Let us make the European Union’s pending anti-deforestation bill work for soy

Gert van der Bijl, European Union’s Senior Policy Advisor, Solidaridad 

In June 2023, the European Parliament will vote on a regulation that will make it obligatory for companies that put cattle and leather, cocoa, coffee, palm-oil, charcoal, wood, rubber or soy on the European market to verify that the product hasn’t led to deforestation and forest degradation since 31 December 2020. A new legislation that is likely to have serious consequences in the soy sector.

In 2021 the European Union imported around 32.5 mln in soy products (bean, meal & oil). More than 3/4 of this soy came from South America. Which means South America is really important for the EU. The other way round, with around 15% of the South American soy produced in South America going to Europe, the old continent is an important market, but definitely less dominant. 

This new regulation has the potential of being extremely impactful. If we look at soy in South America, there are regions where expansion or deforestation can be an issue. But around 80% of all soy comes from regions that have been established long ago. The main impact of the regulation is that it will require companies to provide geolocations (and polygon mapping, if more than four hectares) of products, and to ensure traceability from the plot to the European market.

Companies that put soy on the European market will have to prove there has been no recent deforestation and verify compliance with relevant legislation of the country of production, including on human rights. And this soy can only be mixed with other soy that is guaranteed deforestation free and legal compliant. Buying soy for Europe, without having a clue where the soy comes from, will no longer be an option. The main articles will be fully in force within 18 months after the final vote in June, so by the end of 2024. 

In July 2022, representatives of 14 producing countries, including Brazil, Argentina, Paraguay and Bolivia wrote a letter to European policy makers, saying they regret that the EU has chosen unilateral legislation rather than international agreement, disregarding local conditions and national legislation. And that this is likely to penalize producers and that it will lead to costly requirements. 

Well, not much of this dialogue has actually taken place. As Gustavo Idigoras, of the CIARA, the Argentine Edible Oil Association said on the website DialogoChina in January 2023: “the market gave us an opportunity to develop these traceability programmes as a niche, but it is now becoming a condition of production, and that is a transformational change…. If Europe starts, the US and the UK will follow and then China, India and almost all the buyers thereafter”.

Indeed, this Regulation, whether people agree with it or not, is likely to have a huge impact. And thus, there is no time for actors in the soy supply chain to lend back: immediate action is required.

1. Inform producers, cooperatives and other stakeholders

Our experience as Solidaridad communicating with stakeholders in producing countries indicates that many of them are likely to be affected, but most have no clue about what’s to come. For instance farmers cooperatives need to ensure they have the required data available, if they want to continue supplying the European market. One can think see this as a responsibility for the European Union, but it is also something traders and local governments can and need to work on.

2. Work on partnerships between Europe and local actors, including governments

An important and highly debated element of the regulation is Article 28 on cooperation with third countries. This cooperation is indeed crucial to make sure the regulation really work. But, as Article 28 describes, the next step should be that: “the Commission and interested Member States, shall engage in a coordinated approach with producer countries and parts thereof, to jointly address the root causes of deforestation and forest degradation”. The regulation adds that this cooperation should include the transition to an agricultural production that facilitates producers’ compliance with the requirements of this regulation.

Great. But Europe so far has not done much to realize this and should start doing this today.

3. Invest in capacity building and ensure costs are fairly shared

Governments must be responsible for ensuring that farmers and their cooperatives are actively supported to build their capacity to meet the regulation’s requirements. It’s also very much the responsibility of any company that purchases soy. And it is absolutely essential that compliance costs are fairly shared.

4. And most importantly: work on traceability 

Traceability in the complex soy chain with a product that changes hands many times and is sometimes transported over long distances, is far from easy to establish. Often both traders and farmers like their freedom to choose partners, which makes it even more difficult to realize traceability. It is a long-term process that often depends on supplier -buyer engagement. 

5. Innovate

There are examples to build on. Some of them use digital technologies. Another one is VISEC, a platform in Argentina managed by CIARA that seeks traceability in the Gran Chaco - and ultimately aims to reduce deforestation. Solidaridad is complementing this initiative, supporting Chaco´ provinces to be able to supply public information to identify illegal deforestation. Supported by LIF, Solidaridad is also working in preventive actions by setting with multiple actors a sustainable soy protocol for soy in the Paraguayan Chaco, where soy is still a minor crop, but with the risk of unplanned growth and mixing it with the whole country supply chain might be a major issue for the country regarding this legislation.

Data from a study done by Solidaridad Foundation last year with LIF support and with the partnership of the farmers association AIBA and NGO Imflora in the Cerrado biome in Brazil showed great opportunities for companies and producers in the sector to obtain high profitability by applying low-carbon agricultural practices. The study assessed  50 farms in 22 municipalities in the states of Maranhão, Tocantins, Piauí and Bahia. 

A number of innovations are possible and necessary. Certainly, if they can be combined with incentives for farmers to produce more sustainably - such as including payments for carbon sequestration or other services - they have a chance of becoming a reality in some places.