Editor’s choice
Southeast Asia has emerged as one of the top lobal exporters of agricultural commodities such as palm oil, rubber, cocoa, coffee and staple crops. The escalation of commercial agriculture in the region is marked by a 2% annual growth rate, engaging 40% of the local workforce, predominantly comprising approximately 100 million smallholder farmers (OECD & Food and Agriculture Organization of the United Nations, 2023).
However, this progress comes with substantial drawbacks. In particular, deforestation and unregulated land clear and expansion lead to biodiversity loss and jeopardize the livelihoods of those reliant on ecosystem services and possessed land rights (Mikolajczyk et al., 2021; Russell, 2020).
Various deforestation-free measures and voluntary standards have surfaced, aiming to enhance the sustainability of agriculture in alignment with global demands for sustainable and ethical consumption (Glasbergen, 2018). A recent global regulatory initiative in this regard is the European Union Deforestation Regulation (EUDR), which came into effect on 29 June 2023. The EUDR underscores the EU’s commitment to mitigating its impact on global deforestation, forest degradation, greenhouse gas emissions and biodiversity decline. Despite its good intentions, a significant concern arises regarding how smallholders can comply with EUDR due diligence given limited resources, funding and capacity.
Using a literature review and insights from stakeholder workshops with organizations that work closely with smallholders, in this brief we discuss the challenges faced by smallholders in the implementation of the EUDR. We delve into the context of deforestation in Southeast Asia and the implications of deforestation-free regulations like the EUDR for smallholders. After discussing some of the challenges of meeting these new requirements for the EU market, we conclude with four key opportunities for organizations to support smallholders in EUDR implementation.
Agricultural land in Southeast Asia expanded by almost 40% from 1980 to 2014, while within a decade alone (2005–2015) there was an alarming loss of 80 million hectares of forest (OECD & Food and Agriculture Organization of the United Nations, 2023). A nuanced breakdown by Global Forest Watch (2023) reveals that 73% of deforestation in Southeast Asia is attributable to commodity farming, 19% to logging, and a mere 0.28% to urban expansion. Although deforestation has different causes in various countries, a common trend involves the conversion of tropical forests into farmland for large-scale plantations such as palm oil, rubber and coffee (Russell, 2020).
“Forest-risk commodities”, such as beef, soy, palm oil, rubber, cocoa and coffee, have become essential items in daily life with the development of the global supply chain. Amid lax forest governance and growing demand for agro-food commodities, a handful of multinational corporations have expanded large-scale commodity farming and had a significant influence on tropical deforestation (Garret et al., 2019). This has prompted public concern mainly from consumers and civil society organizations, along with a demand for sustainable production without harming the environment (WWF & The Economist Intelligence Unit, 2021).
In response to this ‘eco-wakening’ movement (or demand), both multinational agribusinesses and governments have adopted deforestation-free standards and commitments. Table 1 below details some of these initiatives and regulations to counteract commodity-driven deforestation. Each standard and commitment is intended to advocate for sustainable production and preservation of forests, but they differ in scope, implementation and function depending on the actors involved.
Varying deforestation standards and commitments, many of which are voluntary, create challenges for the assessment of commitment implementation or effectiveness (Garrett et al., 2019). On the other hand, the EU’s Forest Law Enforcement, Governance and Trade (FLEGT) and the recently officially introduced EUDR require companies to comply with regulations to take part in trade. As the EU is “the second largest importer of tropical deforestation and associated emissions” (WWF, 2021), these regulations acknowledge that the enforcement to curb deforestation from the demand side is crucial. Since deforestation is heavily linked with global trade, the new EUDR policy will ban six forest-risk commodities (wood, soy, rubber, palm oil, cocoa and coffee) and their derivates from entering the market without due diligence.
The move from voluntary action plans to regulatory mandates like the EUDR has been praised as part of greater global efforts to address deforestation and related social and environmental challenges. At the same time, however, there are also many critics questioning whether the EUDR has sufficiently taken into account smallholder farmers, the main workforce of commodity agriculture. While EUDR application standards are different depending on the product, the risk level of the country and region of production, and the size of the business according to EU criteria, there is a lack of sufficient support for building capacity, participation in the decision-making process, and technical assistance to help smallholder farmers comply with these due diligence requirements.
