In the ever-evolving landscape of sustainable practices including environmental and human rights; the European Union's forthcoming regulation on deforestation, set to be enforced as of January 1st, 2025, marks a pivotal shift. Covering commodities like coffee, cocoa, palm oil, soy, timber, and rubber, as well as their derivatives, this regulation signals a fundamental change in the way businesses approach sustainability, particularly concerning deforestation.
1. Sustainability as a Must-Have Requirement, Deforestation is just the First Step
Multiple new regulations are propelling sustainability from a mere differentiation factor to an indispensable pre-competitive necessity. Compliance is not just about staying ahead; it is about meeting baseline requirements. Converting sustainable practices from a choice or a differentiator to a prerequisite for conducting business, with penalties associated with merely maintaining the status quo becoming substantial. For example, foreseen fines in case of non-compliance specifically for the European Union Deforestation Regulation (EUDR), go up to 4% of company turnover within the EU, a serious business risk.
2. Disaggregated flows and the data reality
The commodities selected by the EU for EUDR have been done so for good reason. Simply put, these products are significant contributors to non-sustainable activities. What’s concerning for many operators and brands in their rushed compliance is that substantial amounts of these products come from smallholder subsistence farmers in highly fragmented value chains. These farmers produce limited quantities, resulting in vast volumes of granular data. Disaggregation and data often present compatibility challenges! Beyond a tier 1 or 'direct supplier' relationship, ensuring quality information becomes significantly challenging. As you approach the origin, profit margins shrink, discouraging investment in additional overheads or complexity without commensurate rewards. To compound the challenge, education and technical expertise often decline at the start of agricultural supply chains, leading to a lack of governance and control.
3. Need for Robust Traceability Solutions
This shift in perspective leads to a need for greater transparency in procurement practices, transparency that drives decisions to ensure compliance; and that can be justified. Robust traceability is demanded like it has never been before to both prove compliance with all laws and regulations at a local origin level and ensure that products imported into the EU are not grown on deforested land.
To assure supply chain flexibility and resilience, processes easy to follow and add value to the actors upstream, systems need to be simple, scalable, and interoperable. The challenge lies in developing systems capable of handling the complexities of first-mile farm reality, often offline and in remote environment, while also integrating seamlessly with existing IT infrastructure on client side. Technological processes need to be auditable and dependable so more focus can be on analysis, quickly identifying risks and fixing root causes before they manifest into issues.
In essence, it requires dedicating additional time to refining people and processes to uphold data quality and ensure reliable reporting.
4. Addressing Compliance and Beyond
The Swiss based company farmer connect has developed an extensive traceability solution for risk and due diligence monitoring of disaggregated supply chains, it has been specially tailored to the European Union Deforestation Regulation compliance requirements but goes well beyond. It efficiently allows first-mile data intake, including polygon data, satellite-based deforestation assessments and provides the necessary data stipulated by the regulation – assuring use of already existing data.
Moreover, the solution isn't limited to deforestation. It can encompass various sustainability data, covering aspects like child labor, living income, or farm practice certifications, thereby ensuring compliance with additional regulations like the German Supply Chain Act or the European Green Deal.
5. Leveraging Data for Broader Goals
While compliance is crucial, the data gathered in a traceability system can serve multiple purposes beyond regulatory demands. It can be instrumental in annual sustainability reporting, offering transparency and accountability to shareholders or financial institutions. Furthermore, this data can facilitate consumer engagement, allowing consumers to make informed choices aligned with their values.
In conclusion, the European regulation on deforestation is not merely a burden; it's an opportunity to foster visibility, drive tangible improvements, and propel the industry towards a more sustainable future. Farmer connect's auditable traceability is a great example of how regulatory requirements can be turned into avenues for positive change.
Authors
Susanne Emonet, CEO, farmer connect
Kristian Doolan, Partnership and Innovation, farmer connect
Source
farmer connect
About farmer connect
Farmer connect is a traceability software for trusted and auditable data on sustainability to address your compliance and reporting needs. They are a pioneer in developing auditable traceability solutions that bridge the gap between regulatory demands and practical implementation. Their solution stands out for its interoperability and integration capabilities, seamlessly incorporating third-party data such as satellite assessments or existing certifications.