Plenty of the controversy and backlash to the EU’s controversial Deforestation Regulation (EUDR) has largely been voiced and led by the palm oil trade in Asian producer markets, however the coverage may also have main impacts for commodities comparable to cocoa, espresso, rubber and plenty of extra.
The EUDR got here into drive in June 2023, with an 18-month transition interval for firms till December 2024.
Whereas the EUDR could have sustainability and deforestation-free provide chains on the coronary heart of its argument, trade stakeholders from past the palm oil sector are actually avoicing issues concerning potential impacts to the meals and beverage trade.
“Asia is a notably massive market each from a shopper and producer perspective, and plenty of cocoa produced on this area is being exported to markets like the USA and EU,” ofi Head of Cocoa Sustainability Andrew Brooks informed the ground at a current closed digital webinar discussing the EUDR held by the Cocoa Affiliation of Asia, which FoodNavigator-Asia attended.
“Attributable to these commerce relationships, we see EUDR danger to influence on the worldwide circulation of cocoa merchandise when it comes to the potential of this making a two-tier market, one tier supplying cocoa to the EU and one to the remainder of the world.
“What this finally means in the long term is that there’s more likely to have implications on product prices and pricing [and it is unclear who will absorb these].”
This uncertainty is especially regarding as the extra prices that come up because of EUDR compliance – which might require numerous points comparable to a top-notch traceability system and huge quantities of geolocation information and related processing – might nicely influence farmers or shoppers, a troubling notion within the present financial system.
Brooks added that the concern right here doesn’t lie a lot with huge meals MNCs, however extra so with the smaller smallholder farmers or companies that may wrestle to cope with these further prices.
“We have already got heard of many massive MNCs having acknowledged their intentions to supply sustainable cocoa by 2025, so this can hopefully scale back the general influence,” he mentioned.
“The 2-tier market might doubtlessly additionally profit SMEs which might be in a position to [make the shift] rapidly and flexibly sufficient, as they may enhance their market share significantly.
“However our greatest problem for implementation proper now, based mostly on involvement in lots of sustainability programmes over a few years, is how we [and other big firms] can handle the oblique provide chain – that is actually the elephant within the room that must be tamed and traced to make sure full EUDR compliance, and it’s not going to be simple.”.
The complexity of compliance
Additionally talking on the convention was Rainforest Alliance EU Public Affairs Lead Fanny Gauttier, who concurred that smallholder farmers are more likely to pose the largest problem for the cocoa trade, much like challenges within the palm oil sector.
She additionally predicted total will increase in prices of certification for chocolate and different meals companies to change into EUDR-ready, merely as a result of total expertise and information necessities wanted to fulfil this.
“It’s tough to know what will occur with regard to prices and premiums after the EUDR [is in full swing],” she mentioned.
“We don’t anticipate will increase within the prices for Rainforest Alliance certification, as we’re fairly aligned with the necessities, however we do foresee will increase in prices for firms normally.
“That is as a result of want for the related geolocation info essential to make traceability occur, and the businesses might want to pay for that elevated traceability info.”
It seems that at this level, the EU itself additionally has no reply to the query of ‘who can pay’ for the extra prices and premiums, a query which was posed a number of occasions all through the occasion, together with to Deputy Head of the European Fee Directorate-Basic Atmosphere Helge Zeitler.
“[The EUDR] designates that the duty for compliance falls with the operator, who’s the particular person inserting the particular person available on the market within the EU,” she informed the ground.
“These are the individuals who might want to verify that they’re sourcing the cocoa from a trusted supply and ensure with these earlier than them within the provide chain that the beans are EUDR-compliant.
“We’re additionally stepping up cooperation with producer nations through initiatives such because the SAFE mission and the Cocoa Dialogue – we all know there’s a must establish the place the challenges lie in producer nations, comparable to with smallholders to handle these as a result of we really feel they’ll actually profit lots from the rules as there isn’t a expensive scheme concerned.”