The EU’s newly-agreed law on deforestation-free supply chains across key goods entering the bloc’s single market will set a global benchmark for others to follow, despite the risk of loopholes in the final text due, according to Nicole Rycroft, founder and CEO of non-profit Canopy Planet.

Once adopted, the legislation aims to ensure that the EU market will no longer contribute to international deforestation and forest degradation by requiring mandatory due diligence on certain products imported into the region, including palm oil, cattle, soy, coffee, cocoa, timber and rubber, as well as derived products such as beef, furniture, or chocolate.

The new rules are slated to enter into force in 2024, and could ban goods from entering the EU market if they are deemed to pose a risk to global deforestation or forest degradation. The list of commodities was chosen on the basis of a thorough impact assessment identifying them as the main drivers of deforestation, often due to related agricultural expansion.

The EU’s environment commissioner, Virginijus Sinkevicius, described the agreement as “the most ambitious legislative attempt to tackle these issues worldwide ever”.

As the bloc is one the largest consumer markets of these commodities, the law sets a precedent that will force firms involved in the supply chain, as well as other governments, to wake up and take notice, according to Rycroft, who expressed her views in an interview with Carbon Pulse.

“It conveys a really clear message that the window is closing for business-as-usual logging. Both for the forest industry in the north, as well as the forest industry in the south, the ‘take, make, waste’ supply chains of industrial forestry are relics of the 19th, 20th century,” she said.

“This piece of legislation signals that this is where we are going to stay – there are going to be stranded assets – and these practices are no longer acceptable.”

The law, provisionally agreed in December by legislators, focuses on tackling deforestation regardless of whether it is legal or illegal, and includes strict traceability requirements linking commodities to the farmland where they were produced, with a country benchmarking system.

Operators and traders of the goods will also have to prove that the products are both deforestation-free and legal – produced on land that was not subject to legal or illegal deforestation from 2021 onwards.

One of the main strengths of the law, and key to corporate action, is that it addresses indirect effects along the supply chain of commodities, accounting for 90% of the climate and biodiversity impacts, Rycroft continued.

“That Scope 3 level of biogenic carbon is really where the majority of wood products’ impact lies.”

DEGRADATION

From another technical perspective, the legislation’s power lies in the fact that it covers both deforestation as well as forest degradation, with the latter often overlooked in the past, that Rycroft described as “groundbreaking”.

“This piece of legislation deals with both deforestation, which is the practice of inversion and forest loss most commonly practised from a technical perspective in the tropics, as well as degradation, which is then generally from a technical perspective what logging in northern forests tends to be defined as,” she said.

“That’s incredibly important for both climate and biodiversity, the fact that it covers both.”

Generally for northern forests, 80% of the logging is in primary forests, high carbon landscapes, biodiverse landscapes, that haven’t been captured under the rubric of deforestation laws, so including the definition of “degradation” is key to their protection, she said.

The law also marries well with the EU’s circular economy action plan where there is significant overlap with the objective of utilising sustainable materials.

Canopy Planet works with nearly 1,000 corporates including Amazon and Zara, which are also closely monitoring this emerging EU regulation.

“We help them to eliminate the use of high carbon, high biodiversity value forests from their supply chain, and then identify and help kickstart commercial production of these lower-carbon or circular alternatives,” Rycroft said.

DRIVE NEW LEGISLATION

It is hoped that the move from Brussels will catalyse similar attention for forest protection across the Atlantic with some US lawmakers describing the law as setting a benchmark.

Rycroft pointed to certain states and cities that have already been progressing along the same route as the EU.

“New York and California have been looking at what’s been happening in the EU and have been moving in a similar direction of coupling deforestation and forest degradation together,” she said. “In the US, there’s definitely resonance already.”

In producer countries however, the US and EU being predominantly consumers, there may be greater resistance.

“I would think it will be a while until you’ll see countries like Canada taking a step in a similar direction,” Rycroft said.

Another benefit to the legislation is that it also takes aim at legal deforestation and degradation, not just illegal practices, if the activity contravenes the EU’s legislated standards.

“There’s been a lot of historical focus on legality, you know, which has played an important role. There is a lot of logging that is taking place in the world that is legal, but completely unsustainable from a planetary stability perspective,” Rycroft commented, continuing to consider the example of Canada.

“There is not a single caribou herd, woodland caribou herd in Canada that is not either threatened or endangered because of this loss of habitat,” she said, also pointing to legal logging in Sweden and Indonesia.

“You can just pick spots around the world where there is legal logging …  that’s just completely unviable from a planetary budget perspective.”

Another example of a potential move towards similar legislation may next come from the UK where in a public consultation on tackling illegal deforestation that ended last March, most of the nearly 17,000 respondents reiterating the need for the government to act swiftly, though no legislation has yet been added to the country’s environment agenda.

LOOPHOLES

While the law may be seen as something of a game-changer, it is possible that loopholes may be baked into the final legislative text, according to Rycroft, who expects the measure to come into force in Q2 once the text has been formally approved by the European Parliament and Council of member states.

“There’s still a little bit of ‘the devils in the detail’ in that final text,” she said.

“Word on the street is that there have been significant changes from when the last version of the text was seen until now. So there are some question marks around just how much change has actually taken place to some of the elements of the legislation that were, and could still be, very exciting,” she added.

“Some of the concern is that the European forestry industry in particular, may have been able to create large enough loopholes that you could drive giant logging trucks through them.”

The EU’s definition of “forest degradation” was also said to have been softened amid lobbying from Canada and some other governments, which also resisted the inclusion of protections sought by the Parliament for Indigenous peoples’ human rights.

But Rycroft nevertheless remained positive despite the potential for a weaker final version of the law.

“No piece of legislation is perfect – right?” she asked.

“What the EU legislation – depending on how the final text comes out – does do is it conveys a really clear message.”

DISCLOSURE RULES

Many advocates have called for other forms of new regulation to ensure biodiversity protection, namely mandatory impact and risk disclosure rules for corporates that many, including Rycroft had hoped would be included within the text at the UN’s COP15 summit in Montreal in December.

“Putting in more scaffolding around reporting, having there be mandatory disclosures and accounting for the sourcing impacts of supply chains, it really is critical,” she told Carbon Pulse.

“Biodiversity has been the slightly less famous cousin of climate change over the last 10 to 15 years in particular, and I think it’s really starting to kind of break through in terms of consciousness that if we’re not actually addressing both, then it’s going to be a zero sum game in the end,” she added.

Similar legislation has come into force last year in the carbon world, with mandatory corporate disclosure regulation coming into force in the UK last April that requires publicly-listed firms to publish climate-related risks.

MARKETS

As for the role of markets and nascent biodiversity crediting, Rycroft described its importance for channelling much-needed private finance into conservation.

“There are a lot of people in the movement that are not supportive of carbon credits and so it’s an issue that’s not without controversy, but we have to find a way to be able to help finance nations, both Indigenous as well as countries, to be able to afford to conserve the landscapes and the marine-scapes that are critical for planetary health,” she said.

“Biodiversity credits are an important market mechanism that allows the private sector to be able to plug in to bring investment into vehicles that will have scaffolding around them. That helps ensure integrity and application that also brings money to projects on the ground, to communities.”

Given the urgency of the issue, the world needs to try all solutions to drive the capital into such projects.

It is estimated that in 2021, 25 mln hectares of forests were lost globally, releasing 10 bln tonnes of carbon into the atmosphere.

“No doubt that was 25 mln hectares of habitat critical for biodiversity,” Rycroft commented.

By Roy Manuell – roy@carbon-pulse.com

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