Once adopted and applied, the new law will ensure that a set of key goods, including coffee, beef, and soy placed on the EU market, will no longer contribute to deforestation and forest degradation in the EU and elsewhere in the world.
Since the EU is a major economy and consumer of these commodities, this step will help stop a significant share of global deforestation and forest degradation, in turn reducing greenhouse gas emissions and biodiversity loss.
The political agreement comes just 12 months after the Commission's 2021 proposal. The final version builds on the core features proposed by the Commission, namely: tackling deforestation regardless of whether it is legal or illegal; strict traceability requirements linking the commodities to the farmland where they were produced, and a country benchmarking system.
We've got new data that shows you cannot have sustainable cocoa without higher prices for farmers. It's just not going to work -- Antonie Fountain, co-author of The 2022 Cocoa Barometer
It has also been ratified this week just before the start of the milestone Conference on Biodiversity (COP15), which is set to define protection goals for nature for decades to come. The law will require companies to produce a due diligence statement showing their supply chains are not contributing to the destruction of forests before they sell goods into the EU - or else face hefty fines of up to 4% of a company's turnover in an EU member state.
Strict due diligence
When the new rules enter into force, all relevant companies will have to conduct strict due diligence if they place on the EU market, or export from it: cocoa, palm oil, cattle, soy, coffee, timber and rubber as well as derived products (such as beef, furniture, or chocolate). These commodities have been chosen on the basis of a thorough impact assessment identifying them as the main driver of deforestation due to agricultural expansion, the EU explained in a briefing.
"I hope that this innovative regulation will give impetus to the protection of forests around the globe and inspire other countries at the COP15," said Christophe Hansen. the European Parliament's lead negotiator.
The 2022 Cocoa Barometer, released this week, and a major bi-annual report on cocoa sustainability, said: ‘Deforestation and loss of biodiversity are driven by cocoa production, climate change is both affecting cocoa production and made worse by cocoa-driven deforestation, and agrochemical use is causing both environmental damage and is hazardous to those applying them.’
The main issue comes down to farmer income, the report concluded: 'Farmer poverty is a driver of just about every problem in the cocoa sector; deforestation, child labour, and gender inequality are all made so much harder to tackle if cocoa household incomes are not raised significantly. When farmers must choose between feeding their family, and not cutting down old growth trees, it is not a choice.'
“We've got new data that shows you cannot have sustainable cocoa without higher prices for farmers. It's just not going to work," said Antonie Fountain, Managing Director of the VOICE Network, and one of the report’s authors.
The EU legislation clearly states that companies will also be required to collect ‘precise geographical information’ on the farmland where the commodities that they source have been grown, so that these commodities can be checked for compliance.
Although many companies and cocoa suppliers have increased their efforts to make their supply chains fully traceable with polygon mapping and geo-localization back to farm level, it is still an issue, especially in West Africa, where small-holder cocoa farms remain difficult to locate and demarcate.
Another issue, highlighted by the World Cocoa Foundation (WCF), is that approximately half of the world’s cocoa bean supply is sourced indirectly by chocolate companies from independent exporters and traders, primarily due to the regulatory and licensing requirements in origin countries. This makes it difficult for the cocoa and chocolate companies to fully guarantee 100% sustainability in their supply chains.
Those countries that will be impacted by the new rules, including Brazil, Indonesia and Colombia, as well as Ghana and Cote d’Ivoire, claim the legislation will be burdensome and costly. Certification is also difficult to monitor, especially as some supply chains can span multiple nations.
But the EU insists that member States need to make sure that not complying with the rules leads to effective and dissuasive penalties.
WCF President Chris Vincent, said at the WCF Partnership Meeting in October: “Our members welcome these regulatory developments as we believe that the effective protection of human rights and the environmental standards in the cocoa supply chain can only be significantly enhanced through legislation that achieves a level playing field for all market participants.”
Deforestation is responsible for approximately 10% of global greenhouse gas emissions that drive climate change and will be in focus at the UN COP15 conference this week, where countries will seek a global deal to protect nature.
What happens next?
Negotiators from EU countries and the European Parliament struck the deal on the law early on Tuesday this week and the European Parliament and Council will now formally have to adopt the new Regulation before it can enter into force.
Once the Regulation is in force, operators and traders will have 18 months to implement the new rules. Micro and small enterprises will enjoy a longer adaptation period, as well as other specific provisions.