Use Cases
The European Union’s Deforestation Regulation (EUDR) is ushering in a new era for agricultural commodities like cocoa, driving a pivotal shift toward sustainability and transparency. With cocoa accounting for 7.5% of EU-driven deforestation—representing a significant environmental challenge—the EUDR now requires cocoa producers and exporters to demonstrate that their supply chains are free from deforestation and forest degradation. This regulation marks a pivotal shift for the cocoa industry. Cocoa’s outsized impact compared to other agricultural commodities like palm oil and soy underscores the urgency for compliance. The EUDR is reshaping cocoa supply chains globally, presenting both challenges and opportunities for the industry.
This blog explores the EUDR's implications for the cocoa industry, the strategies being implemented to achieve compliance, and how this transformative regulation could lead to a more sustainable cocoa sector.
The EUDR targets key commodities contributing to deforestation, including cocoa, which is predominantly produced in West Africa, a region with some of the highest rates of deforestation globally. Between 1990 and 2020, the world lost 420 million hectares of forest—an area larger than the EU—due to agricultural expansion, according to data from the Food and Agriculture Organization of the United Nations (FAO).
Cocoa farming has long been tied to deforestation, with more than half of the global cocoa supply originating from Côte d’Ivoire and Ghana, where forest cover has declined in the last century. Under the EUDR, operators must now prove that their cocoa has not been produced on deforested land after December 31, 2020. This is a seismic shift for an industry accustomed to complex and opaque supply chains.
Cocoa supply chains often involve smallholder farmers who contribute the majority of the global cocoa supply. Many operate in remote areas with limited access to infrastructure, making it challenging to document the origins of their produce. In response, advanced systems like blockchain are being used to verify the journey of cocoa beans from farm to market. These technologies create secure, tamper-proof records that allow buyers to trace cocoa back to its source.
Satellite data, integrated with these systems, helps companies detect illegal deforestation early and take corrective action. For example, satellite imagery allows businesses to pinpoint deforested areas and identify responsible parties within their supply chains. Corrective actions often include suspending contracts with non-compliant suppliers, providing targeted training on sustainable practices, or reforesting affected areas. This proactive use of satellite data ensures that companies can address issues before they escalate, aligning their operations with EUDR requirements.
The cost of compliance remains a significant concern for many farmers, particularly smallholders. Certification programs often require upfront investments, and training on sustainability standards can be time-intensive. To address this, partnerships have emerged that provide financial support to farmers transitioning to deforestation-free practices. For instance, programs offering microloans enable smallholders to invest in sustainable farming techniques, such as agroforestry, which integrates cocoa production with tree planting. This approach not only preserves biodiversity but also enhances soil fertility and crop resilience.
Additionally, regional initiatives have equipped farming communities with affordable tools like GPS devices to map their farms and meet traceability requirements. This has been particularly effective in areas where traditional land documentation is scarce or outdated.
Certifications are pivotal in proving compliance with the EUDR. They provide smallholders with access to premium markets and training on sustainable practices, ensuring better yields and long-term economic stability. Additionally, certifications help establish trust with buyers by validating environmentally and socially responsible production methods. Programs such as Rainforest Alliance and Fair Trade ensure that cocoa is produced sustainably and aligns with environmental and social standards. Beyond compliance, these certifications offer broader benefits, including market access to buyers who prioritize sustainably sourced products.
In regions where certification uptake has been high, cocoa farmers receive training on sustainable practices, such as planting shade trees alongside cocoa crops. These practices improve biodiversity and enhance yield quality, demonstrating how sustainability and productivity can go hand in hand.
Under the EUDR, businesses are responsible for conducting thorough due diligence to assess and mitigate deforestation risks in their supply chains. This includes detailed risk assessments, geolocation data collection, and the implementation of monitoring tools to track land-use changes.
One approach involves integrating remote sensing data with on-the-ground inspections to identify areas at risk of deforestation. In some regions, local communities participate in these efforts, offering invaluable insights into land-use practices and helping enforce compliance standards. By fostering these collaborations, companies strengthen their due diligence processes and build trust within their supply chains.
In cocoa-growing regions where deforestation pressures remain high, producers are shifting to sustainable farming techniques that enhance productivity without expanding into forested areas. For example, agroforestry systems incorporate cocoa trees with other crops, creating a diversified and resilient agricultural landscape. This method not only meets EUDR requirements but also provides farmers with additional income streams from non-cocoa crops.
In areas prone to land degradation, soil conservation practices are being adopted, including the use of cover crops and organic fertilizers. These methods improve soil health and reduce the need to clear new land for farming, aligning with the EUDR’s sustainability goals.
Collaboration is critical for meeting the EUDR’s requirements, especially in fragmented supply chains involving numerous smallholders. Multi-stakeholder initiatives bring together governments, NGOs, and industry players to promote sustainable cocoa production.
For example, the Cocoa & Forests Initiative in West Africa unites major chocolate manufacturers, local governments, and NGOs to combat deforestation by promoting sustainable farming techniques and restoring degraded land. Similarly, the Partnership for Forests supports smallholder farmers in Ghana by providing training on agroforestry practices and offering financial incentives to maintain forested areas. These efforts are complemented by NGO-led training programs that empower farmers with the skills and resources needed to adopt sustainable practices, creating a more resilient and transparent supply chain.
Partnerships also extend to technological innovation. Some regions have developed centralized platforms where farmers can upload geolocation data and receive updates on compliance requirements. This not only simplifies the traceability process but also fosters transparency across the supply chain.
While the EUDR presents challenges, it also opens up significant opportunities for the cocoa industry. By aligning their practices with the regulation’s requirements, producers and exporters can access premium markets where demand for sustainably sourced products is growing.
Moreover, the shift toward deforestation-free cocoa is driving innovation in farming and supply chain management. Technologies such as AI-powered monitoring systems and smart contracts are revolutionizing how cocoa is tracked and traded, improving efficiency and reducing risks. For instance, in Ghana, an AI-driven platform analyzes data from farms to predict yield levels and flag any deforestation risks. Smart contracts are being piloted to automate payments between farmers and buyers based on verified sustainability metrics, ensuring fair compensation while meeting regulatory compliance.
The EUDR marks a transformative moment for the cocoa industry. Compliance is challenging but essential to ensure a sustainable future. By investing in traceability technologies, fostering collaborations, and supporting farmers, stakeholders can turn these challenges into opportunities. The regulation is not just about preventing deforestation; it’s about building a resilient, transparent, and equitable cocoa supply chain.
