Challenges and opportunities of the EU regulation on deforestation-free products
The upcoming EU regulation on deforestation-free products (EUDR) requires operators and traders to conduct due diligence to provide traceable information and proof that the products they place on the EU market do not originate from land deforested after 31 December 2020 and comply with laws in the countries of origin.
Since 2022, SSNUP impact investors have been providing their agribusiness partners in developing countries with technical assistance to comply with this new regulation. Together with sectoral experts and value chain actors, they shared their experience with the resulting challenges and opportunities for agribusinesses and smallholder farmers at an online workshop on 29 June 2024.
Data collection challenges
The workshop participants agreed that EUDR will primarily be a challenge for smallholder cocoa and coffee farmers in remote areas. Their operating models vary widely, from well-organised cooperatives to individuals relying on many middlemen. Less-organised smallholders in loose value chains will likely struggle most with compliance.
Even if existing sustainability certification schemes provide a helpful basis for EUDR compliance, all exporters will need a dedicated EUDR management system. An open and interoperable system that enhances collaboration between value chain actors is recommended to enable the integration of various data sources. The resulting cost of compliance is estimated at about 1% or 2% of a product’s price and should ideally be passed on to consumers.
The event also provided an opportunity to reflect on how to facilitate EUDR compliance processes through collaboration between value chain actors, including the alignment of management systems and support for agribusinesses from sectoral associations.
Sustainability opportunities
The challenging, time-consuming and costly compliance risks excluding smallholders in remote areas from the profitable EU market. However, upstream value chain actors are encouraged to make use of the EUDR requirements to implement a broader sustainability approach, ensuring all producers can farm sustainably without deforestation.
EUDR offers an opportunity to significantly change supply chain relationships by incentivising companies to collaborate on compliance and land use rights, thereby empowering smallholder farmers.