New EU deforestation law: A 5-step guide to giving deforestation the chop

This article is brought to you thanks to the collaboration of The European Sting with the World Economic Forum.

Author: Jack Hurd, Executive Director, Tropical Forest Alliance, Member of the Executive Committee, World Economic Forum

• The EU’s new anti-deforestation law requires all companies to issue a due-diligence statement to sell products like coffee, cocoa and wood on the EU market.
• But no single policy instrument can do the job on its own, which is why we need a holistic approach.
• The Tropical Forest Alliance has put together a 5-point plan to do just that.

The first-of-its-kind EU legislation on deforestation-free products is just two weeks old, and is receiving mixed reviews, depending on your vantage point. The new law – which is aimed at tackling both climate change and biodiversity loss – requires all companies to issue a due-diligence statement in order to sell products like coffee, cocoa and wood on the EU market. Those linked to deforestation will be banned from import and export into the EU.

The UN Food and Agriculture Organization (FAO) estimates that 420 million hectares of forest — an area larger than the EU — were lost to deforestation between 1990 and 2020, and EU consumption represents around 10% of global deforestation. The new law obliges companies to verify and issue a ‘due diligence’ statement that goods placed on the EU market have not led to deforestation and forest degradation anywhere in the world after 31 December 2020.

The legislation has been well received by some, but others have criticised the lack of standardization when it comes to including human rights and land rights – such as the right to Free, Prior and Informed Consent (FPIC), or the fact that some ecosystems, such as the Brazilian Cerrado, are not included.

Due-diligence measures will be effective in tackling deforestation only if they are implemented by all actors throughout the supply chain. Suppliers from outside the EU will need to be able to clearly understand regulatory requirements if they are to be implemented efficiently. Particular attention should be paid to small and medium enterprises (SMEs) and smallholders, so they don’t fall short in complying with the requirements and become decoupled from supply chains. Extra resources will be required for SMEs to improve governance and technical capacity, which is needed if they are to farm more sustainably and to meet the new criteria being set by the legislation.

The regulation includes a benchmarking system for assessing risks from the source country. Landscapes or ecosystems within a country face differing levels of deforestation and human rights risks; this means that the benchmarking system should be able to work at the sub-national, provincial or supplier level as well. Failing to do so risks encouraging businesses (and their customers) to abandon high-risk sources entirely, which could penalise suppliers within those high-risk countries who are genuinely taking steps to source sustainably.

Deforestation law: A step in the right direction

Despite these challenges, it is hard to argue that this is not a step in the right direction, because it has to be; a large consumer bloc has acknowledged that it has responsibility for the environmental consequences of the products it consumes. Clearly, demand-side measures such as market prohibitions and due-diligence obligations on businesses play a crucial role, but alone they will not be effective in tackling commodity-driven deforestation.

No single policy instrument can address by itself all the drivers of unsustainable production; a combination of measures – the ‘smart mix’ – is necessary. Building on decades of experience from companies, governments and civil society groups trying to decouple agricultural supply chains from deforestation, the Tropical Forest Alliance has developed a ‘Smart Mix’ combination of measures which consists of five interrelated approaches – all of which must be deployed to deal with the many different drivers of deforestation. These are:

1. EU legislation to introduce an obligation of due diligence on companies involved in commodity supply chains, and to put in place other demand-side measures to support markets for sustainably produced commodities. (This is the legislation that has just been passed.)

2. Partnerships between the EU and producer countries to put in place the enabling conditions necessary to protect forests and improve the standards of production of agricultural commodities.

3. Dialogue with other consumer countries, to ensure that stricter standards in the EU market do not simply divert unsustainably produced products away to other markets.

4. Measures to steer flows of finance and investment away from unsustainable and towards sustainable activities and supply chains.

5. Encouragement for robust, consistent and practical systems and approaches to enable companies to assess, verify and report on risk and risk mitigation within their supply chains.

The legislation passed in the first week of December builds on the first measure, and it certainly is a step in the right direction to stop the destruction of our forests. However, its effectiveness will be limited unless it is accompanied by action on the ground in the tropical forest countries in which the commodities are produced. To avoid unintended consequences – such as the exclusionary impact on smallholders or the diversion of unsustainable commodities from the EU towards other markets – there must be dialogue with producer and emerging consumer countries in order to build better international co-operation and strong partnerships.

These ‘producer partnerships’ – if they are to create the right enabling conditions – should go beyond just development assistance and also feature commitments to improve standards of production (including for smallholders), governance and law enforcement, and should also include the design and deployment of incentives provided by the EU, potentially including trade and market preferences.

Partnerships should also help to improve the recognition and respect for the customary tenure rights of Indigenous peoples and local communities, the provision of basic services, infrastructure and support for farmers and smallholders and the development of traceability systems and processes. Agreement to adopt the legislation is one strong step forward, but more is required.

The EU legislation on deforestation is a perfect example of how all of these issues – on livelihoods, food security, trade, environment, and international co-operation – must be addressed simultaneously, in a mutually reinforcing way, if we are to make progress towards our climate, nature and social justice goals. This is particularly poignant given what transpired at the recent COP15 meeting in Montreal, where governments agreed a deal to stop and reverse nature loss on a global scale.