This article delves into the European Union’s new Regulation on Deforestation-Free Products (EUDR) and probes the prospective role that Voluntary Sustainability Standards (VSS) can play, potentially offering avenues for collecting information, risk evaluation, mitigation, monitoring, and assurance. The article highlights how certification processes can support enhancing supply chain transparency and mitigating supply chain vulnerabilities, ultimately aligning with the due diligence needs.
Deforestation is a pressing global issue with far-reaching consequences for the environment, biodiversity, and climate change. The United Nations Food and Agricultural Organization (FAO) estimates that between 1990 and 2020, around 420 million hectares of forest were converted to land for agricultural use. The European Union’s (EU) consumption accounted for about 10 per cent of global deforestation, with palm oil and soya making up for two-thirds of this.
To address the deforestation challenge, the EU has taken an ambitious step by introducing the EU Regulation on Deforestation-Free Products, or EUDR, which came into force on 29 June 2023. The regulation targets seven key “forest-risk” commodities, namely cattle, cocoa, coffee, oil palm, rubber, soya and wood, as well as their derived products. According to the regulation, the affected companies will have to fulfil due diligence, meaning that any operator or trader who places the related commodities on the EU markets or exports from it must be able to prove that the products do not have an origin from a deforested land and have not contributed to forest degradation (after 31 December 2020).
|The EUDR illustrates the process for conducting due diligence: |
1. Information collection: collecting detailed information, including geolocation data, to show that products comply with the regulation.
2. Risk assessment: This will be done for each product to identify the risk of non-compliance, which will entail identifying risk factors, including the country of production, as set-up by the European Union through a country-risk benchmarking system.
3. Risk mitigation: This will include conducting audits, getting more information, working with suppliers, capacity building, etc.
With companies, operators and traders now having around 18 months to implement the EUDR rules (as of January 2025), discussions pivot towards concrete steps for due diligence implementation and its implications, especially for the developing countries that export deforestation-related commodities to the EU. Developing countries are, however, relatively distanced from the discourse around due diligence in its extended meaning – in the context of human rights or environmental due diligence – which is more prevalent in the discourses in developed countries. In a recent letter signed by 17 countries from the Americas, Asia, and Africa, there has been a call to “repair” the legislation.
Voluntary Sustainability Standards (VSS), which are already active in most developing countries, have surfaced as a potential tool to address the related challenges associated with the implementation of the EUDR. VSS are private standards that require producers to adopt practices that align with specific economic, social and environmental sustainability metrics. VSS, like the Forest Stewardship Council (FSC), the Roundtable on Sustainable Palm Oil (RSPO), and others, have become key tools to address forest degradation and deforestation risks. Many of these standards set guidelines and criteria for sustainable practices in the production and trade of commodities which are linked to deforestation. They often include guidelines to protect high conservation value areas, prevent deforestation, and promote the rights of local communities and workers. For example, one of RSPO’s principle’s is to “operate legally and respect rights”. Another example is FSC which includes a set of requirements aimed at identifying high conservation value areas, maintaining them and restoring natural ecosystem areas where there are no remaining natural ecosystems. In the soy sector, ProTerra has a requirement prohibiting the clearing of native vegetation for agriculture.
The regulation, in its current stage, does recognize third-party certification schemes as a means of risk assessment in supply chains. However, the role that VSS can play in supporting the due diligence requirements is still not fully clear. There are multiple strands of discussions that center around various aspects of VSS in global sustainability governance and raise numerous questions on the role of these instruments in advancing sustainable trade. Nevertheless, through their requirements and tools for data collection and traceability, and for assessing, mitigating, and monitoring deforestation risks, VSS have the potential to support most of the due diligence needs in different target sectors.
As acknowledged in the EUDR, VSS can be used as instruments to conduct risk assessments. VSS constitute systems of assurance based on rigorous assessments through audits by independent third-party organizations to determine whether the certification-seeking entity complies with VSS requirements, which often include supply chain risk assessment obligations. In addition, many VSS are developing further risk assessment systems which could be leverage for companies to comply with the EUDR, such as:
- the automated risk assessment maps for deforestation provided by Rainforest Alliance along with GPS tracking facility;
- the FSC GIS Portal that tracks forest borders including Indigenous Peoples’ lands, protected lands, and territories with forest loss and gain;
- the RSPO Hotspot Hub, which uses satellite technology to provide near real-time information on detected hotspots and potential fires in oil palm plantations in Malaysia and Indonesia.
Besides, certified companies not only need to assess supply chain risks but also to mitigate these risks to obtain and maintain certification. Once it is ascertained that the requirements are being met, a certificate can be awarded, which allows for product differentiation on consumer markets or for buyers.
In addition, VSS can support the implementation of due diligence obligations in the EUDR through their data collection and traceability systems. The geolocation data requirements of the EUDR will present a massive challenge as it requires operators to collect geolocation data of all suppliers, including polygon data for farms larger than 4 hectares. VSS can hence be leveraged as they also include geolocation data requirements. This might prove especially important to prevent the exclusion of smallholder farmers in developing countries. VSS chain-of-custody requirements (for example, FSC, Rainforest Alliance, Fairtrade) and traceability systems, which ensure the integrity of certified products and keep records of their sales along supply chains, can also provide assurance for importers that imported products are coming from a sustainable and legal source, hence reducing the risk of deforestation in the supply chain. This can also facilitate the verification procedures that competent authorities of EU Member States will need to perform.
However, while VSS can be useful tools to support assurance and help companies assess and mitigate supply chain risks, even the most robust VSS cannot exempt companies from due diligence obligations under the EUDR (the so-called “green lane”).
The EU Regulation on Deforestation-free products represents a major step towards combating global deforestation. Voluntary sustainability standards and certifications can play a pivotal role in supporting businesses to comply with the regulation while fostering sustainable and responsible practices. By using VSS, companies can be incentivized to prioritize sustainable sourcing and contribute to the preservation of vital ecosystems worldwide. As companies gear up to comply to the regulations on deforestation, certifications might aid in moving towards a sustainable supply chain, where deforestation becomes a distant memory, and our ecosystems can thrive once more.
Following the discourse, the upcoming UNFSS Academic Advisory Council Meeting, 12th October 2023, at the European University Institute in Florence, will assess the interplay of VSS and Due Diligence under the realm of global sustainability governance and consequent impacts on developing countries and sustainable trade at large.
Find out more about the UNFSS Academic Advisory Council here: https://unfss.org/academic-advisory-council/