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How the EU Deforestation-Free Regulation (EUDR) impact smallholder farmers
EUDR can cause major disruptions for small and medium growers, how can this be mitigated?
Published October 4, 2024
Pim Polesie
Expert@Era of We
The European Union Deforestation-Free Regulation (EUDR) is a legislative initiative designed to combat global deforestation by regulating imports of key commodities linked to deforestation, including palm oil, soy, cacao, wood and timber, rubber, cattle and coffee. While the EUDR is well-intentioned, aiming to reduce environmental destruction, its implications for smallholder farmers in producing countries are profound and challenging. This article explores the possible effects of the EUDR on these farmers, highlighting both the opportunities and the risks associated with the regulation.
Overview of the EUDR
The EUDR was introduced as part of the EU’s broader strategy to tackle deforestation and forest degradation, which are significant contributors to climate change and biodiversity loss. The regulation requires companies importing certain commodities, including coffee, into the EU to prove that their supply chains are free from deforestation and legal under local laws. This involves stringent due diligence processes, including tracing the origins of products and verifying that they have not contributed to deforestation after a specified cutoff date.
Challenges for Small and Medium-Sized Coffee Farmers
1. Compliance Costs and Administrative Burden:
The most immediate impact of the EUDR on small-holder farmers is the increased cost and complexity of compliance. These farmers, often operating with limited resources (less than 4 hectares) and minimal access to information, support and knowledge surrounding the precise requirements of EUDR, may find it difficult to meet the stringent requirements of the EUDR. The regulation mandates traceability and transparency across the entire supply chain, which necessitates sophisticated data collection and management systems. For many smallholders, this could mean investing in information, local support and services or/and new technology, which may be financially prohibitive.
2. Market Access and Exclusion:
The EUDR could inadvertently lead to the exclusion of small-holder farmers from the EU market. In financially strong nations such as Brazil and Vietnam where coffee is a large part of their export, producers and multinational corporations are better equipped to meet the EUDR’s requirements, thanks to their access to resources and existing infrastructure for supply chain management. In contrast, smallholder farmers in less financially encouraged nations may struggle to provide the necessary system, documentation and proof of compliance, increasing the difficulty of exporting their products to the EU. This could result in a market shift where only the largest players can compete, exacerbating inequality in the coffee industry.
3. Reduction in Market Diversification:
The EUDR also poses a risk of reducing the diversification of coffee into the EU market. As smaller and more diverse producers find it difficult to meet the new regulations, the variety of coffee available to European consumers could decrease. This would limit the range of coffee origins and flavors in the EU market, potentially diminishing the richness of the coffee experience for consumers. Furthermore, the concentration of market power in the hands of larger producers could reduce competition, which could stifle innovation and diversity within the industry.
4. Risk of Increased Commodity Prices:
Another significant concern is that the EUDR could lead to higher commodity prices in the EU. The increased compliance costs for farmers, and exporters coupled with the potential reduction in supply as smaller producers exit the market, could reduce supply and drive up the price of the commodity. An increase that the smallholder farmers risk to be excluded from, due to regulations. Consumers in the EU may have to bear the brunt of these price increases, making e.g. coffee—a daily staple for many—more expensive with reduced variety.
This could potentially unbalance the coffee supply chain further, pushing small and medium growers out of the EU market.
5. Impact on Livelihoods:
The livelihoods of smallholder farmers could be at significant risk due to the EUDR. Farming is often the primary source of income for millions of families in developing countries. The regulation, by imposing additional costs and reducing market access, could threaten the economic stability of these communities. If smallholders cannot adapt to the new requirements, they may be forced out of the market, leading to increased poverty and social instability in rural areas.
Opportunities for Adaptation and Support
While the challenges posed by the EUDR are significant, there are also opportunities for adaptation and support that could mitigate its impact on small and medium coffee farmers.
- Capacity Building and Technical Assistance: To help smallholders comply with the EUDR, governments, NGOs, and international organizations could provide targeted capacity-building programs. These programs would focus on educating farmers about the requirements of the regulation and equipping them with the tools and knowledge necessary to meet the new standards. Education, support and technical assistance in areas such as supply chain management, data collection, and environmental sustainability could prove crucial in helping farmers adapt to the new regulatory environment.
- Cooperative Models and Group Certification: One potential solution to the challenges of compliance is the adoption of cooperative models and group certification schemes. By banding together in cooperatives, small and medium-sized farmers can share the costs and resources required to meet the EUDR’s requirements. Group certification allows multiple farmers to be certified under a single standard, reducing the individual burden and making compliance more attainable. This approach not only facilitates access to the EU market but also promotes collaboration and collective action among farmers.
- Leveraging Technology: Advances in technology, particularly in digital tools for traceability and supply chain management, offer new possibilities for small and medium-sized coffee farmers. Mobile applications, tracing technology, and satellite monitoring can provide affordable and accessible solutions for tracking and documenting coffee production practices. By adopting these technologies, like the Era of We cloud software, farmers can more easily comply with EUDR by learning more about local support options and gaining insight into the intricacies of the legislation. This can ensure their products meet the necessary standards and gain a competitive edge in the global market.
- Support from the Private Sector: The private sector, including coffee buyers and international corporations, has a crucial role to play in supporting small and medium-sized farmers through the transition to EUDR compliance. By investing in sustainable supply chains and providing financial and technical support, these companies can help farmers meet the regulation requirements. Initiatives that enable participation, pre-financing, long-term contracts, and premium pricing for deforestation-free coffee could incentivize farmers to adopt sustainable practices and maintain access to the EU market.
Conclusion
The EU Deforestation-Free Regulation represents a significant step forward in the global fight against deforestation, but it also poses substantial challenges for small and medium-sized coffee farmers. The increased costs and administrative burdens associated with compliance could lead to market exclusion, threatening the livelihoods of millions of farmers. Increased knowledge and local support are the first steps towards compliance with EUDR and in later stages, technology platforms and software services can help trace the coffee from origin to ensure that the coffee can be sold on the EU market.
By excluding smallholder farmers, the regulation risks reducing the diversity of coffee available in the EU market and increasing prices for consumers. However, with the right support and adaptation strategies, these challenges can be mitigated. Capacity building, cooperative models, technological innovation, and private sector engagement are all essential components of a holistic approach to ensuring that small and medium-sized coffee farmers can continue to thrive in the face of new regulatory requirements. By addressing these challenges head-on, the coffee industry can contribute to a more sustainable and equitable global supply chain.
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