Table 1. Standards and policies to curb forest-risk commodities
| Category | Name | Actors | Theme | Type | Brief description |
| Standard | Voluntary Sustainable Standards (VSS) | NGOs, private firms
|
Sustainable production and consumption | Voluntary | – Voluntary Sustainability Standards (VSS) encompass private criteria necessitating products to meet defined economic, social and environmental sustainability benchmarks, including product quality, attributes, production methods and transportation (E.A. Alamin & Fernandez de Cordoba, 2020).
– Typically devised and promoted by non-governmental organizations (NGOs) or private firms, VSS are embraced by various stakeholders along the value chain, from farmers to retailers, with certifications and labels serving as indicators of successful VSS implementation (E.A. Alamin & Fernandez de Cordoba, 2020). – Examples: Roundtable on Sustainable Palm Oil (RSPO), Round Table on Responsible Soy (RTRS) |
| Commitment | No Deforestation, Peat, and Exploitation (NDPE) commitments | NGOs, private firms in the palm oil industry | Protection of forest, peatland and labourers | Voluntary | – NDPE commitments aim to avoid deforestation, conserve peatland, and protect workers, local communities and small-scale growers (Proforest, 2020).
– NDPE aims to ensure sustainable supply chain traceability and consistent monitoring of supplier compliance; it is also critical to Key Performance Indicators (KPIs) for palm oil refiners (Dodson et al., 2020). Failure to enforce strict sourcing policies could lead to significant financial, reputational and regulatory challenges. These risks could extend throughout the supply chain, impacting smallholders, downstream buyers, and investors. |
| Commitment | Zero-deforestation commitments (ZDCs) | Private firms
|
Deforestation-free | Voluntary | – Companies voluntarily commit to zero-deforestation, pledging to eliminate deforestation associated with their commodities (Garret et al., 2019).
– There is wide variation in the definitions, goals and implementation methods of these commitments, such as zero net deforestation versus zero gross deforestation (FAO, 2018). – More than 500 companies have adopted ZDCs (Bager & Lambin, 2022). |
| Action plan | Forest Law Enforcement, Governance and Trade (FLEGT) | EU | Sustainable and legal timber logging | Regulatory | – The EU FLEGT Action Plan outlines several measures aimed at collectively preventing the importation of illegal timber into the EU, enhancing the availability of legal timber, and fostering increased demand for timber sourced from responsibly managed forests (European Forest Institute, 2024).
– The FLEGT Action Plan commenced in 2003, with the FLEGT Programme for implementation established in 2016. – The Regulation on deforestation-free products will repeal the EU Timber Regulation in 2024 (The European Parliament and The Council of the European Union, 2005). – Legislation: FLEGT Regulation on the establishment of a FLEGT licensing scheme for imports of timber into the European Community (The European Parliament and The Council of the European Union, 2005) |
| Public policy | EU Deforestation-free Regulation (EUDR) | EU | Deforestation-free | Regulatory | – To protect the world’s forest, the EUDR ensures only deforestation-free products (sustainably and legally produced cattle, cocoa, coffee, oil palm, rubber and soy) are allowed into the EU market (The European Parliament and The Council of the European Union, 2023).
– Legislation: EU Regulations on deforestation-free products (European Union, 2023) |
“…..Reinforce support and incentives for smallholders through enhancing partnership to address global challenges while meeting local needs and paying attention to the challenge faced by smallholders….” – (29) [emphasis added]
Source: (European Union, 2023)
According to Article 3 of the EUDR, commodities should be deforestation-free, have been produced in accordance with relevant legislation of the country of production, and covered by a due diligence statement. Aligning with this criteria, the above Article aims to promote sustainable practices in the production and trade of commodities by requiring adherence to specific standards and certifications such as due diligence, risk analysis, satellite monitoring, field audits, supplier capacity improvements and other various mitigation measures (Setiyanto, 2024).
While this regulation offers clear environmental benefits, it is unclear how this policy to address a global challenge can meet local needs in Southeast Asia. Companies are required to comply within 24 months, incurring significant costs to align supply chains with EU standards. Implementation will notably affect smallholders, a group that accounts for 40% of global production in the oil palm sector (Ogahara et al., 2022). Many smallholders already struggle to obtain the necessary certifications. It is estimated that only 10% of them have obtained Roundtable on Sustainable Palm Oil (RSPO) Certification, and the number is even less when it comes to independent smallholders that are not affiliated with big traders or companies (Abdul Majid et al., 2021; Purnomo et al., 2020).
