nations Convention on Biological Diversity

“We need equitable benefit sharing. The countries of origin – in which the majority of our planet biodiversity can be found – want to get something back … It is a matter of principle. The industrialized world has to recognize that the yields from biological resources have to be shared with those who have safeguarded them to this day for mankind.” – Germany’s Environment Minister Sigmar Gabriel, Chair of the Ninth Meeting of the Conference of the Parties

“The idea is to give access to genetic resources in, say, the Amazon or Congo to cosmetics companies, pharmaceuticals, agro-biodiversity companies, to allow them to use the genetic resources as they have been doing, but to share the benefit arising from the commercialisation of the genetic resources with the owners of biodiversity – the indigenous people, the local communities.”- Executive Secretary of the UN Convention on Biological Diversity Ahmed Djoghlaf

United Nations Convention on Biological Diversity

Article 15: “Access to Genetic Resources”

● Countries have sovereign rights over their natural resources, including genetic resources found within their borders

● Access to genetic resources shall be on mutually agreed terms and subject to prior informed consent of the country providing the resources

● Providing countries should obtain benefits, including commercial benefits, from products developed using resources obtained within its borders. Benefit-sharing should be on mutually agreed terms.

Where national laws exist, comply with them

Source: CBD Secretariat website “ABS Measures Search Page” http://www.cbd.int/abs/measures/

Nagoya Protocol to the Convention on Biological Diversity

● Adopted in October 2010● Establishes international norms and

a framework for regulating how researchers and commercial companies may obtain access to genetic resources and traditional knowledge associated with genetic resources

● Establishes general obligations on how the benefits arising from the utilization of such resources and knowledge should be shared

● 92 signatories and 2 ratifications thus far

Key obligations:● Parties required to ensure that access to genetic resources for

their utilization be subject to prior informed consent of the Party providing such resources that is the country of origin (or a party that has acquired the genetic resources in accordance with the CBD ). This is to be done with the prior informed consent or approval and involvement of indigenous and local groups.

● Parties required to issue at the time of access a permit or its equivalent as evidence of the decision to grant prior informed consent and of the establishment of mutually agreed terms, and notify the Access and Benefit-sharing Clearing-House (where it shall constitute an internationally recognized certificate of compliance).

Nagoya Protocol to the Convention on Biological Diversity

Key obligations (continued):● Parties required to ensure that benefits derived from the

utilization of genetic resources, as well as subsequent applications and commercialization, shall be shared in a fair and equitable way with the Party providing such resources that is the country of origin (or a Party that has acquired the genetic resources in accordance with the CBD). Such sharing is to be upon mutually agreed terms. The same holds for benefits arising from the utilization of traditional knowledge associated with genetic resources.

Nagoya Protocol to the Convention on Biological Diversity

Key obligations (continued):● Parties are required to take measures to address situations of

non-compliance. For example, Parties are required to designate checkpoints for this purpose, though they are free to select those checkpoints that are best suited to national circumstances.

○ Note: Among the checkpoints Parties are considering are: patent offices (at the point when a patent is filed), customs (at the point of raw material export and/or final product import), and product approval.

Nagoya Protocol to the Convention on Biological Diversity

What do the requirements cover? What is the scope?

● Scope differs country to country. In the case of the countries with domestic ABS regimes in place, consult those laws and regulations directly.

● Guidance from Nagoya on the definition of “utilization of genetic resources” :

to conduct research and development on the genetic and/or biochemical composition of genetic resources (defined as genetic material of actual or potential value), including through the application of biotechnology (defined as any technological application that uses biological systems, living organisms, or derivatives thereof, to make or modify products or processes for specific use).

Commonly asked questions

What do the requirements cover? What is the scope?

● Scope differs country to country. In the case of the countries with domestic ABS regimes in place, consult those laws and regulations directly.

● Guidance from Nagoya on the definition of “utilization of genetic resources” :

to conduct research and development on the genetic and/or biochemical composition of genetic resources (defined as genetic material of actual or potential value), including through the application of biotechnology (defined as any technological application that uses biological systems, living organisms, or derivatives thereof, to make or modify products or processes for specific use).

Commonly asked questions

Are commodities covered?

● Scope differs country to country. In the case of the countries with domestic ABS regimes in place, consult those laws and regulations directly.

● Guidance from Nagoya on commodities: None.

Commonly asked questions

When did or will the requirements take effect?

● Begin the process now of instituting internal policies and procedures to ensure compliance with existing domestic laws where they exist

● Seek compliance with the CBD principles where domestic laws do not exist

● Prepare to comply with domestic laws as they come on line or are revised

Commonly asked questions

Are requirements retroactive?

● In the case of the countries with domestic ABS regimes in place, consult those laws and regulations directly.

● Guidance from Nagoya on retroactivity: None.

Commonly asked questions

Company level: Policies and procedures

● What can you do to HELP PROTECT YOUR CUSTOMERS – AND ADD VALUE?

○ KNOW THE ANSWERS TO THESE QUESTIONS.■ Was prior informed consent obtained from the

country providing the resources?■ Were ingredients accessed under mutually agreed

terms? What terms apply to third parties, if any?■ Was there -- is there -- fair and equitable benefit

sharing?■ Will this material put your customer at risk of

allegations of biopiracy?■ What is the impact of sourcing this material on

biodiversity?

Your customers’ key points of ABS-related risk

Company level: Policies and procedures

● Transparency and traceability are here to stay

“Buyers unravel the ethics behind the label” -- Financial Times, September 15, 2010

“…traceability will be a key challenge in corporate reporting over the next decade…” – Global Reporting Initiative, May 2010

“Consumers, governments, and companies are demanding details about the … sources that deliver the goods.” -- Harvard Business Review, October, 2010

Patricia Wupwu@crowell.comTel: + 1 202 624 2963