Smallholder Farmers and EUDR Compliance

Smallholder farmers and EUDR compliance—these words may seem daunting, but they are becoming increasingly relevant in today’s global market. The European Union’s Deforestation Regulation (EUDR) is set to impact smallholder farmers by requiring them to demonstrate that their products are deforestation-free.  

About 500 million farms worldwide (84% of the total) are smaller than two hectares (ha). But they are far from homogeneous and only around 40% sell a substantial amount of their crops. 

This regulation presents a significant challenge for those who lack the resources or knowledge to navigate complex supply chains. However, with the right guidance and tools, smallholder farmers can not only meet these requirements but also secure their place in the global market. 

Key Takeaways 

• Smallholder Farmers and the EUDR 

• Challenges of Smallholder Farmer involvement 

• Technology Solutions for EUDR Compliance 

• TraceX EUDR Compliance Platform 

Smallholder Farmers and EUDR 

Understanding EUDR  

The European Union’s Deforestation Regulation (EUDR) is a landmark policy designed to curb deforestation by ensuring that products entering the EU market are deforestation-free. For smallholder farmers, this new regulation represents a significant challenge. Unlike large corporations with vast resources, smallholders often lack the technological tools, data management systems, and financial backing necessary to meet these stringent requirements. 

The primary pain point lies in the complexity of proving compliance. Smallholder farmers typically operate in remote areas with limited access to the infrastructure needed for thorough product traceability. This could mean anything from verifying the deforestation status of their land to proving that their products, such as coffee, cocoa, or palm oil, do not contribute to forest degradation. Meeting these requirements is not just about adhering to new rules—it’s about overcoming barriers that many smallholders have never faced before. 

Moreover, the consequences of non-compliance are severe. Failure to meet EUDR standards could result in smallholders losing access to lucrative European markets, which many depend on for their livelihoods. The loss of market access could mean financial instability, reduced income, and a significant threat to their economic survival. 

Yet, this challenge also presents an opportunity. By embracing the shift towards more sustainable practices, smallholder farmers can differentiate themselves in a crowded market, command better prices for their products, and gain access to new markets that prioritize sustainability. The journey towards EUDR compliance may be difficult, but with the right support, smallholder farmers can not only meet these new standards but also thrive in a market that increasingly values environmental responsibility. 

Smallholders form the backbone of the economy in many producer countries.  

Smallholders’ important role in achieving sustainable development and food security is increasingly recognised in international policies such as SDG Targets. 

In nations with tropical forests, smallholders, frequently comprising Indigenous Peoples and local communities (IPLCs), play a vital role in combatting climate change and preserving forests. However, they can also be contributors to forest destruction and degradation. 

Deforestation and the conversion of forests by smallholders are often driven by subsistence agriculture or local markets. Additionally, these activities are linked to the production of (export) crops like cocoa, coffee, oil palm, and rubber, with some of these destined for the EU market. 

Smallholders produce 95% of Vietnam’s coffee, 42% of Indonesia’s palm oil, and 95% of Thailand’s rubber.  

The EU’s deforestation-free regulation (EUDR) aims to bar seven forest-related commodities and their products from the EU market if linked to deforestation. Producers and companies dealing in timber, palm oil, soy, rubber, cattle, cocoa, and coffee must provide evidence that their goods were not grown on deforested land since 2020. Compliance is required by December 2024, posing challenges for smallholders, who may lack the technical and financial capacity to meet the stringent due diligence requirements of the regulations. Finding ways to avoid small-scale producers being shut out of EU supply chains should therefore be a top priority for both exporting countries and the EU. 

Challenges of Smallholder Farmer involvement 

The intricate traceability demands may push smallholders away from participating in sustainable commodity markets. 

• Smallholders are often part of complex supply chains. Ensuring traceability and compliance across these chains, especially for exported commodities, can be challenging. 

• Many smallholders lack the technical know-how and resources required to implement complex traceability systems and provide detailed evidence about their land use practices. 

• Clear land tenure is crucial for compliance, but smallholders might face challenges proving ownership or legal access to their land, especially in regions with unclear or informal land tenure systems. 

• Complying with the regulations might involve significant costs, including investments in technology, training, and certification. Smallholders, often operating on tight budgets, may struggle to meet these financial demands. 

• Smallholders might have limited access to information about the regulations and the necessary steps for compliance. This lack of awareness can hinder their ability to make informed decisions. 

• The regulations could potentially create barriers for smallholders to access EU markets if they are unable to meet the stringent requirements. This may affect their livelihoods and income. 

To ensure EU policies on deforestation-free supply chains effectively recognise the rights and roles of smallholders, and addresses the underlying drivers of deforestation, the following principles must be integrated into its design and implementation: 

• Acknowledge the potential of smallholders, especially women, as catalysts for sustainable and deforestation-free agriculture and food systems. Create incentives to empower smallholders to embrace and implement sustainable, climate-resilient practices. 

