Summary: Zero Deforestation Value Chains and Food Systems Webinar 22.3.2022
Recommendations for decision-makers at the EU level
1. Keep it simple, but remember that deforestation is a multi-level issue where smallholders and sustainable farming need to be taken into consideration
2. Farmers in the South who will be affected should be given an opportunity to discuss the proposal and critique it. The regulation needs to address the root causes of deforestation such as poverty, poor standards of landscape management, and governance.
3. Re-think how a just and fair transition could take place in the developing world in terms of production of energy, creation of jobs, and understanding that the growing population requires land.
4. Traceability of raw materials is very important; however, the smallholder farmers’ higher expenses due to the new regulations need to be considered, otherwise, they will be excluded from the system.
5. The EU needs to ensure a fair price for smallholders for their crops and smallholders should be properly compensated for the impact that climate policies from the EU have on their livelihoods.
6. Technical assistance and NGOs’ support are needed to enable smallholder farmers to adjust to the changes and adhere to the standards, this includes providing access to training and technology to increase smallholder farmers’ productivity.
7. EU needs to ensure alignment with the EU level sustainable corporate governance due diligence so that there won’t be double layers on the two regulations.
Facilitator: Tiina Huvio, a program director for Food and Forest Development Finland FFD
Presenters
Dr. Markku Kanninen, Emeritus Professor, University of Helsinki
Maija Kaukonen, Forest and Development Officer, WWF
Panel:
Anne Arvola, Senior Development Impact Advisor, Finnfund
Elizabeth Nsimadala, President of Eastern Africa Farmers Federation (EAFF)
Lea Rankinen, Director of Sustainability & Public Affairs, Paulig
Julia Wakeling, Head of Impact and ESG, SilverStreet Capital
This Zoom webinar was jointly organized by the Finnish Agri-Agency for Food and Forest Development (FFD) and Finnish Development NGO’s (FINGO), and it is part of a series of webinars that aims to assess how to achieve systematic changes in agriculture, natural resource management, and climate change. In 2019, the EU launched five priority actions to tackle the issue of deforestation and promote free supply chains:
Aiming for a free deforestation chain as part of the EU development cooperation.
Strengthening international cooperation to stop deforestation.
Redirecting financing toward more sustainable land-use practices.
Supporting research and innovation.
Working with partner countries, governments, private sector, civil society, to act against deforestation in those countries.
I. Opening Remarks by Tiina Huvio, Programme Director, FFD
Deforestation and the consequent loss of biodiversity are a great global concern.
Approximately 2.4 billion people use wood and charcoal for their daily domestic needs and approximately 1.5 billion people depend on small-scale farming and forestry.
The Intergovernmental Panel on Climate Change’s (IPCC) latest report on climate change published at the end of February 2022 underlines that we must deal with inequalities if we want to deal with climate change and deforestation.
The webinar reflects on how these different objectives can be achieved, in particular how smallholders and companies could deal with proposed EU regulations to reduce deforestation caused by the value chains of the six commodities: beef, soybeans, palm oil, timber, coffee, and cocoa.
II. Summary of the Main Points of the Presentations
2.1 Zero Deforestation Value Chains and Food Systems Role of EU consumption by Prof. Emer. Markku Kanninen
- The IPCC 2019 land report showed that one-third of all greenhouse emissions come from food production and 60% of those emissions come from animal-based food production.
- Since the 1990s, emissions from agriculture have increased around the world while emissions related to land use (including deforestation) have increased at a much slower rate. With declining emissions from industry and transport (due to carbon trading and other mitigation measures), land use and food production sectors are becoming the emission hotspots of the future.
- International commodities’ value chains and global markets influence the CO2 balance between countries and regions. Products with high CO2 emissions are made in one part of the world and consumed in other parts of the world. In developed countries, consumption-based emissions are larger than production-based emissions because production is often outsourced to developing countries; this can be considered a transfer or leakage of emissions from consumer to producer countries.
- As an example, of the global emissions (2.6 Gt CO2 yr-1) related to deforestation, 21% comes from cattle ranching in Brazil and 10% from oilseeds production in Indonesia; of these emissions, exports account for between 15-20% of emissions in Brazil and between 40-45% in Indonesia. On the other hand, a report by the EU shows that about 10% of tropical deforestation (about 190,000 hectares per year) is related to EU consumption. This means that emissions related to EU’s consumption – through deforestation- are about 100 million CO2 eq. tons per year, which is equivalent to two times the total emissions of Finland.
2.2 Impacts of EU and Finnish consumption on tropical deforestation by Maija Kaukonen
- Deforestation is growing rapidly in Latin America, Central Africa, West Africa, East Africa, Southeast Asia, and Australia and the main drivers at the global scale are soy, palm oil, beef, wood products, cocoa, and coffee (more than 80% of tropical deforestation in 2005-2017). The extensive use of firewood and charcoal production also affects deforestation in many African countries.
- Agricultural production is estimated to have caused 5 million hectares of tropical deforestation annually between 2005 and 2017. According to the WWF EU Policy Office report 2021, EU’s imports are estimated to have caused 3.5 million hectares of tropical deforestation during this period placing the EU as the second largest contributor to tropical deforestation after China.
- Commodity production is not only driving deforestation in tropical forests, but also in other landscapes such as forested grasslands and wetlands (also linked to consumption from the EU). Thus, the EU laws and regulations should include land-use change in other forested landscapes such as the Cerrado and the Pantanal in South America.
