The European Union Regulation on Deforestation-free products (EUDR) & Traceability Systems

Our key takeaway: 29 June 2023 was the day when the European Union Regulation on Deforestation-free products (EUDR) entered into force. Companies have to show that goods brought into the EU have been legally produced on land that was neither deforested nor degraded after 31 December 2020. In practice, this means that companies must disclose the specific farm(s), forest(s) or plot of land where the commodity was produced and the conditions on the ground. The paper authored by Lindsay Duffield and Julia Christian puts forward key suggestions for companies to consider as they go about developing, or building on, new and existing traceability systems that are credible and transform practices on-the-ground. Key suggestions include that 1) companies work together to share the methodologies and datasets used to trace back to the farm/forest/plot of land where the commodity was produced to avoid duplication of work and double-counting; 2) traceability systems be designed and evaluated by a multitude of stakeholders; 3) grievance mechanisms are implemented to allow anyone to submit concerns regarding the system; 4) smallholder farmers are given control and access to the data they provide and incentivised to do so; and 5) these systems are linked to remedy and enforcement actions. Traceability systems can only drive real, on-the-ground change if they include robust remedies and are backed by enforceable actions.‍

Lindsay Duffield and Julia Christian authored Transformative Traceability: How robust traceability systems can help implement the EUDR and fight the drivers of deforestation (May 2024). This paper looks into how credible and transformative traceability systems can be leveraged to meaningfully address deforestation in the context of the European Union Regulation on Deforestation-free products (EUDR).

• Challenges with current traceability approaches: The paper highlights some of the key challenges affecting traceability systems. These are: 1) contradictions in data. Companies have their own polygon mapping methods, which can lead to data inconsistencies, for instance, in the recorded plot perimeters; 2) lack of verification of data. Datasets “are only as reliable as the information recorded in that dataset”; 3) unavailable information, for instance, confidential information held by the government showing legality of land tenure that is not publicly accessible; 4) lack of transparency, whereby many companies do not voluntarily disclose the findings and/or functioning of their traceability systems; 5) companies conducting traceability in silos, which can lead to duplication of work, double counting and laundering; and 6) not designed to drive change in producer countries because data is held by downstream companies rather than farmers’ cooperatives, and the data that is produced is not as useful to producers. Not to mention that many traceability systems are not linked to remedy and enforcement, which “compromises the potential of a traceability system to help drive down deforestation or illegalities on the ground.”
  

• 10 criteria for credible and transformative traceability systems: The paper highlights seven key components of credible traceability systems. These are: 1) “[t]he traceability system is based on robust, ground-truthed data.” This means verifying farm polygons and aligning on what it means to legally comply with laws in producer countries; 2) “[t]he data in the system is publicly accessible and comprehensive” so that a wide range of stakeholders such as civil society can access the data; 3) “[t]he system is co-designed and continuously evaluated by a multistakeholder body”; 4) “[t]he system is subject to periodic independent audits”; 5) “[t]he system has a clear and accessible grievance mechanism” to ensure that concerns with the system can be flagged and responded to; 6) “[t]he system is capable of detecting or excluding double-counting of farm polygons in the supply chain”; and 7) “[s]mallholder farmers have access, control and ownership over the data generated from them.” The paper also highlights three key components of transformative traceability systems. These are: 1) “[t]rack characteristics that are important to all stakeholders.” For instance, the prices paid along the supply chain will be of particular interest to upstream producers; 2) “[b]e linked to remedy and enforcement actions, because merely detecting problems is not enough”; 3) “[b]e linked to positive incentives for producers” to improve outcomes on the ground and ensure continued support for well-functioning traceability systems.
  

• Recommendations for companies: The paper recommends that companies take actions in the short-and long-term. In the short term, they can: 1) “[r]elease the production plot polygon data they have already collected, to enable data sharing”; 2) “[s]upport and contribute to efforts to develop interoperable approaches to deforestation commodity traceability”; and 3) “[r]eview existing internal traceability systems and systems in development, against the 10 criteria in this paper, and take steps to address any shortfalls.” In the long-term, companies can: 1) “[f]inancially contribute to the set-up of and running of public traceability systems”; and 2) “[e]ngage in purchasing practices that enable smallholders to invest in producing the data needed for traceability, in particular via long-term contracts and pricing.”