Rapid measures needed to help small coffee growers meet EU’s deforestation-free regulation deadline

The multi-billion-dollar coffee industry stands on the precipice of a transformative moment, set to unfold in approximately 11 months with the application of the European Union’s groundbreaking law on deforestation. The Enforcement of the EU Deforestation Regulation (EUDR) is designed to ensure that products consumed by EU citizens do not contribute to global deforestation or forest degradation, with far-reaching implications for greenhouse gas emissions and biodiversity conservation.

Enacted on June 29, 2023, the regulation (EU) 2023/1115 targets the European supply chains of cocoa, coffee, soy, wood, palm oil, rubber, and cattle. Given Europe's position as the world’s largest coffee-consuming continent, accounting for over 30% of global consumption, the impact on the coffee industry is expected to be substantial.

According to the European Coffee Federation’s report, titled "Coffee Deforestation Initiatives Overview" (February 2022), an alarming 8.8 million hectares of forest land are lost annually worldwide, primarily due to the conversion of forests into farmland. With coffee demand projected to rise and climate change potentially shrinking suitable cultivation areas by 2050, the EU's deforestation-free regulation emerges as a crucial tool to curb global deforestation, greenhouse gas emissions, and biodiversity loss.

The EUDR aims to reduce deforestation impact by approximately 71.92 kha per year, equivalent to about 100,728 football pitches, and cut CO2 emissions by 31.9 million metric tons annually. Companies involved in the affected product supply chains within the EU must conduct thorough due diligence to confirm compliance with the regulation, ensuring that products are not sourced from deforested or degraded land post-December 31, 2020. This cut-off date has been suggested to minimize disruption to international supply chains.

To achieve compliance, coffee companies must collect geographic information, including satellite imagery, assess the risk of non-compliance, and mitigate these risks. Companies will also have to verify that these products are compliant with relevant legislation of the country of production, including respect for human rights, and the rights of affected Indigenous Peoples. The Forest Stewardship Council (FSC) explains that he EU Competent Authorities, which are yet to be nominated, will be the organizations in charge of enforcing and implementing the EUDR. They will have access to relevant information provided by the companies or credible voluntary systems, such as the geolocation coordinates of relevant commodities.

Industry Response

As the regulation takes effect, concerns arise about the awareness and preparedness of producers. Reports from the end of 2023 indicate that EU importers are already reducing purchases from small farmers in Africa and beyond, anticipating the challenges of compliance. The potential repercussions on the livelihoods of millions of farming families highlight the urgent need for global coffee producers to adapt to the new regulatory landscape.

"I see no way of buying significant quantities of Ethiopian coffee going forward," said Johannes Dengler, an executive at German roaster Dallmayr, which buys about 1% of the world's exported coffee. Because beans he orders now could find their way into coffee products sold in the bloc in 2025, they must be EUDR-compliant. The dry-up of contracts in Ethiopia will be felt by some 5 million farming families who rely on the crop as their main source of income.

Similarly, Coffee major JDE Peets said it might be forced to exclude some smaller producing countries from its supply chain as early as March if it hasn't "found and implemented a solution with them" by that date. According to Ekathimerini news site citing a source at commodities trade major reports that two of the world’s largest coffee traders, Sucafina and Louis Dreyfus Company (LDC) have already locked in future sales contracts that include an EUDR premium.

Support Measures and Partnerships

In response to the EUDR, initiatives by organizations like the Rainforest Alliance, partnering with coffee farmers' cooperatives, aim to certify coffee to meet global standards. Rainforest Alliance has partnered with some cooperative societies affiliated to Gusii Coffee farmers’ Cooperative Union ( GCFCU) in Kenya to aid in certifying the coffee to meet the global standard. The International Non-Governmental Organization (NGO) will implement the coffee project under the Gusii Regenerative Agriculture landscape ( GURAL).

Rainforest Alliance Regional Director, - Kenya/ Tanzania, Marion Nduta said 6 percent of companies are driven by business interest and disregard sustainability, noting, they have no back up on agro-biodiversity and data. Additionally, the European Commission said it has several initiatives to help producing countries and smallholders comply with the EUDR, including one launched at COP28 where the EU and member states pledged 70 million euros (US$76 million) to that end.

The European Commission has committed to provide a training environment and “train-the-trainers” sessions to all interested companies in the summer of 2024, in coordination with member states authorities. This will give all interested stakeholders the opportunity to familiarize themselves with the System well before the Regulation enters into application. The Commission will also then make available user manuals and other relevant self-learning material such as video tutorials.

While challenges loom, the European Commission has committed to supporting producing countries and smallholders through initiatives and training programs. The implementation of training sessions, user manuals, and self-learning materials is expected to familiarize stakeholders with the system well before the regulation takes full effect, providing an opportunity for proactive compliance.

Kenya Coffee Producers Association Chairman Peter Gikonyo said there was need to sensitize farmers to comply with the market demands. “The Ministry of Agriculture should facilitate the organizations to help in documenting the farmers' details to comply with the set conditions,” said Gikonyo. Out of the local production of 52,000 metric tones, 50 percent is marketed in the EU countries. To secure the EU market, the government needs Sh400 million (US$2.5M) to facilitate the development of Geo Maps. It emerged that Kenya supplies the EU market with 50 percent of the coffee requirement and thus needs to capture all the 1.2 million farmers on the geo map platform.

Brazil, the biggest producing country of coffee in the world is likely to reap more in the transition face of the new EU regulation of all coffee producers. The country has good land title data, polygon data and forest monitoring data, with much of it already digitized. It will probably increase its sales to Europe if production allows. However, it is still not clear how Ethiopia’s famous forest and garden coffee systems will fare under satellite monitoring that struggles to distinguish between agroforestry trees replaced and forest trees cleared.

The Vietnamese and Ugandan governments are both being proactive and positive about the EUDR. Uganda’s Coffee Development (UCDA) Manager for Eastern wing, Mike Maliro noted that Uganda is prepared to comply as the authority has initiated registration of coffee farmers across the country and their acreage.

“Geo-maps are being generated with coordinates to show how big one’s coffee farm is, what is expected from the field and so on. So, there is no way one can deceive.” Maliro underscored. In Vietnam, ten coffee companies are already supporting three rapid EUDR pilots that IDH is conducting in the Central Highlands of Vietnam with the support of the government.

In conclusion, the EU's Deforestation-Free Regulation is a pivotal step towards sustainability in the global coffee industry. While compliance may present challenges, the regulation aligns with ethical considerations for the environment and ensures greater food safety. As the industry navigates this turning point, proactive measures, awareness campaigns, and international collaboration will be crucial for a smooth transition.