The European Union has made significant progress toward implementing groundbreaking regulations that make companies responsible for ensuring their products do not contribute to deforestation.
The European Parliament has approved a new law with an overwhelming majority, which mandates that companies prove their products do not originate from deforested or forest-degraded lands, or they may face substantial penalties. On Wednesday, the 17th of May, 2023, the EU Council ratified the law.
The new law bans the sale of coffee, cocoa, cattle, palm oil, soy and wood connected to deforestation.
Deforestation accounts for up to 10% of worldwide greenhouse gas emissions, according to the UN Global Forest Goals report, and the loss of biodiversity endangers the existence of millions of species.
A recent report identified that more than 50% of deforestation occurs in 5% of producing areas – including in the Amazon, Cerrado and Gran Chaco biomes.
According to Mongabay, agriculture is one of the largest drivers of deforestation. FAO reports that from 1990 to 2020, 420 million hectares of forest were converted for agricultural purposes. The EU’s demand contributed to roughly 10% of this total.
To tackle these issues, the EU’s new legislation bans importing and selling products like beef, soy, palm oil, and cocoa associated with deforestation and infringing indigenous peoples’ rights.
Environmental and human rights organisations globally have praised the EU’s decision. Greenpeace described it as a “milestone in combating deforestation,” while the Rainforest Foundation UK called it a “crucial advancement in protecting indigenous peoples’ rights.”
How it Works
The regulation introduces a benchmarking system that assigns a risk level – low, standard, or high – associated with deforestation and forest degradation to countries both inside and outside the EU.
This risk classification will guide the obligations of various operators and the authorities in member states to perform inspections and controls.
Consequently, this will streamline monitoring for high-risk countries and simplify due diligence processes for low-risk countries.
Authorities responsible for these areas are required to inspect 9% of operators and traders dealing with products from high-risk countries, 3% from standard-risk countries, and 1% from low-risk countries. This inspection aims to confirm whether they are effectively meeting the obligations stipulated by the regulation.
Further, these competent authorities will also inspect 9% of relevant goods and products either placed on their market, made available, or exported by high-risk countries.
Lastly, the EU plans to enhance its cooperation with partner countries, focusing primarily on high-risk areas.
FSC and PEFC have welcomed the news
On Thursday, the 20th of April (Friday Australian time) PEFC International hosted a free webinar outlining changes and its implications for forest certification within the new framework.
As one of the world’s largest importers of these products, the EU’s ban is expected to influence global markets significantly.
In recent years, companies have faced growing pressure to ensure their supply chains are free from deforestation and human rights violations.
The EU’s new legislation sends a strong message to businesses that they must be accountable for their actions and not contribute to forest destruction or human rights infringements.
The law recognises indigenous peoples’ right to free, prior, and informed consent
The EU’s decision is also important because it acknowledges the critical role indigenous peoples play in preserving forests and biodiversity. Wood Central has covered the importance of legal tenure in driving reduced deforestation and increased forest cover.
The new legislation recognises indigenous peoples’ rights to free, prior, and informed consent (FPIC) and obligates companies to ensure their activities do not breach these rights. This is a significant stride in protecting indigenous peoples’ rights and ensuring their voices are considered in decisions affecting their lives and lands.
Pushback from countries impacted by the regulation
As reported by Reuters over the weekend, the legislation isn’t aimed at any specific nation, but some have expressed concerns about its potential impact.
Indonesia and Malaysia, the top global exporters of palm oil, have accused the EU of hindering market access for their product. As the third-largest importer of palm oil, the EU’s decisions has significant consequences.
In response, Malaysia has threatened to cease palm oil exports to the EU, while small-scale palm oil producers argue that they cannot meet the law’s requirements to provide geolocation data to verify the origin of goods.
Brazilian agricultural organization ABAG has also criticised the legislation, stating that Brazil, a major global supplier of soy, coffee, and beef, already monitors deforestation through its forest code, which permits limited area clearance.
Wood Central has in the past looked at the Brazilian forest code and the challenges around its implementation.
Removal of FLEGT and CITIES ‘green lane’ could create obstacles
Over the weekend Wood Central spoke to a source that has a deep understanding of the new regulation.
According to the source, the EUDR (the regulation just passed) will greatly assist in making the European Union Timber Regulation (EUTR) more ‘doable’.
The EUTR came into effect in December 2010 – and was an outcome of the EU’s FLEGT (Forest Law Enforcement, Governance and Trade) which aims to reduce illegal logging worldwide.
FLEGT has been use by a number of countries, including the USA and Australia, as a reference point for Illegal Logging legislation.
However, following the November 2021 decision to change the FLEGT and CITIES ‘Fitness Test’ which effectively removed the ‘green lane’ provisions, the source suggests that practicalities around the implementation of the new regulation in high-risk forests could be a challenge.
Before the vote, Politico highlighted four main components of the legislation.
- Focusing on six primary commodities: coffee, cocoa, cattle, palm oil, soy, and wood, along with derived products like leather, oil cakes, and chocolate. A deforestation-free label will be granted to commodities deemed to have not been produced on forest land converted to agricultural use after December 31, 2020.
- Implications for companies operating in the EU: companies and certain traders must monitor their supply chains, submit due diligence statements, and help prevent deforestation. EU countries will be responsible for implementation and setting penalties.
- Implications for countries exporting to the EU: the regulation was expected to face opposition from forested countries reliant on exports to the European Union, such as Indonesia, Brazil, and the Ivory Coast. The regulation strike a balance between trusting exporting countries and ensuring they take action to halt deforestation.
- What comes next in the Parliament and the Council? The regulation has been approved by the European Parliament and EU member countries. It now needs to be endorsed by the European Council to enter into force.
Under the new regulation, non-compliant companies may face penalties up to 4% of their turnover in an EU member state. Compliance checks will be conducted by EU countries to ensure adherence to the regulations.
