What does the new European deforestation law mean for Colombian specialty cocoa?

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

Author: Julio Andrés Rozo Grisales, Founder and Director, Amazonía Emprende-Escuela Bosque, Estefania Liehr, Team Amazonía Emprende , Amazonía Emprende

• The European Union deforestation regulation (EUDR) came into force on 29 June 2023 to ensure that imported commodities, like cocoa, are deforestation free.
• To qualify as “deforestation-free”, cocoa must have been produced on land that has not been subject to deforestation after 31 December 2020.
• Europe is the main importer of cocoa beans in the world, accounting for over half of the world’s imports. Over the past four decades, cocoa production has been increasing steadily and EU demand for cocoa is on the rise.
• Colombia is a world-leading supplier of fine or flavour cocoa, ranking fifth in global exports.

When treating ourselves to a good bar of chocolate, we rarely stop to question where the main ingredient, cocoa, comes from, or what impact its production had on people, forests, and biodiversity. The reality is often a sad one. Ghana and the Ivory Coast (the world’s two biggest cocoa producers) lost 94% and 80% of their forests, respectively, in the past 60 years, with roughly one-third of that being a result of expanding cocoa production. And in 2021, an estimated 1.5 million children were engaged in child labour in cocoa farms in these two countries. As these facts become more widely known, it is understandable that consumers demand products that do not generate such negative impacts.

To improve conditions in the supply chain, a new EU deforestation regulation (EUDR) entered into force, requiring that commodities imported into the EU market are deforestation free and comply with environmental laws of the country of production. The regulation encompasses various commodities including cattle, cocoa, coffee, oil palm, rubber, soya and wood.

What does this mean for the cocoa sector?

Companies that supply cocoa beans or chocolate bars to the EU market are the ones with the primary responsibility. Some key requirements are:

• Products must be deforestation free, meaning they were produced on land that has not been converted from forest to agricultural use after 31 December 2020.
• Production must be in accordance with the relevant legislation of the country of production, including social and environmental laws.
• Due diligence must be conducted to show compliance (including traceability systems, data collection, verification from producers, deforestation risk assessments, monitoring systems for deforestation, etc).

Understandably, this will add burden on suppliers and producers both in terms of cost and bureaucratic hurdles. The effects may be felt differently across the supply chain, but it is important that the burden does not fall solely on producers who already struggle with high poverty levels, increasing production costs, and many other challenges. Whilst this is a clear challenge, the new EUDR represents an opportunity to not only generate positive impact when producing commodities, but also to access a market that is on a clear growth trajectory.

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Market Opportunities

Europe has a diverse chocolate market with robust processing and manufacturing industries that require substantial quantities of cocoa beans. The value of the EU chocolate market was estimated at €42 billion ($44.7 billion) in 2022. While these industries require significant volumes of bulk cocoa, there is a new rising demand emerging: specialty cocoa. Specialty cocoa is a type of higher quality cocoa with specific characteristics such as good genetics, unique origins, traceability and good harvest and post-harvest techniques. It is a smaller market and accounts for less than 10% of the total chocolate market but it is currently the fastest growing segment in Europe. Organic beans and chocolate have also experienced growth in demand in the European market, a trend expected to continue.

Moxe Colombia

There is a company already working in alignment with the values encompassed by the EUDR. Moxe is a Colombian bean-to-bar chocolate company that produces artisanal, specialty, high-quality chocolate with unique flavours while focusing on generating positive social and environmental impact to their producers. They focus their production on three main pillars:

• Social responsibility: Moxe pays a premium for cocoa beans, ensuring that producers receive fair compensation and can improve their livelihoods.
• Environmental stewardship: Moxe actively promotes cocoa production within restoration projects, employing native species and steering clear of monocultures. They also adhere to 100% certified organic production practices, nurturing biodiversity and safeguarding the environment.
• Health and well-being: Moxe creates distinctive products with unique flavours that offer superior nutritional value compared to industrially produced chocolate, and without any exposure to harmful chemicals.

Restoration and agroforestry projects that include cacao significantly increase biodiversity and productivity by boosting soil nutrients, maintaining key ecological functions, preventing soil erosion and creating resilient ecosystems. In fact, a recent study found that cacao-based agroforestry systems are effective in restoring the soil quality of degraded pastureland, a key finding for the Colombian Amazon seen as the main driver of deforestation is extensive cattle ranching. In addition to the carbon and biodiversity gains of such projects, cacao also improves livelihoods (e.g., stable jobs, increased income) of rural communities resulting in lasting social impact and, if done right, also raises awareness of local environmental problems and mitigation actions.

This is why Moxe has partnered with Amazonia Emprende, an organisation in Caquetá that promotes ecosystem restoration with native forest species at large-scale. The heart of this partnership lies in the joint ambition of contributing to the preservation and revitalisation of the Colombian Amazon. Amazonia Emprende’s comprehensive agroforestry model includes cocoa as a key element. This ensures that they are not only rehabilitating ecosystems, but also championing sustainable agricultural practices and providing alternative economic livelihoods to the rural population.

While this regulation represents a significant step forward in promoting sustainability, it may pose certain challenges and lead to unintended consequences. For instance, companies could shift their business to markets with less stringent environmental and social standards, while deforestation continues. Similarly, the regulation may exclude already marginalised producers, particularly those lacking clear tenure rights. And then there’s the issue of who will bear the increased costs associated with obtaining certifications, implementing monitoring systems, fostering capacity building, and navigating the bureaucracy required to meet the EUDR.

Navigating this will need to be a team effort. Governments and big companies should invest in smallholder capacity building and investments to meet the requirements. Compliance costs should be shared equitably among stakeholders, ensuring that the root cause of deforestation (in many cases poverty) is addressed. And finally, it is important for consumers to understand and appreciate the additional effort made, throughout the entire supply chain, to bring them sustainably produced chocolate that helps people and biodiversity, even if this results in higher costs.