The European Union’s “Restore Nature” law, which aims to tackle climate change and preserve biodiversity, threatens global trade estimated annually at $110 billion, affecting economies around the world and suppliers struggling to come to terms with the reality of Europe’s quest to become… More environmentally friendly, according to Bloomberg Economics.
7 items
By the end of the year, major companies operating in 7 commodities (coffee, cocoa, soybeans, palm oil, livestock, rubber and wood) will be required to prove that people in their supply chains did not work on deforested land after 2020, legally or illegally.
This means that every coffee bean, livestock carcass and plank of wood, along with things like chocolate, car tires and books, will need to be traced to the exact locations from which they were brought, or the European Union will impose heavy sanctions, Bloomberg reported.
There are more than 55 countries that each export at least $100 million annually in goods to the European Union that will be affected by the law, and the impact will depend on the goods they ship, who buys them, and whether there is data to deal with mapping the farm and all the necessary paperwork. But there are warnings about higher prices for consumers in Europe.
The task is even heavier in the coffee industry, which is less tied to deforestation than palm oil, livestock or soybeans, but more dependent on millions of smallholder farmers spread across dozens of countries, many of whom lack the means to prove they can comply with the law.
A global challenge
“We are starting to see the scale of this challenge around the world,” said Elizabeth Teague, director of climate resilience at Root Capital, an impact investor that supports small farmers in transition. “Everyone is trying to scramble and respond to the reality of European law.”
Indonesia exports large quantities of 5 of the seven commodities to which the law will apply, as it is the largest producer of palm oil in the world, the second largest exporter of rubber, and one of the largest coffee producers.
The Jakarta government expressed concern about the European Union’s one-rule-all approach that threatens to undermine economies by excluding smallholder farmers from the world’s largest trading bloc.
“There is a lot of fear among countries about what this will mean for their exports, and therefore their bottom line, because they are huge,” said Pamela Cook-Hamilton, executive director of the International Trade Center, which works with weak economies.
No one denies the need to protect forests, which are extremely important for reducing carbon in the atmosphere. According to Bloomberg, in just 3 decades, the world has lost an estimated 4.2 million square kilometers of forests, an area larger than the area of the European Union.
At the COP26 climate summit in Glasgow in 2021, more than 100 countries pledged to stop this matter and increase the area of forests, and while some reduced their commitment to the matter, the European Union stuck to the promises, arguing that it was a matter of credibility after obtaining overwhelming popular support.
Adapting to the new rules highlights the scale of the challenge of introducing green environmental policies, some of which are already facing a backlash. Since the legislation came into force last June, this legislation in Brussels has led to calls to postpone its implementation, and many letters of concern. regarding its implementation, and intense pressure from governments.
Various industry groups, such as coffee roasters, wood flooring makers, printers, and farmers, have expressed concerns about enforcement of the law, which is a growing concern.
Countries such as Australia have asked for a delay until requirements are understood well enough, traders have blamed the European Union for an increase in cocoa prices this year, and coffee-producing countries have warned of potential shortages in Europe.
In recent weeks, some EU member states have expressed concern that their farmers and companies have not had enough time to prepare, and have called for a “rapid review” and extension of the implementation period.
GPS
Meanwhile, as the race is on to prove that farms have not engaged in deforestation and adhered to local laws, companies, governments and agricultural cooperatives are busy geotagging land around the world.
According to Bloomberg, Thomas Vassen, director of Meridia Land, oversees the arduous process of verifying data from more than 35 countries, and maps of farms in Indonesia, Ivory Coast and Ghana, for the benefit of companies operating in the European Union.
The company is increasingly being used by some of the largest consumer brands and companies, including Unilever, Mondelez International, Cargill, and Lollydrives, to name a few.
Vasen says the company’s number of clients has doubled since the new law was announced in late 2021, and it is working to verify millions more farms.
It is estimated that about half of the farms included in the European law may not have been mapped. “Thousands of people are now mapping the geographical locations of farms around the world,” Vassen said. “There is a huge effort ongoing. There are millions of farms and they must all be mapped within a few years.”
