Rooting deforestation out of Europe’s supply chains

The EU will soon require that certain agricultural commodities imported into Europe have not caused deforestation.  The Deforestation Regulation which covers cattle, cocoa, coffee, palm oil, soya and wood, is progressing through its approval stages.  Significantly, there is a realisation that requirements for oversight, audit and verification by the authorities must be robust if the new regulation is to be effective. 

These commodities have long been recognised as a driving force for deforestation, land-grabbing and even human rights abuses.  In response, multi-stakeholder sustainability schemes have been developed to weed out bad actors. But these schemes are voluntary. Some of the biggest international food companies won’t pay the extra to buy sustainably certified raw materials, so the EU is stepping in, with the effect that some aspects of the certification process will be enshrined in regulation. Does this mean that sustainability schemes will become redundant?

The new regulation, in its present state, has detailed requirements for both commodities and products which contain them, to be tracked right back to the plot of land from which they were produced. Article 9 stipulates that geo-localisation coordinates of this land, as well as the date of production, must be recorded and made available to the authorities.  The individual plots of land must have been deforestation free since December 31, 2020, and there is an extensive list of new definitions to close any potential loopholes. The images and positioning offered by the European satellite positioning services EGNOS/Galileo and Copernicus are a recommended way to check on whether the plot was forest, prior to conversion to agricultural land.  Sustainability schemes for agricultural products have a similar focus on land status and ISCC, one of the largest, recognises GRAS, a satellite-based tool that provides geo-referenced information on land use change and other sustainability related data. 

However, there are important differences between the measures proposed by the European Commission and the requirements of a sustainability scheme, which mean that the latter will still have a key role to play. By adapting to the new requirements, they could also offer additional services to members.

The new regulation takes a risk-based approach, so it leaves the decisions on what measures are necessary, to operators. Sustainability schemes, in contrast, insist on a certain level of checks for all consignments. External auditing is recommended but not required, unlike sustainability schemes. The oversight will be left to EU Member States who must ensure that the annual checks carried out by their competent authorities cover at least 15% of the operators and 15% of the commodity volumes coming into Europe from high-risk countries. Sustainability Schemes have a single oversight body.

The Deforestation Regulation does not really deal with the problem of opaque supply chains.  I have reported before that storage, transport and processing of commodities involve mixing of materials from different sources, so, it will be extremely difficult for operators to trace an individual consignment back to its origin. Article 10 requires that operators assess and mitigate any risk of ‘mixing with products of unknown origin or produced in areas where deforestation or forest degradation has occurred or is occurring’ but says little or nothing about what to do. In fact, the only ways operators can mitigate this risk, are either to control the whole supply chain, or to purchase only commodities certified by a sustainability scheme with full traceability requirements. 

Traders who organise collection, shipping and importation often own the site where commodities from different sources are first mixed. Such traders figure prominently in the new regulation. They will be included in the 15% selected for audit by the authorities. Large traders should now be deciding how they will cope with the requirements of the regulation. It is likely that they will need to keep European shipments segregated from material destined for other countries who have no controls. 

The supply chain risks to companies, who will have to pay the penalties for non-compliance, may tip the balance more in favour of sustainability certification. To take advantage of any new opportunities, schemes could develop a new standard with a de-forestation cut-off date of 31st December 2020, to offer alongside their existing standards, which usually have a much earlier cut-off date.  This would provide a useful extra compliance option to existing members.  So, by branching out, existing sustainability schemes can do even more towards preserving the world’s forests. 

Published: 26 July 22

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