The food industry says it is running out of time 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 their goods have not been 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 with deforestation. Commodities including palm oil, coffee, cocoa, beef, soy and rubber will be affected.
But as crops for 2024-25 are planted, many in the industry argue the EU has left it too late to finalise the details of an initiative that aims to reduce carbon emissions and preserve biodiversity.
For example, it has yet to finalise a list of “high-risk” countries whose exported commodities will be subject to extra checks. With the designations set to shape companies’ future supply chains, the selection process has become diplomatically fraught given strong objections from many agricultural nations in the so-called global south.
“It is not sufficient [for the EU] to come up with guidelines in December 2024,” said Nathalie Lecocq, director-general of Fediol, the EU’s vegetable oil trade group. “In certain instances, you need to invest . . . you cannot wait until the last minute.”
Louis Dreyfus Company, one of the world’s largest food traders, told the Financial Times that while the firm was “actively working to prepare for compliance”, the sector was still awaiting more guidance from the European Commission “in good time ahead of enforcement by end-2024”.
The new rules mean food companies operating in the bloc will have to precisely geolocate the plots of land on which their commodities were produced, and be prepared to hand over these co-ordinates to the EU authorities. The authorities will carry out checks, the number of which will depend on the deforestation risk rating of the producing country.
It is not yet clear how strict the EU will be in enforcing the new rules, leading to hesitancy among companies about how stringent their approach will need to be.
Nanne Tolsma, business development director at agritech start-up Satelligence, said contract negotiations were being made more challenging by uncertainty over the legislation.
Food manufacturers and retailers are seeking to write into their contracts with traders clauses on which party will bear the cost of fines for non-compliance, which could amount to up to 4 per cent of annual turnover.
Olivier Tichit, sustainability director at Indonesia-based palm oil producer Musim Mas, accused the EU of “blindly” applying its definition of deforestation, which is broadly defined in the act as “conversion of forest to agricultural use”.
Tichit said this would create a two-tier system, under which companies would ship 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 industry body for vegetable oils in Brazil, which is the world’s dominant grower of soyabeans and biggest exporter of beef. The country’s top customer for agricultural exports is China, followed by the EU.
NGOs argue, however, 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 commodities production, said the regulation had been in the works since 2015.
Food companies that failed to prepare might turn to countries with better infrastructure and traceability systems, cutting out smallholders in poorer nations, said van der Bijl, adding that the EU and companies should work with producing countries to prevent this.
Musim Mas was already reducing the number of small palm oil suppliers it used, Tichit said. “You find the people who are already complying today . . . and that’s the ones you keep,” he said.
Laurent Sagarra, global head of sustainability at coffee producer JDE Peets, said companies should go beyond the EU’s traceability requirements. If not, he said, “you don’t solve deforestation, you just make us in Europe feel good”.
Instead of cutting out farmers in high-risk areas to comply with the new rules, Sagarra said the Netherlands-based coffee giant was working with governments and NGOs to make sure all smallholders in the supply chain were included.
Chris Beetge, head of the EMENA region for Olam Food Ingredients, one of the world’s largest suppliers of goods including cocoa beans and coffee, said “a whole landscape approach” was needed to bring together “farmers, civil society and especially local governments”.
A commission spokesperson said the EU’s executive body was “working very intensively on the implementation of the deforestation regulation, both with partner countries and companies to help them get ready”.
Data solutions start-ups that map deforestation have reported a rush of interest since the commission ratified the regulation in June.
“Scrambling is definitely happening,” said Thomas Vaassen, chief executive of Meridia, one data firm working with some of the biggest agri-food companies. Companies are thinking “we have way too little time”, he said. “We should have started two years ago and now we are panicking.”
Others note there are limits to how much technology can aid compliance.
Reluctance by suppliers and traders to publish details of the farms from which they source their commodities meant that supply chains for ingredients such as soy could still be a “black box”, said André Vasconcelos, global engagement lead at Trase, a data-driven initiative tracking 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 having the political will.”