Furthermore, the informal nature of transactions in the palm oil supply chain, especially involving local independent smallholders, sub-agents, and Fresh Fruit Bunches (FFB) traders, are not taken into account in these regulations (Abdul Majid et al., 2021). The requirements pose challenges for small-scale farmers who face additional expenses to meet geolocation and traceability demands, and this risks the exclusion of smallholders from the global value chain (Setiyanto, 2024; Zhunusova et al., 2022). It is important to ensure smallholders can take part in, benefit from, and have a positive position to negotiate through these deforestation-free value chains.
In addition, a workshop organized by SEI and RECOFTC in Thailand gathered insight into some of the main challenges smallholders in Thailand face regarding the EUDR implementation. Table 2 below presents some of the main challenges discussed by smallholders in the workshop, collected into six key topics.
Table 2. Discussion results on challenges faced by smallholders related to EUDR implementation
| No | Topic | Challenges |
| 1 | Lack of awareness and information | Smallholders lack comprehensive information about the EUDR’s requirements and implementation processes. This includes knowledge about compliance costs, EUDR standards and procedures. |
| 2 | Cost of compliance | It is still unclear who would bear the associated financial burden that will arise from EUDR compliance. This could include costs for certification, additional labour data collection, and setting up geolocation activities. There is also no guarantee that EUDR compliance will result in premium prices for products. |
| 3 | Partnership | Smallholders often struggle to identify and connect with existing alliances and organizations that can support them for EUDR compliance efforts. |
| 4 | Land tenure | Clear land tenure is crucial for EUDR compliance, but many smallholders in Southeast Asia face land insecurity issues. The lack of legal ownership can hinder their ability to prove that they are not engaged in deforestation. In addition, maps being used for EU reference may not accurately reflect on-the-ground realities. |
| 5 | Power and decision-making processes | Smallholders often have limited access to and participation in decision-making processes. Concerns include how they can engage and negotiate their position, especially if the policies could potentially restrict access to markets due to compliance struggles. |
| 6 | Data and technology | There is a lack of technology and infrastructure to support data collection that aligns with EUDR compliance. |
Local context is crucial, as smallholders in different countries in Southeast Asia can have varying cultivation methods, growing schemes and value chains for commodities that global regulations can fail to account for. The EU’s previous FLEGT legislation worked to combat illegal logging and promote sustainable forest management by engaging in voluntary partnership agreement with producer countries. These agreements laid the groundwork for developing legal frameworks that ensure timber legality, especially in Vietnam, Laos and Indonesia where deforestation is rampant due to agricultural expansion. However, the experiences of smallholders in achieving timber legality proved to be complex due to limited access to information and resources, lack of technical capacity, and the bureaucratic complexities of compliance. Regulatory and voluntary standards are often practical for large companies but in this instance failed to address the social, economic and environmental impacts faced by smallholder tree farms (Lesniewska & McDermott, 2014; Midgley et al., 2017).
“Partnerships and cooperation shall allow the full participation of all stakeholders, including …microenterprises and other SMEs, and smallholders. Partnerships and cooperation shall also support or initiate inclusive and participatory dialogue towards national legal and governance reform processes to enhance forest governance and address domestic factors contributing to deforestation.” – Article 30 (2) [emphasis added]
Source: (European Union, 2023)
The growing concerns regarding the EUDR and its implications for smallholders arise from a lack of information on how the regulation will be implemented. The policies are set to be fully enforced by December 2024, with small and medium-sized enterprises (SMEs) required to comply by June 2025. Given this timeline, there is an urgent need to mitigate the associated risks and provide adequate support to ensure that smallholders are prepared to meet EUDR standards, and particularly to ensure that the process is inclusive and participatory.
In analysing our literature review and stakeholder workshops, we have identified three primary opportunities to enhance the capacity of smallholders to adapt to the policy.
1. Establish knowledge hubs to raise awareness and capacity for smallholders
There is a significant lack of understanding regarding the application and implementation of the EUDR among smallholders. Despite research and various assessments, the information often fails to reach smallholders on the ground. Workshop participants recognized the need to raise awareness and build capacity, and they suggested a knowledge hub to bridge this gap. The focus of this hub would be on EUDR standards, certification systems, traceability concepts, updated maps and other relevant issues. This hub could function as an online platform for national and regional organizations to share regular updates and serve as a collaborative network where members can share and integrate different tools and data. Members of the hub could disseminate information to their constituents and farmer members, identifying the need for training sessions, workshops and engagement opportunities. Additionally, creating localized educational materials and promotional content in the national language, along with training on market needs, export markets and quality control, is essential for ensuring a thorough understanding of the EUDR’s requirements (RECOFTC, 2024).
