New deforestation law

MAY

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The EU’s landmark anti-deforestation law was adopted by the European Parliament on 19 April, with European ministers expected to adopt the text in May (see p8).

The new EU Deforestation Regulation (EUDR) will apply to palm oil, soyabeans, cattle, wood, cocoa, coffee and rubber, which have been identified as the main drivers of deforestation due to agricultural expansion.

To sell these commodities and products made from them in the EU, companies will have to prove they do not come from land where forest has been destroyed or degraded after 31 December 2020. They will also have to collect precise geographical information on the land where these commodities have been grown.

Not surprisingly, leading palm oil producers Indonesia and Malaysia – which together account for some 80% of global palm oil supply – have branded the law discriminatory. Meanwhile, organisations such as NGO Solidaridad, the Council of Palm Oil Producing Countries (CPOPC), and Dutch oils and fats association MVO fear the EUDR will exclude smallholders from the EU market as they may have problems proving the legality and geo-location of their land.

“Oil palm smallholders [those with around less than 50ha of oil palms] account for about 41% and 27% of total oil palm planted areas in Indonesia and Malaysia, respectively … and about 35-40% of the global production of palm oil,” the organisations said on 12 April. “They are essentially small-scale farmers growing oil palm as their primary source of income … [and] in line with the United Nations sustainable development goals, the European Commission (EC) and member states should look into how the EUDR can be implemented in a way that improves smallholder inclusivity.”

The new law also risks making voluntary certification schemes, such as the well-known Roundtable on Sustainable Palm Oil (RSPO) irrelevant, according to Wilmar International general manager for sustainability Perpetua George. “If people are being told that [voluntary certification schemes] are not going to help you meet regulatory requirements, then they are going to drop it,” she said in March at the Palm & Lauric Oils Price Outlook Conference in Malaysia.

Once adopted, large and medium-sized companies will have 18 months to comply with the new law, while smaller enterprises will have 24 months. Governments will also need to set out how to enforce the law and any penalties for breaking it. The EC will rank countries as low-, standard- or high-risk for deforestation, with low-risk countries subject to simplified due diligence.

Within two years, the EC will also look at whether to extend the EUDR to additional commodities, other ecosystems such as grasslands, peatlands and wetlands, as well as to European financial institutions which may be funding companies linked to deforestation.

“A 2021 report from Global Witness revealed that between 2016 until 2020, EU-based banks provided €30.6bn worth of deals to 20 agribusinesses accused of deforestation,” according to a Greenpeace briefing on 13 April.

The new EUDR is an important step in addressing deforestation related to key commodities. It may not go far enough for some campaigners, but it is a major first goal post in compelling companies and industries to address the sustainability of their supply chains.

Serena Lim, serenalim@quartzltd.com