The food industry says time is running out to prepare for new EU rules to cut carbon emissions from the supply chains of several key commodities, accusing Brussels of issuing proposals that lack detail and will fail to stop deforestation.
The rules, which will oblige companies to prove that their goods are not produced on recently deforested land, are due to come into force at the end of 2024 and will make the EU the first region to ban imports of products linked to deforestation. Commodities including palm oil, coffee, cocoa, beef, soybeans and rubber will be affected.
But with the 2024-25 crops planted, many in the industry say the EU has left it too late to finalize the details of an initiative that aims to cut carbon emissions and preserve biodiversity.
For example, it has not yet finalized a list of “high-risk” countries whose exported goods will be subject to additional checks. With the designations set to shape the companies’ future supply chains, the selection process has become diplomatically fraught with sharp objections from many farming nations in the so-called global south.
“Not enough [for the EU] to come up with guidelines in December 2024,” said Nathalie Lecoq, director general of Fediol, the EU vegetable oil trade group. “In certain cases you have to invest. . . you can’t wait until the last minute.”
The Louis Dreyfus Company, one of the world’s largest food retailers, told the Financial Times that while the firm is “actively working to prepare for compliance”, the sector is still awaiting more guidance from the European Commission “in time before implementation to the end -2024”.
The new rules mean that food companies operating in the bloc will have to precisely geolocate the plots of land on which their goods are produced and be prepared to hand over those coordinates to EU authorities. The authorities will carry out inspections, the number of which will depend on the degree of risk of deforestation in the producing country.
It is not yet clear how strict the EU will be in enforcing the new rules, leading to hesitation among companies about how strict their approach should be.
Nanne Tolsma, director of business development at agritech startup Satelligence, said contract negotiations were becoming more difficult because of the uncertainty surrounding the legislation.
Food manufacturers and retailers are seeking to include clauses in their contracts with retailers which party will bear the cost of fines for non-compliance, which can be as high as 4 percent of annual turnover.
Olivier Tichit, director of sustainability at Indonesia-based palm oil producer Musim Mas, accused the EU of “blindly” applying its definition of deforestation, which is broadly defined in law as “the conversion of forest to agricultural use”.
Tichit said this would create a two-tier system where companies would supply deforestation-free goods to Europe and the rest to other regions.
The rules would raise prices for European consumers while not helping to reduce deforestation, said Abiove, the vegetable oil industry body in Brazil, which is the world’s dominant soybean producer and biggest beef exporter. The country’s largest customer for agricultural exports is China, followed by the EU.
However, NGOs argue that the food industry has had time to prepare. Gert van der Bijl, senior EU policy adviser for Solidaridad, a Netherlands-based NGO focused on sustainability in commodity production, said the regulation had been in the works since 2015.
Food companies that failed to prepare could turn to countries with better infrastructure and tracking systems, excluding smallholders in poorer nations, van der Bijl said, adding that the EU and companies should are working with the producing countries to prevent this.
Musim Mas is already reducing the number of small palm oil suppliers it uses, Tichit said. “You find the people who are already compliant today. . . and these are the ones you keep,” he said.
Laurent Sagara, global head of sustainability at coffee maker JDE Peets, said companies need to go beyond EU tracking requirements. If not, he said, “you’re not solving the deforestation problem, you’re just making us in Europe feel good.”
Instead of excluding farmers in high-risk areas to comply with the new rules, Sagara said the Netherlands-based coffee giant is working with governments and NGOs to ensure all smallholders in the supply chain are included.
Chris Beege, head of the EMENA region for Olam Food Ingredients, one of the world’s largest suppliers of commodities including cocoa beans and coffee, said a “whole landscape approach” was needed to bring together “farmers, civil society and especially local authorities’.
A commission spokesman said the EU executive “is working very intensively on the implementation of the deforestation regulation, both with partner countries and companies to help them prepare”.
Data solutions startups that map deforestation have seen a surge in interest since the commission ratified the regulation in June.
“A shuffle is definitely happening,” said Thomas Waassen, CEO of Meridia, a data firm that works with some of the biggest agri-food companies. Companies think “we have too little time,” he said. “We should have started two years ago, and now we’re panicking.”
Others note that there are limits to how much technology can aid compliance.
The reluctance of suppliers and traders to publish details of the farms they source their goods from means supply chains for ingredients such as soy can still be a “black box”, said Andre Vasconcelos, head of global engagement at Trase, an initiative, data-driven tracking of supply chains.
Calling for more transparency from traders, he added: “We already have all the knowledge and technical expertise when it comes to geospatial data to implement the regulation. The problem is the presence of political will.