On the night of 6 December, after more than nine hours of negotiations, the European Union’s trilogue (Parliament, Commission and Council) reached a provisional agreement to ban imports of several commodities if they are produced from land deforested after December 2020.
An initial list of six products was initially proposed by the Commission in November 2021 and confirmed by the Council in June 2022. They were cocoa, coffee, palm oil, soy, timber and beef, as well as by-products such as leather, furniture, paper and chocolate. During the latest negotiations, the Parliament succeeded in adding rubber, charcoal, printed paper products and certain palm oil derivatives such as shampoo and lipstick. Corn and biodiesel could not be included on the list, but the door remains open for them to be added in the future.
Environmental organisations welcomed the text, although they also pointed to numerous weaknesses. “We have made history with this first global law against deforestation,” says Anke Schulmeister-Oldenhove, Senior Forest Policy Officer at the WWF’s European Policy Office.1 “This is an important step forward for forests and the people who fight to protect them,” explains Philippe Verbelen, biodiversity expert at Greenpeace Belgium.2
Europe largely responsible
This legislation is indeed welcome, as deforestation is a vast problem. According to the Food and Agriculture Organization of the United Nations (FAO), 420 million hectares of forest – an area larger than the European Union – were lost to deforestation between 1990 and 2020. Europe itself is responsible for 16% of global deforestation through its imports (of which soy and palm oil account for two-thirds) and, according to the WWF, is the second biggest destroyer of tropical forests behind China, but ahead of India and the United States.
Companies will have to exercise due diligence
The new regulation will require importing companies, who are responsible for their supply chain, to demonstrate “due diligence” and prove, via crop geolocation data that can be combined with satellite photos, that products do not come from deforested or degraded land.
The data will then be accessible to the competent EU authorities, who will carry out checks according to the level of risk (high, standard or low) defined by the Commission and linked to the countries of origin of the products concerned.
Indigenous peoples largely forgotten
Importers will also have to “verify compliance with the human rights legislation of the country of production“. But if national legislation does not protect indigenous peoples, they will not be protected by the European text, which makes no reference to international conventions on the subject. For Nicole Polsterer, Sustainable Consumption and Production Campaigner at Fern, the EU has “missed the opportunity to tell the world that the most important solution for ending deforestation is to uphold the rights of indigenous peoples“, who are regularly the target of attacks by land and environment campaigners. The NGO also deplores the fact that the legislation does not allow victims to obtain compensation from companies that break the law.3
A broader definition of forest degradation, but the text does not cover woodland
As requested by Parliament, the text includes a broader definition of forest degradation, which now covers all forests and not just primary forests. The European Parliament had also called for its scope of application to be extended to woodlands, such as Brazil’s Cerrado savanna, a biodiversity-rich ecosystem covering an area half the size of the EU and the source of many of Europe’s soy imports. But the Council strongly objected. “There is therefore a risk that agricultural activities will simply shift from forests, which are now protected, to as yet unprotected savannas, as can already be observed in the South American Cerrado savanna,” warned Delara Burkhardt of the Socialists and Democrats (S&D) political group.4
However, the agreement stipulates that the Commission will examine the possibility of extending the scope of the directive to other woodlands (no later than one year after its entry into force) and other ecosystems with a high carbon storage and biodiversity value, such as peatlands (two years after its entry into force).
Have small-scale producers been forgotten ?
To comply with the legislation, importers will be increasing their demands on producers, particularly in terms of traceability, product segregation and geolocation data collection. Who will pay for this change, in a context where small-scale producers of coffee, cocoa, etc. rarely receive a decent income and where the costs of adapting to climate change are considerable? There is a high risk that this cost will be passed on to the last link in the value chain, i.e. producers.
It will therefore be important to find ways of supporting producers so that they too can adapt to the legislation, in order to avoid certain adverse effects, such as the further concentration of supply chains to the benefit of the largest plantations with the resources at their disposal, or the exclusion of suppliers, less well-equipped producers and/or those located in high-risk areas.
Finance has succeeded in evading legislation
The European Parliament wanted the law to apply to European banks and financial institutions. However, this provision was not retained in the final agreement and banks will therefore be able to continue investing in deforestation-causing projects. Nevertheless, the proposal will also be reviewed in two years’ time, a postponement deplored by the NGO Global Witness, whose 2021 report indicated that EU-based financial institutions granted over 30 billion euros to 20 agribusinesses accused of deforestation between 2016 and 2020.5
Sanctions
Companies that fail to comply with the regulation will face penalties of up to 4% of their annual EU turnover. They will also be temporarily excluded from public procurement and financing.
What’s next?
In early 2023, the European Parliament and the EU Council are expected to adopt the new regulation, which will come into force 20 days after its publication in the Official Journal of the European Union. Companies will then have a transition period of 18 months (24 months for micro and small businesses) to comply with the new rules. Companies will therefore have to comply with the law’s requirements from 2025.
Samuel Poos
Coordinator of Enabel’s Trade for Development Centre
