• Share this on:

The EU Green Deal – How will it impact my business?

Last updated:
Takes 40 minutes to read

In 2019, the European Commission launched the European Green Deal (EGD). The EGD is a package of actions to reduce greenhouse gas emissions and to minimise the use of resources while achieving economic growth. This means that products sold in the EU market will need to meet higher sustainability standards. If you export to the EU, you want to know how the EGD policies can impact your businesses and prepare yourself for those impacts.

1. What is the European Green Deal?

The European Green Deal (EGD) is the EU’s response to the global climate emergency. It comprises a set of policies with the aim to transform the EU into a climate-neutral and resource-efficient economy by 2050. The EGD covers all sectors of the economy: from agriculture to energy and from transport to construction. As such, the EGD includes key policies and measures such as the Farm to Fork Strategy and the New Circular Economy Action Plan.

The EGD policies will likely impact trade within and imports to the EU, and it is possible that environmental and sustainability standards will become stricter at a later stage. This will mean more requirements for businesses from developing countries that export to the EU. Many decisions will be taken in the coming 2 years, and these decisions will determine the extent of the impact on business. In any case, it is important to be informed about the targets and ambitions of the EGD in order to be prepared to comply with higher standards.

A roadmap towards a climate-neutral Europe

The EGD is a comprehensive plan for a carbon-neutral Europe. It provides a roadmap with actions to radically cut down greenhouse gas (GHG) emissions by at least 55% by 2030 (compared to 1990 levels) and turn the climate crisis into an opportunity to grow more sustainably. The EGD outlines investments needed and financing tools available to achieve a climate transition. In some areas, the EGD is also proposing new and improved policies to ensure this transition.

Ambitious goals

The EGD aims to preserve, maintain and improve the EU’s natural resources, land and ecosystems as well as to protect the health and well-being of European citizens against environmental risks and the impacts of climate change. To achieve the climate goals, up to 2% of Europe’s GDP will go into greening the economy, including new infrastructure, public procurement, R&D and industrial reorganisation.

The EGD also seeks to lead the way in global action against climate change. But the EU cannot achieve its climate goals alone, as it requires the participation of its allies and trade partners worldwide. The EU recognises that there will be some regions, industries and workers that will find it more difficult to make this transition. Therefore, the EGD will take a fair and inclusive approach to achieve a just transition.

Key elements of the EGD

The European Green Deal was presented on 11 December 2019 by the European Commission, and the first set of legislative proposals was launched on 14 July 2021. These proposals include a series of actions in the near future, ranging from a European Climate Law to establishing and developing cross-cutting strategies to catalyse the transition in aspects of economic importance such as energy, industry, mobility, pollution, biodiversity and food.

Key elements of the EGD

The EGD is comprised by the following policy areas:

  1. A higher level of EU climate ambition for 2030 and 2050.
  2. Achieve zero pollution in an environment without toxic substances.
  3. Clean, affordable, and safe energy supply.
  4. Preservation and restoration of ecosystems and biodiversity.
  5. Industry mobilisation for a clean and sustainable economy (Circular Economy Action Plan).
  6. Achievement of a fair, healthy, and environmentally friendly food system (Farm to Fork strategy).
  7. Efficient use of energy and resources in construction and renovation.
  8. Acceleration of the transition to sustainable and smart mobility.

2. What is the Farm to Fork Strategy?

The Farm to Fork Strategy (F2F) is 1 of the main steps to make Europe climate neutral by 2050. Fair, healthy and environmentally friendly food systems lie at the core of F2F. F2F sets out both regulatory and non-regulatory initiatives to support a just transition.

F2F was launched on 20 May 2020 with the goal to reduce the EU food system’s environmental and climate footprint, as well as to reverse biodiversity loss. In this context, F2F seeks to reduce food waste, to ensure that there is a sufficient and affordable supply of foods for its citizens, while also guaranteeing that farmers receive a fair price for their products and that the EU remains competitive on a global scale (Figure 1).

