EUDR Won’t Wait: A Roadmap for Industry and Government to Support Smallholders Now

In recent weeks, there has been a surge of requests from various organisations and industry groups for delays in the implementation of the European Union Deforestation Regulation (EUDR).

These widespread appeals highlight the growing fear and uncertainty surrounding the regulation, especially as the EU has yet to clarify key details.

However, the EUDR won’t wait. It’s time for industry and government to shift focus from postponement to proactive support.

This article offers a practical roadmap with actionable steps to help smallholder farmers comply with the EUDR. By following this plan, we can ensure that smallholders are not left behind and that the agricultural sector is prepared for this critical transition.

The Cost of Compliance: Smallholders Facing Overwhelming Burdens

The European Union Deforestation Regulation (EUDR) is approaching fast, with the EU making it clear that there will be no delay in its implementation. While the regulation is crucial for combating deforestation, the reality of its impact on smallholder farmers across various crops—such as coffee, cocoa, and palm oil—presents significant challenges.

These farmers, often operating with minimal profit margins, are now faced with the daunting task of proving their products are deforestation-free.

The costs of compliance are steep. Satellite mapping services, which are being heavily promoted, are just one piece of the puzzle. These services can help identify non-compliant farms, but without a robust system for traceability, mapping alone is pointless.

Traceability requires constant monitoring of crop deliveries, keeping detailed records, and ensuring that every batch of produce can be traced back to its source. For smallholder farmers and their producer organisations/cooperatives, who typically work with limited resources, the financial and logistical burden of implementing such systems is overwhelming.

Digitisation is not just about ticking boxes for compliance; it’s an opportunity to transform smallholder value chains, building resilience, efficiency, and sustainability for the long term.

Digital Transformation: The Essential Path to EUDR Compliance and Beyond

In our experience at AgUnity, the drive for compliance with the EUDR has highlighted the urgent need to digitise smallholder value chains—many of which are still heavily reliant on paper-based processes. While the initial push for digitisation may stem from the need to meet traceability requirements, it’s crucial to understand that the benefits extend far beyond regulatory compliance.

Most smallholder farmers and cooperatives currently view digitisation primarily as a tool for satisfying external mandates, but its potential reaches much further.

Digitisation can streamline operations, enhance data management, and open up new market opportunities. For large cooperatives and unions like OCFCU, which represents nearly 600,000 farmers, the scale of operations demands a digital approach, as manual processes simply cannot handle the complexity and volume of reporting required.

This transformation should therefore not just be about ticking boxes for compliance; it’s about fundamentally improving how these value chains operate.

However, the potential of digitisation can be difficult to grasp for those in developing economies who are new to digital systems. Therefore, it’s vital to focus on demonstrating the broader, long-term benefits of digitisation, ensuring that it leads to sustained improvements in efficiency, decision-making, and sustainability, rather than merely meeting immediate compliance needs.

A few weeks ago, an EU delegation visited Ethiopia and met with OCFCU, one of our clients. They were impressed by the progress made in digitising their operations, but the visit also underscored the inherent complexities of the coffee smallholder value chain.

This realisation highlights the importance of a well-supported transition to digital systems. Most cooperatives, often comprising around 1,000 farmers, face exponentially increasing complexity when additional buyers and exporters are involved. To meet the EUDR’s requirements, European buyers will need accurate, instant reporting of each farm’s GPS location to the European Information System. Attempting to manage thousands of farmer records and GPS locations manually is simply not feasible. Therefore, digital traceability systems, which can automate the reporting process, are the only practical way forward.

Implementing Digital Solutions: A Step-by-Step Roadmap

Given the complexities and challenges involved, the following approach outlines how smallholder value chains can be digitised effectively to comply with the EUDR:

Preparation:

1. Digitise Cooperative Members: Start by creating a centralised database of cooperative members, including detailed information about their personal situations, land sizes, crops, and other relevant data.
2. Record GPS Locations: Capture GPS coordinates for farms up to 4 hectares in size or use polygons for larger plots. This step is crucial for ensuring that each farm’s location can be monitored for compliance.
3. Validate with Satellite Services: Use approved satellite services to validate the GPS locations and confirm that the farms are deforestation-free. This step helps identify any potential risks early in the process.
4. Verify and Update: For farms identified as being at risk, conduct further investigations and provide additional evidence or seek governmental decisions to update their status if necessary.

