By Marcelo Inacio da Cunha and George T. Mudimu
It is undisputable that addressing deforestation, biodiversity loss, and climate change requires a collectively effort globally. Although the private sector – as a key element of forest and agricultural value chains – is far from doing enough reduce its share in deforestation, it could serve as a paramount lever if pushed towards effectively halting the expansion of the agricultural frontier into forests.
With its legislative lever, the European Union (EU) has gone ahead and adopted the EU Deforestation Regulation (EUDR). It is targeted at deforestation-free forest and agricultural commodity chains including cattle, wood, cocoa, soy, palm oil, coffee and rubber.
The regulation came into force on 30 June 2023, and is to be applied from 30 December 2025 by large operators and traders, pending approval by the EU Council of this new EU Commission proposed date. Small and micro businesses would need to comply with the EUDR by 30 June 2026.
The regulation mandates that the relevant raw materials and products may only be imported into, or exported from the EU, or placed on the EU market, if they are not linked to deforestation or forest degradation. Exporters or suppliers who do not comply with this regulation risk having their export licenses revoked.
Originally, the EUDR was set to finds its application as of end of 2024, yet responding to concerns raised by traders and operators, non-EU countries and EU member states that they would not be able to fully comply with the regulation, the EUDR was postponed by one year. However, some of the concerns remain:
EU challenges
- Complex value chains: In enforcing the EUDR, traceability has to be ensured across global and complex supply chains. In this process, operators must gather and verify comprehensive data, including geolocation information, on land and production sites. This information must be provided before the goods or products are exported into Europe. Prospects of getting concrete and accurate information on time may be a hurdle given the complexity of global supply chains, asymmetries in geographic information systems (GIS) and georeferenced information stemming from asymmetric technical capacities, and the accessibility of upstream chain-producing actors who are sometimes located in remote places in the production zones.
- Enforcement and compliance: To ensure compliance to these regulations, EU member states have to establish effective systems for monitoring and enforcement, including conducting annual checks on a percentage of operators and products. This requires substantial administrative resources and coordination, and also support from production countries.
- Data management and exchange: Developing an electronic interface for data transmission between national customs systems and the EU information system at the latest by 2025 comes with financial and logistical challenges.
Non-EU country challenges
- Governance and enforcement issues: Numerous producer countries struggle with weak governance and enforcement, which can hinder “compliance” with EUDR requirements.
- Economic impact on smallholders: Smallholders in producer countries may be “excluded” from supply chains, especially those governed by a lead firm or trader which/who may want to be supplied only by large upstream actors who do not face challenges in investing in traceability for transparency within the frame of compliance and due diligence requirements of the. Ensuring their inclusion in sustainable supply chains without imposing undue burdens is crucial. In addition, adhering to this new EU regulation will result in costs for both the so-called producer and consumer countries, a cost which most likely producers of the goods will factor in on the cost of goods thereby to an extent triggering product price increases.
Points of critique
The fact that the EUDR was adopted and entered into force in 2023 is already a positive step. However, in the design of the EUDR, partner countries from the so-called Global South where most EUDR-relevant produce and raw materials come from, claim to have not been consulted enough in this process. They fear that smallholders will be partially replaced by larger suppliers of raw materials and products as a potentially unintended implication of the EUDR. Further, there is a tendency of high-risk areas in partner countries to be left behind as traders tend to minimize deforestation-risk and required burden of due-diligence statements for entering product to the EU by shifting their procurement focus from high-risk to lower risk areas.
Moreover, the regulation mandates robust monitoring and enforcement mechanisms, including checks on traders, operators and product supply. EU member states are to ensure compliance and address non-compliance through corrective actions and penalties. Traders have to submit due diligence statements proving up to the value chain node that interfaces with customs at the EU borders that the product is deforestation-free. This provokes not only a technical challenge but also an exposition one, as small-scale producers may face risks of land appropriation by more powerful actors in rural areas who can claim land property due to lack of papers of landless then.
The EU poses such requirements of geolocation which may have negative implications for vulnerable upstream value chain actors and yet need to be provided. Such asymmetries are exacerbated by the fact that more powerful and capitalized downstream value chain actors extract the data they need for EUDR compliance from the small-scale producers and suppliers. These not only disproportionately face costs without being provided compatible benefits but are also properly being informed of what happens with data they provide.
Looking ahead
With the new European Commission, the EU is further aiming to strengthen cooperation with producer countries to address deforestation’s root causes and support sustainable production practices.
It further includes structured trust-building; and cooperation arrangements and joint roadmaps towards environmentally sound value chains based on just transitions. It is key for the new EU representatives to prioritise partnerships with the producer countries which are mostly low- and middle-income countries. These partnerships will ensure secure supplies of raw materials and also provide opportunities for value addition in partner countries, while producing co-benefits in the realm of inclusive and sustainable rural “development”.
The EU is committed to assisting smallholders through capacity-building initiatives and technical assistance to enable them to comply with the EUDR. This includes raising awareness, disseminating information, and conducting workshops in affected countries. This support is key and needs to be expanded, while being context-sensitive and tailored to smallholder needs for them not to be left behind by falling off lead-firm-governed value chains with prevailing large-scale suppliers and exclusion of such small-scale suppliers.
Conclusion
The European Commission is now proactively reaching out to main producer countries, which is key for “buy in” by countries where most EUDR-relevant raw materials and products come from. If the goal with the EUDR is to effectively address deforestation in the EU and elsewhere – beyond protecting consumers in the EU from “importing deforestation to their plates” – then the following are crucial: (i) effective and inclusive implementation which at the same time supports smallholders so they are included in the relevant commodity chains by large powerful downstream value-chain actors; (ii) robust enforcement; and (iii) strong international cooperation on an equal footing between the EU and partner countries.
Marcelo Inacio da Cunha is a scientist at CIFOR-ICRAF
George T. Mudimu is a researcher at The German Institute of Development and Sustainability (IDOS), Bonn
Image: Geospatial John under a creative commons licence on Wikimedia