Strengthening the EU regulation on deforestation-free products

The European Commission’s proposed regulation for deforestation-free products prohibits the import of agricultural commodities such as soy, beef and palm oil if they were produced on land deforested after 2020. It sends a welcome signal to actors linked to deforestation and, with careful implementation, has the potential to drive up consumer market standards across the world.

This Trase policy brief discusses strategies to implement the regulation so that it succeeds in both “cleaning up” EU supply chains and supporting efforts to drive down commodity driven deforestation.

Currently, the proposed legislation requires regulated businesses to collect plot-level geo-locations (the coordinates of the plots of land where the commodity in question was produced) for all of their imports – regardless of risk level. If their imports come from national, and potentially subnational, regions which are assessed to be “standard” or high risk, then the business must take steps to assess and mitigate the risk that commodities were produced in deforested areas.

The effectiveness of the legislation in achieving its goals can be strengthened by integrating a robust sub-national risk benchmarking system with the highest viable resolution, underpinned by a multi-stakeholder process for development and review, including producer country participation and verification.

To aid implementation of the proposal, introducing robust sub-national risk assessments would inform the operator (traders which are not small and medium-sized enterprises are considered operators) requirements on both information collection and risk assessment in order to achieve compliance and help to conduct targeted checks. In the lowest risk regions, deforestation-free compliance can be demonstrated by tracing supplies to these regions (directly or indirectly via suppliers) and sourcing from these regions while also segregating supplies from higher risk regions. In medium or higher risk regions. More detailed geo-location evidence and stricter segregation would be needed to establish compliance.

Overall, emphasis should be placed on ensuring that the evidence provided encompasses the deforestation risk associated with the operators’ full supply base (the set of plots known to supply that operator). The operators’ supply base, even in low-risk regions, must be identifiable to make periodic validation possible. Given the prevalence of indirect sourcing of many commodities, and the relatively small proportion of total commodities which can be traced back to certified supply bases with third party certification (segregated certification), the proposed regulation will need to foster a step change in how industry currently operates. The EU needs to invest in partnerships with producer countries and regions to equip stakeholders – especially smallholders and enforcement agencies in high-risk regions – to achieve compliance with the law and have access to the information necessary to demonstrate deforestation-free supply.

To date, the focus has almost exclusively been on individual supply chains and its notion of deforestation-free supply. To be successful in driving down deforestation, there is an urgent need to move away from this and towards providing incentives for individual operators to become deforestation suppliers. Commodity buyers can then triage their risk exposure both vertically, based on who they are sourcing from within the supply chain, and horizontally across different regions, based on a sub-national benchmarking system.

As far as possible, information on the implementation and enforcement of the regulation should sit in the public domain in order to facilitate dialogue, independent scrutiny and the exchange of best practice across stakeholder groups.