- An analysis of more than 1200 companies, which are associated with high-risk deforestation commodities, found that only about half of them had commitments, and out of those, only 46% of those reported any kind of progress. Therefore, companies’ commitments to reducing deforestation seem to have a low impact on controlling deforestation.
- Similarly, less than 10 % of financial institutions have a deforestation-free commitment. Thus, urgent action is needed to stop negative financial incentives for deforestation.
III. Summary of the Panel Discussion
Key challenges to reducing deforestation from the perspective of financial institutions
- Financial institutions cannot reach all stakeholders in value chains, and it is especially challenging to reach smallholders.
- Another challenge is transparency when measuring impact, e.g., reporting what has been done and understanding what smallholders have achieved.
- Ensuring financial feasibility for smallholders as they are more likely to do something new if it makes economic sense.
- Another challenge is smallholders’ capacity to deal with change (e.g., competitors, local and international rules, and different operating environments).
- Finally, it is important to demonstrate different methods of working to smallholders so that they can decide for themselves. Thus, systematic changes are needed and an enabling environment for smallholders to thrive.
Key challenges companies are facing to encourage suppliers and tackle deforestation
- One of the key elements is to identify the key raw materials and ensure good traceability to the country of origin.
- Another key area is industrial collaboration to drive change and increase farmers’ capacity.
- Verification and certification systems are also important, but the challenge is that different raw materials have different criteria and timelines. Dynamic models to harmonize criteria and expectations in due diligence processes are needed.
- Another challenge lies with a large amount of country data, which can be used for risk assessments, but more accurate and updated data is needed.
- One final challenge is the dynamics of global versus local demand. Are local policies and actions compatible with EU policies? Local policies might not provide the incentives to produce changes at the farm level
Key challenges for farmers to adopt forest favourable production systems. What about governments?
- By organizing farmers into small groups such as farmers’ associations and cooperatives, a greater impact can be achieved. However, many farmers’ associations and cooperatives experience challenges due to institutional capacity and resource constraints. If producer organizations had enough resources, they could raise awareness regarding deforestation among smallholders and implement initiatives against deforestation.
- Usually, there is no incentive to refrain from deforestation and the alternative energy sources to replace firewood are usually very expensive. The income of smallholders needs to be diversified to non-wood products such as fruits, nuts, and berries to reduce deforestation.
- Another problem is a lack of awareness of the implication and impacts of deforestation. All actors need to come together and work towards the same goal (with clear roles and implementation tasks). The overall process should be participatory and inclusive.
- Governments have set initiatives for example to reduce the use of charcoal and thus reduce deforestation, but the implementation of policies has been lacking.
- There is a need for effective and transparent reporting mechanisms dealing with deforestation. This should be complemented with real accountability which includes local powerful players.
- Finally, the governments should involve all actors when drafting policies.
Advantages and challenges regarding the new EU proposal regarding zero-deforestation value chain regulations?
- The main benefit of the common regulatory frame is that now deforestation becomes everybody's responsibility. Voluntary certification schemes have played an important but insufficient role in creating deforestation-free supply chains, but they are still relevant.
- The main challenge is the very specific and high-level expectation for traceability (plot of land where the crops originated). A strong platform needs to be in place and strong technical support to handle a large amount of data (who is responsible for the data?)
- A second challenge to be tackled is the differences between countries and between markets. How will deforestation leakages be prevented? How will the EU support local governments in transforming their internal markets?
- Another challenge relates to the scope as EU regulation focused on controlling deforestation, but not all “forests” are the same. Thus, the regulation should be inclusive by comprising biodiversity and indigenous ecosystems (e.g., open ecosystems such as savannas and grasslands).
- At the level of producers and consumers:
The costs of adhering to new regulations can be exclusionary for smallholders. Thus, there is a need for technical assistance and NGOs to support smallholders to adhere to regulations.
It is to be seen to what extent consumers accept the price increase that is quite inevitable (e.g., costs associated with product traceability).
Recommendations for decision-makers at the EU level
1. Keep it simple, but remember that deforestation is a multi-level issue where smallholders and sustainable farming need to be taken into consideration
2. Farmers in the South who will be affected should be given an opportunity to discuss the proposal and critique it. The regulation needs to address the root causes of deforestation such as poverty, poor standards of landscape management, and governance.
3. Re-think how a just and fair transition could take place in the developing world in terms of production of energy, creation of jobs, and understanding that the growing population requires land.
4. Traceability of raw materials is very important; however, the smallholder farmers’ higher expenses due to the new regulations need to be considered, otherwise, they will be excluded from the system.
5. The EU needs to ensure a fair price for smallholders for their crops and smallholders should be properly compensated for the impact that climate policies from the EU have on their livelihoods.
6. Technical assistance and NGOs’ support are needed to enable smallholder farmers to adjust to the changes and adhere to the standards, this includes providing access to training and technology to increase smallholder farmers’ productivity.
7. EU needs to ensure alignment with the EU level sustainable corporate governance due diligence so that there won’t be double layers on the two regulations.
“Climate change has no borders, it affects each and everyone, therefore, reducing deforestation should not only be a producer level initiative. With a holistic view everyone needs to understand that they are responsible for deforestation and solutions to controlling deforestation as well”
(Elizabeth Nsimadala, President EaFF)
Jose Valdivia (volunteered at FFD)
Adrian Monge Monge, Climate and Adaptation Expert FFD