As the European Union (EU) continues to advance its legislative framework, businesses operating within its borders must stay agile and prepared for new regulatory demands. One of the most significant developments on the horizon is the EU Deforestation Regulation (EUDR), set to become mandatory on 30 December 2024. This regulation, while part of a broader trend of increasing environmental oversight, introduces particularly far-reaching obligations. Companies trading in six key agricultural commodities — soy (and derivatives), palm oil, cattle, coffee, cocoa, and timber — now have to ensure that their products do not originate from recently deforested areas or “contribute to forest degradation.”
The regulation as a whole aims at mitigating the EU’s role in global deforestation, forest degradation, and biodiversity loss. It also seeks to reduce greenhouse gas emissions and protect the rights of indigenous peoples. These goals align with the EU’s broader commitment to sustainability, but they also place considerable responsibility on businesses and farmers. For those within the scope of the EUDR, extensive due diligence will be required to demonstrate compliance, necessitating large volumes of data on product origins and supplier practices. While larger corporations may have the resources to manage these demands, is it reasonable to demand the same from smaller businesses or localized farmers?
Although good progress has been made, the introduction of the EUDR highlights a wider pressing issue in agriculture with respect to the traceability and sustainability of commodities. Countries with more mature digital infrastructure, like Brazil, and greater financial resources are better placed to adhere to the new regulation. However, many poorer countries, characterized by smallholder and/or family farming, face considerable hurdles when it comes to compliance. Lacking sophisticated data management systems and mapping capabilities at landscape level, farmers in these poorer regions will be affected by systemic technological limitations that not only threaten their access to the EU market but also risk greatly affecting their livelihoods.
The reason is simple: these farmers and communities might cease to have access to a crucial market, while their harvest (whether responsible for deforestation or not) will almost certainly be diverted to less “sensitive” end markets, likely at a discount. In what would be a sad twist of irony, these challenges could inadvertently drive further deforestation as these communities seek alternative sources of income to support their livelihoods by expanding volumes to offset loss of income per unit of product sold. Some evidence of this phenomenon has already been documented in the past for commodities such as cocoa, even before the introduction of the EUDR. The “digital divide” that unfairly affects smallholder farmers, is something that needs to be rectified to avoid implementing a regulation that unfairly affects certain parts of our world.
To effectively implement the EUDR and push the industry forward, the regulation’s focus must extend beyond compliance to fostering collaboration and support, particularly for developing countries. These stakeholders, often lacking the necessary resources, require both technical and financial assistance to meet the EUDR’s regulatory changes. Coordinated efforts among public and private actors are essential to achieve this, involving government ministries overseeing environment, agriculture, and trade, as well as partnerships with local authorities. Local governments could also play a critical role in providing guidance and support to small producers, ensuring they have the tools needed to comply with the regulation.
In addition to this, due to fragmented production chains with numerous smallholders, the private sector requires immediate and practical support from international buyers and governments. This includes geolocating production areas, implementing robust traceability systems, and verifying adherence to local laws. These efforts could be pursued cost-effectively through collaboration between local governments, NGOs, and farmers’ cooperatives. By creating a public-interest digital infrastructure to store and manage information about farmed areas, monitored via remote sensing technology, stakeholders can streamline the compliance process. Crucially, this system should be unified rather than fragmented into separate national and international silos. Sharing data evidence across borders will enable a more efficient compliance process. By integrating smallholder farmers into this digital ecosystem, the EUDR’s objectives can be met while also advancing a more sustainable and inclusive global agricultural system.
As the deadline for the EUDR approaches, the growing calls for a delay from large corporations and even governments signal the significant impact this regulation will have across the industry. This is a promising sign, as it indicates the EUDR’s potential to effect real, positive change in the fight against deforestation and climate change. However, it is crucial to ensure that this progress does not come at the expense of smallholder farmers, who are vital to global agriculture. If these farmers are left behind, the unintended consequence could be increased deforestation as they seek alternative markets and livelihoods.
Rather than viewing the EUDR as a burden, it should be embraced as a catalyst for broader industry transformation. By strengthening data capabilities and integrating smallholder farmers into the digital ecosystem, we can not only help them remain compliant and competitive in the EU market but also address longstanding challenges in agricultural traceability and sustainability. This