Figure 1: The Farm to Fork (F2F) strategy in short

The Farm to Fork (F2F) strategy in short

Source: European Commission (n.d.)

Main targets of the F2F

F2F has set 5 main targets to be reached by 2030:

  • Reduce the use and risk of chemical pesticides by 50%.
  • Reduce nutrient losses by at least 50%.
  • Reduce the use of fertilisers by at least 20%.
  • Reduce sales of antibiotics for farm animals by 50%.
  • 25% of agricultural land is to transition to organic production.

As part of the actions required to achieve these objectives, the EU is planning the revision of many existing regulations for food and agriculture, as well as the creation of new rules and the improvement of coordination tools within the EU (Table 1). Promotion programmes have also been proposed, establishing a sustainable food labelling system (Table 2 and Table 3), including organic products in schools and public institutions and the adoption of an Action Plan for Organic Agriculture 2020-2026.

Table 1: Sustainable food production actions to deliver the Farm to Fork Strategy

Relevant implementation actions

Timeline

Impacted sectors

EU Guidelines on Aquaculture

Q2 2021

Fish and seafood

The new Common Agricultural Policy

2021-2022 (transitional period)

Q1 2023

(implementation)

Agricultural and Forestry sectors

Biopesticides – approval criteria for microbial active substances

Q4 2021

Agricultural sector

Revision of the existing animal welfare legislation, including on transport and slaughter

Q4 2021

Apparel, home decoration and home textiles

Revision of Sustainable Use of Pesticides Directive

Q1 2022

Agricultural sector

EU Strategy on Algae (Blue bioeconomy)

Q2 2022

Natural ingredients and Fish and seafood sector

Action plan for integrated nutrient management to reduce pollution from fertilisers

Q4 2022

Agricultural and Forestry sectors

Table 2: Ethical food production actions to deliver the Farm to Fork Strategy

Relevant implementation actions

Timeline

Impacted sectors

Initiative to improve the corporate governance framework (integrate sustainability into corporate strategies)

Q2 2021

Agricultural, Fishery and Forestry sectors

EU code and monitoring framework for responsible business conduct in the food supply chain

Q3 2021

Tourism, Agricultural, Fishery and Forestry sectors

Revision of EU geographical indications scheme (to tackle food fraud)

Q4 2021

Agricultural, Fishery and Forestry sectors

Table 3: Nutrient content, food safety and labelling actions to deliver the Farm to Fork Strategy

Relevant implementation actions

Timeline

Impacted sectors

Revision of rules on information provided to consumers

Q4 2021

Agricultural, Fishery and Forestry sectors

Proposal for harmonised mandatory front-of-pack nutrition labelling to enable consumers’ health-conscious food choices

Q4 2021

Agricultural, Fishery and Forestry sectors

Revision of EU marketing standards for agricultural, fishery and aquaculture products (ensure uptake and supply of sustainable products)

Q2 2022

Agricultural, Fishery and Forestry sectors

Revision of EU legislation on Food Contact Materials (food safety and environmental footprint)

Q4 2022

Agricultural, Fishery and Forestry sectors

Set nutrient profiles to restrict promotion of high salt, sugar or fat content

Q4 2022

Agricultural, Fishery and Forestry sectors

Proposal to require origin indication for certain products

Q4 2022

Agricultural, Fishery and Forestry sectors

Revision of legislation for plants produced by certain new genomic techniques

Q2 2023

Agricultural and Forestry sectors

But the EU food system depends on global supply chains: from animal feed to spices and tropical fruits. Therefore, to achieve the goals of F2F, EU trade policy will boost cooperation with countries outside the EU to improve nutrition and to alleviate food insecurity by strengthening the resilience of food systems and reducing food waste.

