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Quick summary: Explore the critical role of deforestation-free supply chains in achieving compliance with the European Union Deforestation-Free Regulations (EUDR). Learn how traceability solutions and sustainable practices contribute to a greener future.
Imagine your customers asking exactly where that delicious cup of coffee originated, or if the furniture in their living room fuelled the destruction of precious rainforests. This is the new reality for businesses in the wake of the EU Deforestation Regulation (EUDR). Ensuring deforestation free supply chains is no longer just a sustainability goal, it’s a legal requirement with hefty fines for non-compliance. But how can you navigate this complex challenge and maintain a strong, transparent relationship with your customers?
Deforestation-free supply chains have emerged as a critical component of sustainable and responsible business practices. With an alarming rate of deforestation and its devastating impact on ecosystems, climate change and local communities, companies are increasingly recognizing the need to address deforestation in their supply chains.
According to Nature, the global food demand is projected to increase by 30-62% by 2050.
According to FAO, around 10 million hectares of forest are lost every year and 80 % of deforestation is caused by expansion of agriculture production. Global forest loss continues at a rate of around 25 million hectares a year.
According to IPCC, the agriculture, forestry and other land use is responsible for 22% of global greenhouse gas emissions, with half of that (11%) from deforestation and land conversion.
Globalization, population growth, food loss and waste, dietary shifts among consumers are few of the factors that push for variety in agriculture production. The land degradation and climate change is reducing the available arable land. In the ‘business as usual scenario, this will lead to conversion of forest lands into agriculture that will have a huge impact on climate and biodiversity.
Palm oil, Soy, Cocoa, Rubber, Beef, timber and coffee are the major agriculture commodities that drive deforestation and ecosystem conversion. These are largely produced in tropical countries like Brazil and Indonesia where largest tracts of forests are at risk. Some of these products are direct drivers of deforestation. A forest can be cut down and sown with grass to create pasture for the cattle. The forest can be cut down to plant palm trees. A large proportion of forests are also cut down to grow cocoa and soy. Deforestation drivers can also be indirect, where forest land is gradually degraded by shifting cultivation and timber extraction and replacing by cash crops.
Timber harvesting, Cattle ranching and soy production have different deforestation profiles. Cattle ranching and soy farming accounts for 80% of deforestation in Amazon. 80% of soy is used to feed animals to produce beef and other dairy products.
Beef Deforestation releases 340 million tons of carbon into the atmosphere, most of it coming from the Amazon region.
Palm oil is a key ingredient that is found in almost every product in a supermarket store. Right from the soaps, shampoos to cookies and snacks have palm oil as one of its ingredients. This palm oil is extracted from the fruits grown on palm trees. The growing demand has resulted in palm oil deforestation with a significant destruction of rainforests in Indonesia. The forests are slashed and burnt to pave way for palm plantations. This has not only caused biodiversity losses but also has displaced a number of indigenous communities from their lands.
Timber production is another major driver of deforestation due to illegal logging. Many types of wood used for furniture, flooring and construction are harvested from tropical forests in Africa, south America and Asia. Large trees are cut down and dragged through the forests.
The four forest-risk commodities are found in many value chains across a number of sectors and an average company generates almost 24% of revenue from them.
According to CDP reports, some companies report that they are still unaware of the presence of these forest commodities and their impact. Forests are cleared at alarming rates to grow palm and soy and provide grazing land for livestock. Agriculture is the clear cause of deforestation to produce these commodities with large scale commercial agriculture accounting for 40% of deforestation and local subsistence farming accounting for 33 % of deforestation.
Food producers are the largest source of deforestation on the planet accounting for between 60% and 80% of biodiversity loss.
Concealed within the everyday food products we purchase, including items like chocolate and ice cream, lie commodities such as palm oil and soy. These commodities, extensively used in various industries, are linked to deforestation on a global scale. From Indonesia to the Peruvian Amazon, vast expanses of carbon-rich forests are being systematically cleared to make way for the production of these agricultural commodities. This widespread deforestation not only fuels climate change but also triggers social conflicts in affected regions.
In the food and beverage sector, deforestation is due to meat, soy and palm oil. Meat production is a major driver for deforestation with vast areas of land being cleared for grazing livestock and growing soya for the animal feed. The animal products that we consume like the meat, egg and dairy all contribute to deforestation. Soyabeans are also used as vegetable oil, as an emulsifying agent in food products and other soya products. Palm oil is a widely consumed oil in our planet with many of the delicacies like chocolates, ice cream, cookies and pizza dough having them as an ingredient.
Did you know that a significant portion of the world’s cocoa, a key ingredient in our favourite chocolate treats, is linked to deforestation? Cocoa Deforestation not only threatens biodiversity but also impacts the livelihoods of cocoa farmers.
That morning cup of joe might be costing more than you think. Large-scale coffee production is a major driver of coffee deforestation, as traditional growing methods often clear swathes of rainforests to make way for coffee plantations.
Deforestation lurks beyond the label: It’s not just the food we eat.
Even the packaging surrounding our food contributes to deforestation. The pulp and paper used often come from timber sources, adding another layer of concern.
Southeast Asia, responsible for a staggering 90% of global natural rubber production, has witnessed rubber deforestation. The automobile industry, heavily reliant on rubber, also plays a significant role in this story.
The fashion industry takes its toll as well. Shockingly, over 150 million trees are cut down each year to produce cellulose fibers for clothing.
Sustainable supply chains are no longer just an ethical imperative, they’re a business necessity. Companies reliant on agricultural commodities face a double threat of resource scarcity and regulatory pressures.