• Ensure that the regulation mandates companies (or their suppliers) to uphold land and tree tenure rights, including customary rights, as well as the right to Free, Prior, and Informed Consent (FPIC). This promotes fair access to resources. 

• Develop and incorporate tools, including technological solutions, that smallholders can utilize to verify on-the-ground activities. These tools, developed in consultation with smallholders, may involve satellite data or community monitoring, such as a deforestation observatory. It’s crucial to ensure that producers, particularly smallholders, benefit from information derived from enhanced traceability (like market trends) and have ownership of data, including maps. 

• Mandate comprehensive disclosure of the entire process, outcomes, and on-the-ground impact, ensuring transparency regarding stakeholders and the inclusion of their perspectives in due diligence policies, risk identification, mitigation, and monitoring. This process should be grounded in effective, free, meaningful, and informed participation of stakeholders or their representatives (like unions or cooperatives). It should also address additional barriers to participation faced by smallholders, including women. 

Technology Solutions for EUDR Compliance 

Digital tools will play a crucial role in aiding companies and producers in monitoring deforestation and adhering to the new regulations. Mobile apps can assist traders in the vital initial phase of gathering geolocation data necessary for EUDR compliance, facilitating access to EU markets for more than millions of smallholder farmers globally. These apps promote inclusivity and transparency, with the potential for scalability to encompass other crops and regions engaged in trade with the EU. 

TraceX EUDR Compliance Platform 

TraceX’s EUDR compliance platform tackles several key challenges faced by smallholder farmers in meeting EU Deforestation Regulation (EUDR) requirements: 

Complexity of Compliance  

Smallholder farmers often lack the resources to navigate complex regulatory requirements. TraceX’s platform simplifies this by providing clear, actionable insights and automated compliance checks tailored to their needs. 

Data Collection and Reporting  

Gathering and maintaining accurate data for compliance can be cumbersome. TraceX uses blockchain technology to streamline data collection and ensure that records are accurate, secure, and easily accessible, reducing the administrative burden on smallholders. 

Cost of Technology 

Implementing new technologies can be costly for smallholder farmers. TraceX’s platform is designed to be cost-effective and scalable, offering affordable solutions that fit within the financial constraints of smaller operations. 

Traceability 

Ensuring traceability from farm to market is a significant challenge. TraceX’s platform provides a transparent supply chain view, enabling smallholder farmers to prove that their products meet deforestation-free criteria and enhancing their market access. 

Access to Markets 

Compliance with EUDR can open up new market opportunities. By meeting these regulations, smallholder farmers can gain access to international markets that demand deforestation-free products, potentially increasing their revenue. 

Benefits and Opportunities for the Smallholder Farmers 

• One key opportunity lies in the adoption of traceability solutions within the supply chain. By integrating digital traceability tools, smallholder farmers can not only meet regulatory requirements but also gain valuable insights into their farming practices, ensuring sustainability and enhancing overall productivity. 

• Governments, NGOs, and private organizations can play a pivotal role in providing training, technology, and financial assistance to empower farmers on their journey toward compliance. These support programs can address the challenges of limited resources and technical know-how, fostering a more inclusive and equitable approach to EUDR compliance. 

• Collaborative initiatives and partnerships across the supply chain can create synergies that benefit both smallholder farmers and larger stakeholders. The exchange of knowledge, resources, and best practices can streamline compliance processes, making them more accessible and manageable for farmers. These collaborations can also open doors to market access and certification, positioning smallholders as vital contributors to deforestation-free supply chains. 

The challenges of EUDR compliance present unique opportunities for positive change and empowerment in the agricultural sector. By leveraging these opportunities, smallholder farmers can not only meet regulatory standards but also enhance the sustainability and resilience of their farming practices, contributing to a more environmentally conscious and socially responsible global supply chain. 

Empowering Smallholder Farmers for EUDR Compliance and Sustainable Agriculture 

In conclusion, while smallholder farmers face inherent challenges in navigating the complex landscape of EUDR compliance, there exist substantial opportunities for collaboration, empowerment, and sustainable agricultural practices. By addressing challenges such as limited resources, technical constraints, and potential economic impacts, stakeholders can work together to build a framework that supports smallholder farmers.  

Embracing digital solutions, fostering inclusivity, and providing tailored support are integral steps in ensuring that these farmers become active contributors to deforestation-free supply chains. The opportunities lie in transforming challenges into avenues for growth, resilience, and the creation of a sustainable agricultural ecosystem that benefits both smallholder farmers and the global commitment to combat deforestation. Through collective efforts, the journey towards EUDR compliance can become a catalyst for positive change, aligning the goals of environmental conservation with the livelihoods of those at the heart of agriculture—our smallholder farmers. 

Frequently Asked Questions

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