The European Union's latest environmental directive, the Regulation on Deforestation-Free Supply Chains (EUDR), marks a pivotal step in curbing global deforestation. The EUDR mandates stringent due diligence for companies sourcing agricultural commodities from regions at risk of deforestation, with the aim of promoting transparency and responsible sourcing.
However, this regulatory milestone poses significant challenges for smallholder farmers, particularly in Southeast Asia, who often lack the resources and capacity to comply with these demanding standards. Without the proper support, these farmers, who are critical to global supply chains, risk exclusion from the European market.
To address this issue, stakeholders must develop mechanisms to support smallholders, offering tools, resources, and guidance that reduce the financial and logistical burden of compliance. Moreover, cross-border partnerships and collaborations are essential to ensuring the regulation’s success while maintaining the livelihoods of millions of smallholder farmers.
A Double-Edged Sword for Southeast Asian Agriculture
Southeast Asia is a global agricultural powerhouse, exporting a vast array of commodities, including palm oil, rubber, coffee, cocoa, and staple crops. Agriculture accounts for 40% of the region's workforce, primarily involving nearly 100 million smallholder farmers. Over recent decades, the region has experienced a rapid expansion of agricultural land, with commercial farming growing by 2% annually.
However, this growth has come at a cost. Deforestation, driven primarily by the expansion of large-scale plantations, has led to significant biodiversity loss, impacting the livelihoods of millions who depend on ecosystem services. From 2005 to 2015 alone, the region lost over 80 million hectares of forest.
The EUDR seeks to mitigate the environmental damage associated with commodity farming by requiring companies to verify that their products are deforestation-free. While such initiatives are essential to halting deforestation, smallholder farmers, particularly in Southeast Asia, face substantial barriers to compliance due to their limited access to financing, technology, and knowledge.
Deforestation-Free Standards and Compliance Concerns
The EUDR is part of a broader global trend of deforestation-free commitments and regulations. Forest-risk commodities—such as beef, soy, palm oil, and coffee—are now subject to greater scrutiny, as multinational corporations face pressure from civil society and consumers to prioritize sustainable production practices.
Despite the growing adoption of voluntary sustainability standards (VSS), the transition to regulatory mandates like the EUDR represents a significant shift. While large corporations often have the resources to comply, smallholder farmers, who play a crucial role in the supply chain, are less equipped to meet the new requirements. Key challenges include the cost of certification, data collection, and the implementation of traceability systems.
Given these hurdles, there is growing concern that smallholders, who account for 40% of global palm oil production, could be sidelined. Only 10% of smallholders currently hold Roundtable on Sustainable Palm Oil (RSPO) certification, and the numbers are even lower for independent farmers.
Impacts of Compliance on Smallholders
Smallholder farmers in Southeast Asia, who rely on informal trade networks, may struggle with the additional expenses linked to the EUDR. The regulation demands geolocation tracking, satellite monitoring, and other technical measures, which are difficult to implement at the smallholder level.
Workshops held by stakeholders in Thailand have highlighted several critical barriers for smallholders, including a lack of awareness about EUDR requirements, high compliance costs, insecure land tenure, and limited participation in decision-making processes. Additionally, smallholders often face challenges in adopting new technologies needed to meet the EU's traceability demands.
Support Mechanisms for Smallholders
To mitigate the risks posed by the EUDR and ensure that smallholders can maintain access to international markets, several key opportunities must be explored:
1. Raising Awareness and Building Capacity Establishing knowledge hubs is critical for disseminating information about the EUDR to smallholders. These hubs could serve as platforms for sharing tools, data, and training on compliance, certification, and traceability. Educational materials tailored to local contexts and languages are essential for effective communication.
2. Addressing the Costs of Compliance Financial support mechanisms, such as co-investment programs, could help offset the costs of compliance for smallholders. Engaging the financial sector is essential to provide the infrastructure and technology needed to meet EUDR standards.
3. Facilitating Collaboration Across Stakeholders A collaborative approach between governments, international organizations, and the private sector is necessary to align efforts and streamline initiatives. Comprehensive stakeholder mapping could identify existing partnerships and resources to support smallholders, ensuring that they have a voice in the implementation process.
Conclusion
As the EUDR moves from voluntary standards to regulatory mandates, the pressure on smallholder farmers to comply will continue to grow. While the regulation represents an essential step toward environmental sustainability, ensuring that smallholders are not left behind is critical. Through coordinated efforts, increased support, and targeted investment, smallholders can be integrated into deforestation-free supply chains without sacrificing their livelihoods.