2. Provide mechanisms to support smallholders, especially to address the cost of compliance
The workshops highlighted significant concerns about the burden of the increased cost associated with EUDR compliances. One attending organization developed a business case where they co-invest with farmers to comply with certification standards. For example, they would pre-invest in data collection, including geolocation, for smallholders’ plots and charge companies for the certification standards. In addition, since traceability and certification is a costly process, engagement with the financial sector is essential to provide necessary investment, especially for necessary infrastructure and technology.
To ensure sustainable compliance, the EU should also develop various incentives and strategic policies, beyond penalties, to enhance the well-being and livelihood of smallholders (Bastos Lima & Schilling‐Vacaflor, 2024; Gritten & Khunrattanasiri, 2023). It is also important to identify a fair payment scheme for products that comply with EUDR requirements, since certification does not necessarily result in a premium price for smallholders (Zhunusova et al., 2022).
3. Streamline the collaboration and coordination between stakeholders through policy facilitation and dialogues
Value chain commodities have layers of complexities, and effectively implementing EUDR standards requires a collaborative approach from diverse stakeholders to align their efforts and coordinate initiatives. One way to achieve this is to develop a comprehensive stakeholder mapping to identify working relationships, the support provided to smallholders, and the type of interventions implemented, as well as other related programs. For example, international and regional organizations with greater access to resources can provide credible information on the traceability and sustainability performance of commodity supply chains. They could also aid in clarifying land tenure by facilitating consultations between governments and smallholders, verifying maps, and conducting policy analysis to inform smallholders. By fostering collaboration, relevant stakeholders can harness existing knowledge and tools in assessing the progress and impacts of EUDR-related initiatives on smallholders.
Abdul Majid, N., Ramli, Z., Md Sum, S., & Awang, A. H. (2021). Sustainable Palm Oil Certification Scheme Frameworks and Impacts: A Systematic Literature Review. Sustainability, 13(6), 3263. https://doi.org/10.3390/su13063263
Bager, S. L., & Lambin, E. F. (2022). How do companies implement their zero-deforestation commitments. Journal of Cleaner Production, 375, 134056. https://doi.org/10.1016/j.jclepro.2022.134056
Bastos Lima, M. G., & Schilling‐Vacaflor, A. (2024). Supply chain divergence challenges a ‘Brussels effect’ from Europe’s human rights and environmental due diligence laws. Global Policy, 15(2), 260–275. https://doi.org/10.1111/1758-5899.13326
Dodson, A., Salisbury, C., & Spencer, E. (2020). Palm oil crushers and refiners Managing deforestation risk through a supply chain bottleneck. SPOTT. London: Zoological Society of London. https://www.spott.org/wp-content/uploads/sites/3/dlm_uploads/2020/08/Palm-oil-crushers-and-refiners-managing-deforestation-risk-through-a-supply-chain-bottleneck-SPOTT-2020.pdf
E.A. Alamin, N., & Fernandez de Cordoba, S. (2020, July). The Trade Impact of Voluntary Sustainability Standards: A review of empirical evidence. UNCTAD Research Paper No.50. https://www.sipotra.it/wp-content/uploads/2020/07/The-Trade-Impact-of-Voluntary-Sustainability-Standards-A-review-of-empirical-evidence.pdf
European Forest Institute. (2024). Combatting illegal logging through forest, law enforcement, governance, and trade.https://flegt.org/about-flegt/
European Union. (2023, May 31). REGULATION (EU) 2023/1115 OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL of 31 May 2023 on the making available on the Union market and the export from the Union of certain commodities and products associated with deforestation and forest degradation and repealing Regulation (EU) No 995/2010. Official Journal of the European Union.
Garrett, R. D., Levy, S., Carlson, K. M., Gardner, T. A., Godar, J., Clapp, J., Dauvergne, P., Heilmayr, R., le Polain de Waroux, Y., Ayre, B., Barr, R., Døvre, B., Gibbs, H. K., Hall, S., Lake, S., Milder, J. C., Rausch, L. L., Rivero, R., Rueda, X., … Villoria, N. (2019). Criteria for effective zero-deforestation commitments. Global Environmental Change, 54, 135–147. https://doi.org/10.1016/j.gloenvcha.2018.11.003
Glasbergen, P. (2018). Smallholders do not Eat Certificates. Ecological Economics, 147, 243–252. https://doi.org/10.1016/j.ecolecon.2018.01.023
Gritten, D., & Khunrattanasiri, K. (2023). Assessment of the potential impact of the proposal for an EU regulation to prevent deforestation-products originating from Thailand to enter the EU Market. Landless Mills.
