As the European Union (EU) enhances its regulatory landscape, businesses within its jurisdiction must remain adaptable and ready to meet new requirements. One of the most pivotal developments is the EU Deforestation Regulation (EUDR), which will take effect on 30th December 2024.

Part of a broader movement towards increased environmental oversight, the EUDR introduces stringent obligations. Companies trading in key agricultural commodities—such as soy, palm oil, cattle, coffee, cocoa, and timber—must now ensure their products do not originate from recently deforested areas or contribute to forest degradation.

Essentially, the regulation aims to curb the EU's role in global deforestation, mitigate biodiversity loss, and reduce greenhouse gas emissions. It also seeks to protect the rights of indigenous populations.While these goals align with the EU’s commitment to sustainability, they bring significant challenges for businesses, especially farmers. Those impacted by the EUDR must now perform due diligence to prove compliance, requiring detailed data on product origins and supply chain practices.

Larger corporations may have the resources to tackle these demands, but can we expect smaller businesses and local farmers to meet the same standards?

 

The problem

While progress has been made, the introduction of the EUDR highlights ongoing challenges around traceability and sustainability in agriculture. Implementing the regulation in a way that stays true to its original mission is difficult. Its core objective is to mitigate the damaging effects of commodity sourcing on tropical habitats.

However, while countries with robust digital infrastructures, like Brazil, are better equipped to comply, many poorer nations face serious obstacles. Smallholder farmers and family-led farms, in particular, often lack the technology and data systems necessary to meet EUDR requirements.

This "digital divide" threatens to shut them out of the EU market entirely, potentially devastating their livelihoods. When farmers lose access to such a vital market, their products, deforestation-linked or not, may be diverted to less regulated markets, often at reduced prices. Ironically, this could result in further deforestation as these farmers expand their operations to make up for lost income. This scenario has already been observed in sectors like cocoa, even before the EUDR’s introduction.

It is crucial to bridge this digital gap to ensure the regulation is not disproportionately harmful to those who are already vulnerable.

 

A solution

For the EUDR to succeed, the focus must extend beyond compliance to fostering collaboration and support, particularly for developing nations. These countries need both technical and financial help to adjust to the regulation’s requirements.

Public-private partnerships will be key to achieving this. Governments, local authorities, and international buyers must work together to support smallholder farmers. Government ministries responsible for the environment, agriculture, and trade can provide the necessary resources, while local governments can offer guidance on compliance.

Additionally, the private sector can contribute by investing in practical solutions, such as geolocating production areas, improving traceability systems, and ensuring adherence to local laws. International buyers, who play a critical role in global trade, should assist smallholder farmers in integrating into more sustainable supply chains.

Collaboration with NGOs and farmers' cooperatives is another way to make this process cost-effective. By establishing a public-interest digital infrastructure, smallholder farmers can monitor their production areas using remote sensing technology. This could simplify the compliance process and offer a more inclusive solution.

To avoid fragmentation, these systems should be unified, allowing for seamless sharing of data across borders. This would enable a more efficient compliance process while helping smallholders to access the digital tools they need to compete in the EU market. Such integration would push the industry forward while ensuring sustainability is maintained.

 

The bottom line

With the EUDR deadline fast approaching, both large corporations and governments are voicing concerns about the regulation’s potential impact. While these concerns highlight the scale of change required, they also signal the EUDR’s potential to drive meaningful progress in the fight against deforestation and climate change.

It’s vital, however, that this progress doesn’t come at the expense of smallholder farmers, who are essential to the global agriculture industry. If these farmers are left behind, we risk increasing deforestation as they seek new markets and livelihoods.

The EUDR should be seen not as a burden but as an opportunity to transform the industry. By integrating smallholder farmers into a digital ecosystem and improving data capabilities, we can help them remain compliant and competitive, while also tackling long-standing challenges in agricultural traceability and sustainability.

Ultimately, the EUDR presents a chance to create a more resilient and inclusive agricultural system. But to do so, we must ensure that the transition is fair, supporting both the environment and the farmers who are critical to its preservation. Through proactive measures, we can set a path towards a future where sustainable practices are not just an ideal, but the norm.