Deforestation-Free Supply Chains

Deforestation-free supply chains

BACKGROUND

Wide-scale unrestrained deforestation and forest degradation are major threats to people and the planet. The conversion of forests and natural ecosystems to agricultural land is responsible for the vast majority of this destruction.

To address the twin climate and biodiversity crises, meet the SDGs and Paris Agreement goals, and protect the rights and livelihoods of thousands of smallholders and local communities who rely on forest resources, it is critical to keep forests healthy and standing.

On the 17th of November 2021, the European Commission published its proposal for an EU Regulation on deforestation-free products with the aim to  prevent the export from as well as placing and making available on the EU market of a selection of commodities and derived products, including from smallholder intensive sectors such as cocoa, rubber or coffee, in case they are found to be linked with deforestation or forest degradation.

End of June 2023, the EU Regulation on deforestation-free products has officially entered into force, with some of its provisions (e.g., due diligence obligations) only becoming applicable 18 to 24 months thereafter depending on the size of the company.

The Regulation requests companies to verify through a due diligence process that the products they intend to place on the EU market are both legal, as per the laws of the country of origins of the product, and deforestation-free, according to the definitions laid down by the EU Regulation.

This demand-side regulation will help the European Commission to achieve priority one of its 2019 Communication on Stepping up EU Action to Protect and Restore the World’s Forests. Furthermore, the final version of the Regulation commits the European Commission to develop a strategic framework of partnerships with partner countries. As outlined in the text of the EUDR, partnerships and cooperation mechanisms shall help addressing the root causes of deforestation and allow for the full participation of all stakeholders, including civil society, indigenous peoples, local communities and smallholders. Partnerships and cooperation shall also support or initiate inclusive and participatory dialogue towards national legal and governance reform processes to enhance forest governance and address domestic factors contributing to deforestation.

FTAO’S VIEWS

The FTAO has warmly welcomed and supported the process of setting up an ambitious EU legislative tool that can effectively contribute to decouple agricultural production and deforestation around the world. As a major importer and consumer of forest risk commodities (FERC), the EU bears an important responsibility. Its legal framework and market incentives can be decisive to curb deforestation and foster instead sustainable and fair production patterns.

Addressing the complex issue of deforestation, including its root causes, requires however an EU legislation that accommodates to the specific players and commodities involved. Smallholders are key constituents of some of the supply chains that will be covered by the EU Regulation. They account for 70 to 90 percent of global cocoa and coffee production, and form the backbone of the economy in many partner countries.

While the new legislative framework does not per se foresee any obligations for non-EU smallholder farmers, unless they export directly to the EU (in such a case they are considered as economic operators falling within the scope of the legislation), the Regulation puts in place a whole new set of traceability requirements for companies buying commodities produced by smallholder farmers with the intention to export the latter to the EU market. Only products meeting the new market access requirements laid down by the EU Regulation will be allowed to enter and be sold on the EU market – it is expected that some of these requirements will de facto trickle down to or at least have a non-negligible impact on smallholders and the cooperatives’ that companies source from.

In this context, we are convinced that particular attention should be given to the capacity of these down-stream supply chains actors to comply with new EU Regulation.

It is no longer necessary to demonstrate that environmental and socio-economic sustainability are two sides of the same coin. This is especially true in this case: If smallholders are unable to meet or demonstrate compliance with new EU market access requirements, smallholders will be de facto pushed out of the EU market while perpetuating unsustainable farming practices, selling their products to less regarding consumer markets or move to non-regulated crops, activities or ecosystems with an adverse impact on both nature and people. Furthermore, purchasers might decide it is less risky and more efficient to buy from large-scale producers, who have been better equipped to meet new market criteria quickly.

To avoid this, we are pleading to couple strong environmental requirements with concrete tools to ensure a just transition for smallholders. This is the precondition for the new Regulation to achieve its full potential, namely clean up EU supply chains while effectively reducing deforestation rates on the ground.

This should be done, among others, by:

  • Recognising the rights and roles of smallholders and local communities as part of the systemic solution to tackle global deforestation and forest degradation.
  • Ensuring a fair share of compliance costs among supply chains actors, meaning the heaviest shoulder should carry the heaviest burden
  • Ensuring smallholder inclusive due diligence processes for companies, that foresee meaningful engagement and consultation with local stakeholders and support to smallholders from whom companies source towards greater compliance levels, including through a fair remuneration that would effectively cover the cost of sustainable and deforestation-free farming practices.
  • Developing of a concrete set of technical, legal and financial support measures for smallholders and cooperatives adapted to local realities for them to be able to meet the new EU market access requirements
  • Developing a coherent and time-bound EU framework strategy for Partnerships with producer countries, linked to efficient economic and trade incentives.
  • Reinforced involvement of smallholders in protecting and restoring forests.

For more details, see our diverse publications below.

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