Lesniewska, F., & McDermott, C. L. (2014). FLEGT VPAs: Laying a pathway to sustainability via legality lessons from Ghana and Indonesia. Forest Policy and Economics, 48, 16–23. https://doi.org/10.1016/j.forpol.2014.01.005
Midgley, S. J., Stevens, P. R., & Arnold, R. J. (2017). Hidden assets: Asia’s smallholder wood resources and their contribution to supply chains of commercial wood. Australian Forestry, 80(1), 10–25. https://doi.org/10.1080/00049158.2017.1280750
Mikolajczyk, S., Mikulcak, F., Thompson, A., & Long, I. (2021). Unlocking smallholder finance for sustainable agriculture in Southeast Asia. Climate Focus and WWF. https://sustainablefinanceasia.org/wp-content/uploads/2021/03/WWF-2021-Unlocking-Smallholder-Finance-for-Sustainable-Agriculture.pdf
OECD & Food and Agriculture Organization of the United Nations. (2023). OECD-FAO Agricultural Outlook 2023-2032. OECD. https://doi.org/10.1787/08801ab7-en
Ogahara, Z., Jespersen, K., Theilade, I., & Nielsen, M. R. (2022). Review of smallholder palm oil sustainability reveals limited positive impacts and identifies key implementation and knowledge gaps. Land Use Policy, 120, 106258. https://doi.org/10.1016/j.landusepol.2022.106258
Proforest. (2020, February). Info Note 04: Understanding commitments to No Deforestation, No Peat and No Exploitation (NDPE). Proforest. https://www.proforest.net/fileadmin/uploads/proforest/Documents/Publications/infonote_04_introndpe.pdf
Purnomo, H., Okarda, B., Dermawan, A., Ilham, Q. P., Pacheco, P., Nurfatriani, F., & Suhendang, E. (2020). Reconciling oil palm economic development and environmental conservation in Indonesia: A value chain dynamic approach. Forest Policy and Economics, 111, 102089. https://doi.org/10.1016/j.forpol.2020.102089
RECOFTC. (2024). Potential impacts of the EU Regulation on Deforestation-free products (EUDR) on smallholders in Thailand and Indonesia- case studies on rubber, timber, and coffee.
Russell, M. (2020). Forests in south-east Asia: Can they be saved? EPRS. https://www.europarl.europa.eu/thinktank/en/document/EPRS_BRI(2020)652068
Setiyanto, A. (2024). Assessing the implications of implementing European Union countries’ anti-deforestation regulations on Indonesia’s palm oil industry. IOP Conference Series: Earth and Environmental Science, 1308(1), 012066. https://doi.org/10.1088/1755-1315/1308/1/012066
The European Parliament and The Council of the European Union. (2005, December 20). COUNCIL REGULATION (EC) No 2173/2005. Official Journal of the European Union. https://eur-lex.europa.eu/legal-content/EN/TXT/?uri=celex%3A32005R2173
World Wildlife Fund. (2021). Stepping up? The continuing impact of EU consumption on nature worldwide. World Wildlife Fund. https://www.wwf.nl/globalassets/pdf/stepping-up-the-continuing-impact-of-eu-consumption-on-nature-worldwide.pdf
World Wildlife Fund & The Economist Intelligence Unit. (2021). An Eco-wakening: Measuring awareness, engagement and action for nature. The Economist Intelligence Unit. https://f.hubspotusercontent20.net/hubfs/4783129/An%20EcoWakening_Measuring%20awareness,%20engagement%20and%20action%20for%20nature_FINAL_MAY%202021%20(1).pdf
Zhunusova, E., Ahimbisibwe, V., Sen, L. T. H., Sadeghi, A., Toledo-Aceves, T., Kabwe, G., & Günter, S. (2022). Potential impacts of the proposed EU regulation on deforestation-free supply chains on smallholders, indigenous peoples, and local communities in producer countries outside the EU. Forest Policy and Economics, 143, 102817. https://doi.org/10.1016/j.forpol.2022.102817
Press release / A groundbreaking study mapping rubber-related deforestation in Southeast Asia shows forest loss is far greater than previously understood.
Journal article / New mapping techniques indicate that deforestation related to rubber production is at least two to three times higher than previous estimates have suggested.
Past event / AgriFoSe2030 will join SIANI to host a workshop in Nairobi on 15 November 2023 themed partnerships and collaborations for food system transformation.
Design and development by Soapbox.
