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. The upcoming EU Regulation aims 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 cocoa and coffee, if they are associated with deforestation or forest degradation.

The upcoming Regulation will require economic operators to undertake a three-steps due diligence process to assess whether their products may be linked to deforestation.

This demand-side regulation would 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 Commission has also committed to developing supply-side measures to support producer countries in their transition towards deforestation-free supply chains. The proposal is currently under revision by the Council and the European Parliament.

FTAO’S VIEWS

FTAO warmly welcomes the process of setting up an ambitious EU legislative tool that can effectively 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 large-scale actors cause the majority of deforestation and forest degradation, a portion of it is smallholder driven, with underlying causes often directly or indirectly linked to poverty, poor land, and forest governance, lack of access to land, information, finance mechanisms, markets, etc. On the other hand, smallholders continue to suffer the consequences of deforestation and climate change, which in turn accelerates the negative cycle of structural poverty.

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 or activities. 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 reinforce the current proposal in order to ensure a just transition for smallholders – while not lowering the environmental requirements bar. This is the precondition for the upcoming Regulation to achieve its full potential, namely clean up EU supply chains while effectively reducing deforestation on the ground.

This should be done, among others, by:

  • Recognising the rights and roles of smallholders and local communities as part of a 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 requirements for companies, which would require them to meaningfully engage with local stakeholders and support the smallholders from whom they source towards greater compliance, including through a fair remuneration that would effectively cover the cost of sustainable farming practices.
  • A coherent and time-bound EU framework strategy for Partnerships with producer countries, linked to diverse economic and trade incentives.
  • Reinforced involvement of smallholders in protecting and restoring forests.

For more details, see our recommendations paper here.

Furthermore, as requested by 50 CSOs in an open letter, we believe the European Commission should conduct a needs assessment as soon as possible – without delaying the legislative process – that would evaluate, among other things, the costs and capacities for smallholders to comply with new EU market access requirements, identify which requirements are likely to pose specific challenges within relevant producer countries and sectors, and, on this basis, propose accompanying measures to support an effective implementation of the regulation, before it enters into force.

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