Saturday, September 30, 2023
HomeEnergy & MeSustainable supply-chains: how will the EU’s new deforestation-free law change your weekly...

Sustainable supply-chains: how will the EU’s new deforestation-free law change your weekly shopping trip?  

Under the EU’s flagship Green New Deal, a new law obligating the bloc’s imports and exports to be deforestation-free entered into force in June earlier this year. Following the adoption of new legislative tools promoting renewables and energy efficiency during last winter’s energy crisis, the new deforestation law may once again strengthen the EU’s position in responding to the climate crisis.

Land use change – that is primarily deforestation – contributes to around 20 per cent of the global greenhouse gas emissions, while beef, soy and palm are responsible for 60 per cent of tropical deforestation.

The EU is the second biggest importer of deforestation after China, according to a WWF report from 2021 – with a 16 per cent share of deforestation associated with international trade, totalling 203,000 hectares and 116 million tonnes of carbon in 2017.

In terms of the drivers of deforestation, soy, palm oil and beef were the commodities with the largest embedded tropical deforestation imported into the bloc between 2005-2017. During this period, the largest EU economic players – including Poland – were collectively responsible for 80 per cent of the EU’s embedded deforestation through their use and consumption of forest-risk commodities, the report said.

Is the EU’s shift from a lagger to a leader in sight?

Despite notable progress in the roll-out of renewables and cutting carbon emissions when compared to the rest of the world, tackling global deforestation – and biodiversity loss, more broadly – has thus been an awkward anomaly in the EU’s green transition.

The long-awaited deforestation-free law means that relevant companies will be obligated to conduct strict due diligence if they trade palm oil, cattle, soy, coffee, cocoa, timber and rubber as well as derived products such as beef, furniture or chocolate.

Equally, the new legislative framework has a key emphasis on international cooperation. The regulation applies uniformly to both EU and non-EU products, aiming to incentivise sustainable practices and transparent supply chains. Interestingly, the law’s text urges the 27-member bloc and its executive body (i.e. European Commission) to take a leading role “at influencing the global market, not only supply chains to the Union.”

Influencing other countries like China and the United States to take similar legislative action could be the law’s key success story, Julia Christian, Fern’s Forest Campaigner, tells CEENERGYNEWS. However, as she highlights, it is currently too early to see an impact.

Green shopping for all?

The law’s more immediate impact is most likely to be seen at your next supermarket trip in December of next year, as most relevant suppliers have 18 months to implement the law with an extension for small and medium-sized enterprises.

“Consumers will no longer have to contend with confusing food labels,” Ms Christian tells us. Labelling of green products has often been associated with greenwashing. For instance, as seen with ambiguous abbreviations of products that contain palm oil or confusion surrounding sustainable palm oil. Thanks to the law, consumers across Europe will have a guarantee that they are indeed shopping sustainably.

Indeed, certain sustainable products have often been linked with a higher price tag. As Fern’s Forest Campaigner tells us, thanks to the law’s guarantee of sustainable supply chains – “you will no longer have to be rich to afford ‘de-forestation free’ products.”

In terms of added costs, the extent to which the new law may drive up prices for those products remains unclear, however, it seems unlikely to play a major inflationary role. An impact assessment that accompanied the European Commission’s initial 2021 legislative proposal noted that the minimum monetised benefits of the regulation would “clearly offset the costs,” Adalbert Jahnz, the Commission’s spokesperson tells us.

“We are still working through the details of compliance, building on the work we have already undertaken across the Tesco Group to avoid deforestation. Beyond that I’m afraid we’re not yet in a position to provide a definitive view,” TESCO’s Central Europe Communications Director, Ian Hutchins, told CEENERGYNEWS when asked about the regulations’ impact on food prices and whether the company is planning any operational changes.

Asking a similar question on food prices to the EU’s executive body, spokesperson Maëlys Dreux tells CEENERGYNEWS that the European Commission “acknowledges” that under the new rules, companies would have to make some investments to establish and maintain a due diligence system. 

As of late August 2023, the regulation’s direct impact on food prices therefore remains unanswered. Perhaps understandably so considering today’s volatile economic environment, as seen with the recent energy crisis and rampant inflation, which naturally presents further barriers for drawing up precise estimates.

However, as reassured by the European Commission, the new regulations is expected to provide new “market opportunities for sustainable producers regardless of their size”. As Mr Dreux further notes, with enhanced traceability and stronger due diligence in supply chains, companies are “better equipped” to manage sustainability impact and address financial, operational, and reputational risks.

Despite having to make certain changes and investments, the new law may not necessarily impose a significant administrative burden on companies and national authorities. The due diligence statement will be made available via an electronic system and for future imports, the statement’s submission will be done together with the customs declaration.

Moreover, authorities of EU countries will take into account the compliance record of operators, so that companies with a track record of compliance will be inspected less frequently, Mr Dreux tells us.

So, how will the EU’s new deforestation-free law change your weekly trip to a supermarket? From a climate perspective, the law seems to provide a strong regulatory tool for strengthening sustainability in the European retail sector. Looking globally, the law also signals a political will to reshape the EU’s approach to supply chains, strengthening its role in green diplomacy.

At the same time, from an economic perspective, more time is needed to gauge the impact of the law, particularly when it comes to prices. Until then, we can mostly rely on the European Commission’s view that the law will bring more benefits than barriers for consumers across the continent.

Sign up for our newsletters

    Monthly newsletter – Delivering the most important energy stories of the month selected by our Editor-in-chief
    Weekly Oil&Gas roundup - All major news about the oil and gas industry, LNG developments, the upscaling of new gases and related EU regulations arriving in your mailbox every Monday.
    Weekly Renewables&Climate roundup - All major news about investments in renewable energy sources, environment protection, green hydrogen and new innovative ways to tackle the climate crisis arriving in your mailbox every Tuesday.

    Most Popular