Is Europe really wishing us a happy green harvest?
Aline Locks, CEO Produzindo Certo
The news was no surprise. We knew it would come in due course. Still, some were taken aback when, in December 2022, the European Union gave its preliminarily approval to a bill that includes a ban on the entry into the bloc of commodities produced in forest areas cleared after December 31st, 2020.
The list of products covered by the rule is also not surprising: soy, coffee, cocoa, meat, lumber, rubber, and palm oil, as well as by-products such as chocolate, leather, and furniture. Brazil exports all of them to European countries. Thus – and this was also expected – one of our most important clients has sent us a very clear year-end message: to be happy in 2023, we must get greener. Or better yet: we will need to make it clearer that we already produce those products the right way.
There are some novel details to the regulation, still subject to a final vote by the European Parliament and the Council of the European Union. One point of frequent contention is that the resolution makes no distinction between legal and illegal deforestation, unlike Brazilian law, which does. On the other hand, the rule only covers forest areas, which in Brazil means the Amazon, Pantanal, and Atlantic Forest, but for the time being leaves out biomes such as the Cerrado.
That "for the time being" is significant. A review of the bill is already scheduled for a year after its enactment, and it is more than likely that new biomes will be included as areas subject to EU restrictions. The Cerrado will almost surely be put on the list, both because of international pressure and because of its well-known strategic position as home to the headwaters of some of South America's main river basins. As Brazil’s second largest biome, it features one of the highest rates of conversion of native vegetation into croplands. Here, once again, it is important to bear in mind that, under the European rules, the 12/31/2020 cut-off makes no distinction as to whether later conversions were legal or not, in the eyes of Brazilian law.
Stale rhetoric
The European Parliament's lead negotiator, Christophe Hansen, gave the bill a solemn air, while glorifying its impact: "I hope this innovative regulation will boost forest protection worldwide and inspire other countries," he said.
The term innovative, however, has no place in this situation. Europe has simply repackaged one of its well-known tools: blacklisting. Anyone who doesn't fit is out. This is an environmental blockade, not a means to reduce deforestation. The first impact will indeed be to exclude agricultural frontiers from European imports, but they will continue to spread nonetheless, to serve other markets.
The beneficiaries should be producers in consolidated regions, such as southern Brazil, who produce enough to meet European needs, but at a higher cost to buyers. Deforestation, in turn, will go on, until the term "incentive" is voiced by EU leaders, instead of just restriction.
Warning signs
To comply with the proposed regulation, importing companies – which will pass requirements on to their suppliers – will have to provide due diligence statements attesting that their supply chains do not contribute to clearing forests. Anyone failing to comply will face heavy fines.
Large companies will have 18 months to adapt to the new rules, and smaller companies 24 months. This means a transition period, probably starting in 2023, for export chains to improve or adopt verification and tracking systems, stepping up local initiatives already underway.
Even with the option of buying from other regions, it is possible that major traders and food companies who lead the purchase and export of Brazilian commodities will expand their current pilot experiences, improve their sourcing models, and select their suppliers more strictly. New technologies should gain even more space.
The problem is whether Brazil will take this red flag that the market has begun to shift as a trigger to develop real and feasible strategies to reduce deforestation. The fact that the European approach may be adopted by other commodity importers – even China is actually looking into tighter socio-environmental conditions for commodities like soy and meat – can be a tremendous incentive for small and medium-sized farmers to adopt responsible agricultural production. That message is coming through loud and clear.
Looking ahead, our organization "Produzindo Certo" (Doing it Right) is prepared to help farmers and exporters comply with new European requirements. The Produzindo Certo Platform has already verified nearly 2 million hectares of soy on farms that together protect over 2.2 million hectares of native vegetation. Making sustainable production pay back on those farms is the way to get more farmers to commit to deforestation-free agriculture.
Furthermore, with the growing number of sustainability-oriented extension agents supported by LIF, knowledge and awareness about new demands for sustainable production chains are sure to spread. And this will keep us working for even greener harvests in the future.