The EUDR: What you Should Know and What to Expect

With the EUDR coming into effect on December 30, 2024, all actors along the cacao value chain are working to comply with the requirements of the regulation and to deal with its foreseeable effects.

This ongoing process has proved extra challenging due to the lack of clarity of some of the requirements -including the implementation through the EU portal – as well as the practical challenges of having full traceability from hundreds of small holder farmers for one shipment.

In order to have a basic understanding of this regulation, we should take a quick look at the development of the previous years and the steps that have been taken so far.

Production area on the island of St. Vincent (Courtesy of SVG Cocoa)

WHAT IS THE EUDR: A QUICK OVERVIEW

On 6 December 2022, European legislators reached a preliminary agreement on a new Regulation that should curb EU-driven deforestation and forest degradation.

On June 29, 2023, the Regulation on deforestation-free products entered into force. The main driver of these processes is the expansion of agricultural land that is linked to the production of commodities like cattle, wood, cocoa, soy, palm oil, coffee, rubber, and some of their derived products, such as leather, chocolate, tyres, or furniture. As a major economy and consumer of these commodities linked to deforestation and forest degradation, the EU is partly responsible for this problem. In a bid to lead the way to solving it, the Regulation requires those who are responsible for importing these commodities into the EU territory to source products that:

• Did not cause deforestation or forest degradation after 31 December 2020 (cut-off date);
• Have been produced in accordance with the relevant legislation of the country of production (legally produced); and
• They are covered by a due diligence process.

The due diligence process includes:

• Obligation to collect the following information: type of commodity, quantity, supplier, country of production. A key requirement is to obtain the geographic location of where the relevant commodities/products were produced. Coordinates can be supplied for farms smaller than 4 hectares and a polygon map is required of all farms bigger than 4 hectares.
• Requirement to analyse and evaluate the risk in the supply chain: this includes carrying out due diligence on the protection of human rights and rights of indigenous people in the production process.
• Establishment of processes to adequately manage and mitigate the risk of non-compliance, including for large companies an independent audit function and the appointment of a compliance officer.

However, the exact obligations will depend on a benchmarking system of the European Commission. They will identify countries as low, standard or high risk of producing commodities or products that are not deforestation-free or in accordance with the legislation of the producer country. Obligations for operators and authorities will vary according to the level of risk of the country or region of production, with simplified due diligence duties for products coming from low-risk and enhanced scrutiny for high-risk areas.

Operators and traders (considered to be non-SME: Small Medium Enterprise) shall bear the majority of responsibility and are asked to hold the higher standards of due diligence and traceability, while for those who are to be considered SME the regulation asks to keep track and share with the relevant authorities the reference number under which the due diligence for that specific product has been done.

More information can be found on the European Union EURLex page.

DAARNHOUWER AND THE EUDR

Since the beginning of 2023, Daarnhouwer took the first steps towards compliance of the EUDR by working on a self-risk assessment of our supply chain, to identify possible criticalities and apply corrective measures where/if needed.

We have applied the OECD Due Diligence process to asses our supply chain and define our levels of risk.

Having completed this assessment, we are proud and happy to announce we have partnered with Satelligence, a leading company in geolocation data collection and assessment, and risk assessment and mitigation related to deforestation in the supply chain.

Being a company with a rich history spanning over 100 years, Daarnhouwer has established deep rooted relationship with all of our suppliers and customers. However, we do realize that we don’t have the in-house capabilities to be everywhere and do everything ourselves in this process. Through the support and guidance of Satelligence, we can continuously improve our sourcing management, support our partners in origin, provide the information our clients need and ultimately, contribute to a better future for all the actors across the cacao value chain.

THE EUDR: CURRENT AND FUTURE CHALLENGES

Even though the objective of the EUDR is to have a positive lasting impact on the entire supply chain and contribute to reducing global deforestation, it requires a significant amount of effort and resources from most of the actors involved along the chain.

Small holder famers are the building block of the entire cacao value chain and the EUDR represents a challenge for the vast majority of them. Small cacao producers don’t have the required resources – partially or entirely – to comply with the standards imposed by the consumer market. The EUDR requires a significant additional investment from the most fragile part of the supply chain.

Those who cannot comply will be forced to find alternative and less profitable markets. As Daarnhouwer we want to use our extensive network to help those who cannot comply and be sure not to remove them from our supply chain.

Concurrently, we want to offer our support to those who decide to comply but have no resources to do so.

We have taken additional steps to strengthen our impact on a deforestation-free supply chain, by increasing our presence in certain origins and helping our partners where necessary.

Daarhouwer will be ready with full compliance by the end of 2024 and we look forward to further improvements across the value chain. Our role and responsibilities are towards our partners in origin as well as our clients in Europe and therefore the final consumer.

Do you have any questions about how we are preparing towards the EUDR deadline? Feel free to reach out to our Cocoa Team: cocoa@daarnhouwer.nl

Farmer members of Cooperativa El Ceibo. Cooperatives like El Ceibo provide geolocation services to each of their farmer members and update their members’ geolocation data to ensure their cacao is fully compliant with the EUDR.