During Harvest:

• Farmer Identification: Ensure that farmers identify themselves when delivering their produce at collection points. This can be done digitally to streamline the process.
• Record Transactions: Keep digital records of all transactions at collection points. This data should be linked to the individual farmer and their GPS location.
• Separate Produce: Maintain strict separation of produce from compliant and non-compliant farms throughout the processing phases.
• Track Produce: Assign unique codes to produce bags, which are linked to the original lot and corresponding GPS locations, ensuring full traceability throughout the supply chain.
• New Lots for Mixing: When produce is mixed during processing, create new lots and update the traceability records accordingly.

Final Step:

• Reporting: When products are sold, share the GPS or polygon information combined with legal compliance evidence for the order based on the originating lots. This ensures that the buyer has full visibility of the product’s origin, satisfying EUDR requirements.

The Risk of Market Exclusion: Why Inaction Is Not an Option

The stakes are high for smallholder farmers who fail to comply with the EUDR. Without the necessary compliance evidence, these farmers risk losing access to the European market—a critical source of income for many.

Moreover, with other regions likely to adopt similar regulations, the potential for market exclusion extends beyond Europe. Smallholders could find themselves shut out of major global markets if they cannot prove that their products are deforestation-free.

However, rather than immediately penalising non-compliance, the EU could consider starting with warnings instead of fines. This approach would provide the entire supply chain with some breathing room to adjust to the new regulations, allowing more time to develop and implement the necessary systems without the immediate threat of financial penalties.

Moving Forward: No Delays, But Comprehensive Support

While delaying the EUDR might seem like a reasonable way to ease pressure on smallholders, it is not a viable long-term solution. The environmental goals of the regulation are too important to postpone. Instead, the focus should be on providing comprehensive support to help smallholders meet the new requirements. This includes extending financial aid, offering technical assistance, capacity building, and fostering public-private partnerships to share the burden of compliance.

It’s also important to recognise the positive steps that some countries are already taking. For example, initiatives in many countries show that progress is possible, and these efforts should be encouraged and supported.

In conclusion, while the challenges of complying with the EUDR are significant, they are not insurmountable. With the right support and a phased approach to enforcement, smallholder farmers can meet these challenges.

This period of transformation should be seen as an opportunity to implement lasting, systemic changes that will benefit the entire agricultural sector in the long run.

We at AgUnity are committed to working with industry leaders, government agencies, and unions/cooperatives to bring this roadmap to life. The EUDR won’t wait, and neither should we. Let’s collaborate to implement these steps, ensuring a resilient and sustainable future for all stakeholders in the agricultural sector. Reach out to us today to start making this vision a reality.

References used for inspiration:

1. EuroCommerce Calls on European Commission to Delay EUDR. ESM Magazine. Retrieved from: https://www.esmmagazine.com/supply-chain/eurocommerce-calls-on-european-commission-to-delay-eudr-270182
2. Prominent Coffee Groups Call for Immediate Interventions as EUDR Looms. Daily Coffee News. Retrieved from: https://dailycoffeenews.com/2024/08/15/prominent-coffee-groups-call-for-immediate-interventions-as-eudr-looms/
3. Fairtrade Statement on the EU Deforestation Regulation. Fairtrade International. Retrieved from: https://www.fairtrade.net/news/fairtrade-statement-on-the-eu-deforestation-regulation
4. GCP Signs Letter to EU Commission. Global Coffee Platform. Retrieved from: https://www.globalcoffeeplatform.org/latest/2024/gcp-signs-letter-to-eu-commission/#About
5. Fairtrade International Calls for Financial Support and Clarity for Small-Scale Farmers Over EUDR Regulations. Food Ingredients First. Retrieved from: https://www.foodingredientsfirst.com/news/fairtrade-international-calls-for-financial-support-and-clarity-for-small-scale-farmers-over-eudr-regulations.html
6. The Impact of European Union Deforestation Regulation: Peru Case. World Bank Blogs. Retrieved from: https://blogs.worldbank.org/en/latinamerica/the-impact-of-european-union-deforestation-regulation-peru-case

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