The European commission approved a first of its kind EU deforestation-free regulation last year, signalling that European supply chains of cocoa, coffee, soy, wood, palm oil, rubber and cattle need to prepare for closer due diligence. The new regulation will require any company importing or exporting commodities from EU to prove the products are deforestation-free.
The EU’s Deforestation Regulation (EUDR) imposes strict compliance requirements, with hefty penalties for non-compliance (fines or 4% of turnover).
Imports to the EU are one of the biggest drivers of global deforestation. The implementation of EU deforestation-free regulations aims to reduce the impact of deforestation and forest degradation by 71.92kha per year and reduce CO2 emissions by 31.9 million metric tonnes per year. Given the scale of impact, EU deforestation-free regulation is essential in minimizing deforestation, GHG emissions and biodiversity loss.
Technology has become a powerful driver for establishing deforestation-free supply chains. It enables companies and organizations to implement traceability, monitor supply chains, and take necessary actions to combat illegal deforestation.
Blockchain and Distributed Ledger Technology (DLT): Blockchain and DLT provide a transparent and immutable ledger of transactions, making it possible to record every step of a product’s journey. This technology enables companies to trace the origin of products and validate their legality, ensuring they are deforestation-free.
Geospatial Technology: Geographic Information Systems (GIS) and remote sensing technologies allow for precise mapping of supply chain elements. These technologies provide geospatial data that can track the exact location and changes in land use, helping to identify and prevent illegal deforestation.
Data Analytics: Advanced data analytics and machine learning algorithms can analyze vast amounts of data to identify patterns and potential issues related to deforestation. These technologies can automatically assess the risk of non-compliance and suggest corrective actions.
Internet of Things (IoT): IoT devices can be integrated into supply chains to monitor environmental conditions and detect any irregularities or potential breaches. For example, they can track temperature, humidity, or land use changes in real time, allowing for immediate intervention if illegal activities are detected.
Mobile Apps: Mobile applications empower suppliers, farmers, and other stakeholders to report activities related to deforestation. They can document land use changes, report illegal logging, or provide other critical information that contributes to deforestation-free supply chains.
Supply Chain Management Software: Specialized supply chain management software can integrate data from various sources and trace products’ journeys from source to market. This software assists in maintaining visibility and ensuring that deforestation-free products reach consumers.
Compliance and Reporting Tools: Technology-driven compliance and reporting tools help companies assess their supply chains’ compliance with regulations and standards. These tools streamline the process of gathering information and generating reports for regulatory authorities.
Traceability plays a crucial role in helping businesses comply with the European Union Deforestation Regulations (EUDR). These regulations aim to prevent the import of products linked to illegal deforestation and forest degradation. Here’s how traceability aids in EUDR compliance:
Origin Verification: Traceability allows companies to accurately track and verify the origin of the products they want to sell. This includes collecting detailed information such as the quantity, supplier, country of production, and evidence of legal harvest.
Geospatial Data: EUDR requires geographic coordinates of the plots of land where the commodities are produced. Traceability systems help gather this information, ensuring that the products’ origins are documented with precise geolocation coordinates.
Risk Assessment: Traceability systems enable businesses to perform risk assessments by verifying and evaluating the risk of non-compliant products entering the supply chain. This step is crucial in identifying potential issues related to the legality of production.
Risk Mitigation: If risks are identified during the risk assessment, businesses can take necessary steps to mitigate them. This may include working with suppliers to address non-compliance and documenting the actions taken to rectify any issues.
Due Diligence Statements: Before placing products on the market, businesses must submit due diligence statements, which include traceability coordinates and information about the risk assessment and mitigation steps.
Regulatory Compliance: By maintaining robust traceability systems and ensuring that products comply with EUDR requirements, companies can meet the legal and regulatory obligations outlined in the law.
Environmental Impact: Beyond regulatory compliance, traceability helps reduce the environmental impact of supply chains. It promotes sustainable sourcing and ensures that products come from legal and environmentally responsible sources.
TraceX’s EUDR compliance platform provides the right edge to counter these challenges and ensure deforestation free supply chains. EUDR platform simplifies compliance with a suite of tools for supply chain mapping, risk assessment, and data management. Leveraging blockchain technology, TraceX ensures complete transparency, allowing you to demonstrate deforestation-free sourcing and build trust with your customers.
The European Commission, along with the Netherlands, Germany, and France, have launched the TEI. This initiative aims to achieve two key goals:
By working together through the TEI, the European Union and partner countries can create a more sustainable future for our forests and our planet.
TFA’s report identifies over 110 companies supporting landscape-level approaches in cocoa, palm oil, pulp & paper, beef, and soy sectors. This number has grown significantly, increasing sevenfold in the past six years.
We need to drive a better alignment between technology and the environmental goals. Deforestation is the third largest source of greenhouse gas emissions generating 15 to 20 % of the carbon emissions and it is essential for companies to disclose the impact of forest and ecosystems to achieve the climate and nature targets. The disclosure of Scope 3 emissions, investor pressures to manage deforestation risk and due diligence due to regulatory requirements will mandate the need for traceability in these supply chains and result in deforestation free supply chains.
The EU Deforestation-Free Regulations (EUDR) aim to prevent EU companies from importing products linked to illegal deforestation. It’s crucial for businesses to comply because it helps combat deforestation, reduce greenhouse gas emissions, and protect global biodiversity.
Companies may encounter challenges like complex supply chains, difficulty in sourcing compliant products, and the risk of displacing deforestation to other regions. However, with robust traceability solutions and sustainable sourcing practices, these challenges can be overcome.
Traceability solutions, such as TraceX, provide companies with the tools to trace the origin of their products, ensuring compliance with local laws and regulations. They offer transparency and data accuracy, making it easier to verify the legality of products and meet EUDR requirements.
