New EU rules for deforestation-free products: Companies will be ‘monitored and held accountable’

By Katy Askew

- Last updated on GMT

Will Europe's new deforestation regulation breach WTO rules? / Pic: GettyImages-Stockbyte
Will Europe's new deforestation regulation breach WTO rules? / Pic: GettyImages-Stockbyte

Related tags deforestation

The European Parliament has said companies supplying products that risk contributing to deforestation will be ‘monitored and held accountable’ through new due diligence regulations. But farming groups have raised concerns that the new regulation might not be WTO-compliant.

The regulation sets mandatory due diligence rules for companies selling products in the EU that are ‘associated with deforestation and forest degradation’. It targets six commodities - beef, wood, palm oil, soya, coffee and cocoa – and products derived from them such as chocolate.

Businesses will be required to collect the geographic coordinates where commodities have been produced. “This strict traceability is meant to ensure that only deforestation-free products enter the EU market.”

In preventing deforestation and forest degradation linked to products sold on the European market, European regulators said this would cut carbon emissions linked to EU consumption by ‘at least’ 31.9m metric tons per year.

“The initiative is groundbreaking, showing that the EU wants to lead by example: it takes a decisive step forward by moving beyond illegal deforestation to address any deforestation driven by agricultural expansion to produce the commodities in the scope of the regulation,”​ the European Commission said in a statement.

“Companies placing the relevant commodities and products on the market will be required to put in place and implement due diligence systems to prevent the placing on the EU market of products linked to deforestation. They will be monitored and held accountable by enforcing authorities if they fail to comply with the requirements of the Regulation,”​ the EC stressed.

How will it work? 

Companies will be required to submit a statement to a European information system confirming that they have successfully exercised due diligence and that the products they place on the market are compliant with EU rules. This statement will also provide information for enforcement monitoring, namely the geographical coordinates of the farm or plantation where the commodities were grown.

Companies will be required to go through three steps. Firstly, they will need to ensure access to information on: the commodity, quantity, supplier, country of origin and geographic coordinates. Secondly, companies will need to use geolocation information to evaluate the risk in their supply chain. And finally, businesses will need to take ‘adequate and proportionate mitigation measures’.

Providing enforcement authorities with geolocation data will be crucial to confirm whether products are deforestation-free because they will be able to cross-reference this against land-use data. “Combining geolocation with remote monitoring via satellite images is expected to boost the effectiveness of the Regulation,”​ the EC said.

A benchmarking system will also be introduced to flag areas of greater risk. This will be operated by the Commission and will identify countries as presenting a ‘low, standard or high risk’ of having links to deforestation. “Obligations for operators and authorities will vary according to the level of risk of the country or region of production, with simplified due diligence duties for products coming from low-risk and enhanced scrutiny for high-risk areas.”

The need for collaboration

European regulators have also committed to work with partner countries, including with governments, academia, the private sector and civil society, to address deforestation and forest degradation. They indicated an intent to develop international bilateral and multilateral discussion on policies and actions to halt deforestation.

According to EuroCommerce, the trade body representing European retailers, this level of collaboration will be crucial to the success of the regulation.

“In the week after the agreement at COP 26 and as Europe imports and consumes close to a third of the globally traded agricultural commodities, it seems relevant that the Commission comes forward with a proposal to help business in avoiding contributing to further deforestation and climate change. Only with cooperation between private actors of the supply chain, local action by government in producing countries and harmonized enforcement of current and future regulations will we succeed in making a concrete and real impact on deforestation,”​ said EuroCommerce Director General Christel Delberghe.

Controversy over benchmarking

EuroCommerce stressed that the retail industry is committed to ‘play its part’ in combatting deforestation. However, the organization also stressed retailers are part of a ‘very complex supply chain’ and require ‘help and support’ to identify ‘where the risks of deforestation are’.

In this regard, Europe’s benchmarking proposals will prove valuable, EuroCommerce predicted. “The proposal for benchmarking third-country regions will help all in the supply chain in identifying areas of risk, and will be a major help in setting priorities in the due diligence mechanism and establishing the right policies and tools to target deforestation,”​ the industry body suggested.

However, there was disagreement at the other end of the supply chain. European farmer associations Copa and Cogeca expressed support for the initiative but stressed that Europe cannot take unilateral action – the bloc needs to remain compliant with WTO rules.

“It is essential for the European farming sector that the EU’s political ambition on this topic is fully in line with the ambitions on fair trade and fair competition and with the current legislation.

“It is necessary to underline that as a member of WTO, the EU has to fully respect the WTO rules and ensure an open, transparent and equitable multilateral trading system. It is in this regard that the current proposal on the benchmarking system categorizing countries is incompatible with these rules and can have serious consequences on the future trading relationships and distort the competition on both the EU and global market.”

In this context, Copa and Cogeca said it is ‘very important’ for the EU to work in partnership with producer countries to address the root causes of deforestation.

“EU farmers and agri-cooperatives consider that the Regulation should be supported by concrete measures to ensure a gradual approach in its implementation and should provide farmers with access to a wide range of alternative solutions as well as with an EU plan for protein production; which would reduce their dependence on imports.

“The approach to implement segregated supply chains without a proper transition could have a significant impact not only on costs and prices but also on the availability of compliant agricultural commodities for the EU market.

“Finally, considering forest degradation, it is important that the focus remains on the criteria implemented under the current legislation before starting to build sustainability criteria and definitions that are still under discussion at EU level.”

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