Areas of international cooperation will include:

  • Food research and innovation;
  • Agroecology;
  • Sustainable landscape management and land governance;
  • Conservation and sustainable use of biodiversity;
  • Inclusive and fair value chains;
  • Prevention of and response to food crises, especially in fragile contexts;
  • Resilience and risk preparedness; and
  • Sustainability embedded in humanitarian and development interventions.

F2F is expected to create big changes in the way that food is produced, transported, distributed and marketed. The most immediate impact of the F2F strategy on businesses that export to Europe will be from the New Common Agricultural Policy, which will enter into force in Q1 2023. Businesses from non-EU countries exporting to the EU will have to comply with stricter regulations regarding labelling and information.

Figure 2: F2F will impact the way food sold on the EU market is produced, transported, distributed and packaged

 F2F will impact the way food sold on the EU market is produced, transported, distributed and packaged

Photo: CBI

There are also potentially impactful regulations entering into force in the long term (3 to 10 years). For example, there is the Action plan for integrated nutrient management to reduce pollution from fertilisers, which will include considerations of impacts of fertilisers not only on human health, but also on the environment. This will likely result in more restrictions for the type and amounts of chemical fertilisers used in agriculture, with consequences for the business model of enterprises under a conventional agriculture regime.

We still know very little about the requirements that new or revised regulations will entail. It is likely, however, that these new rules will bring changes in:

  • The types of materials used to package raw materials and specially processed products;
  • The type and amount of pesticides allowed in agriculture;
  • The type of genetic technologies allowed in plant breeding and cultivation;
  • The type of information provided to consumers, including front-of-pack labelling and other marketing standards.

Tips:

3. What is the Circular Economy Action Plan?

The EU’s Circular Economy Action Plan (CEAP) is a set of interrelated initiatives which aim to reduce pressure on natural resources by transforming the design, production and consumption of products so that no waste is produced. These initiatives target many different materials and commodities such as packaging, technology, vehicles and textiles.

What is a Circular Economy?

The circular economy is a model of production and consumption, which involves sharing, leasing, reusing, repairing, refurbishing and recycling existing materials and products as long as possible. In this way, the life cycle of products is extended. In practice, it means reducing waste to a minimum. When a product reaches the end of its life, its materials are kept within the economy wherever possible. These can be productively used again and again, thereby creating further value.

This is different to the current, linear economic model, where materials are used in products, consumed, and thrown away.

The CEAP is sometimes referred to as the ‘new CEAP’ because it builds on the first CEAP adopted in 2015. It will be more coherent and cover more products and materials than before.

Measures that will be introduced under the new CEAP aim to:

  • Make sustainable products the norm in the EU;
  • Empower consumers and public buyers in the EU;
  • Focus on the sectors that use the most resources and where the potential for circularity is high, including packaging, plastics and textiles;
  • Ensure less waste;
  • Make circularity work for people, regions and cities;
  • Lead global efforts on a circular economy.

The first plan resulted in some significant steps towards developing a resource-efficient economy, including a Directive on single-use plastics and mandatory EcoDesign requirements for energy-related products like household products, motors and power supplies. However, many of the measures proposed in the first CEAP remained voluntary, with few entering official legislation by the beginning of 2019.

Figure 3: A circular economy

A circular economy

Source: Parliament News (2021) “Circular economy: definition, importance and benefits.”

Of the actions that are relevant to SMEs from developing countries (Table 4), many have to do with reviewing current laws, assessing the impact of transitioning to a circular economy and holding public consultations. The Commission is also proposing 3 new laws in 2021 which will still need to be reviewed before becoming law. This means that, if these proposals are reviewed and approved, they likely will not be implemented until 2023 or later.

Table 4: Summary of relevant actions by the European Commission to implement the CEAP

Relevant implementation actions

Timeline

Impacted sectors

Mainstreaming circular economy objectives in free trade agreements, in bilateral, regional and multilateral processes and agreements and in EU external policy funding instruments

As of 2020

All

Mainstreaming circular economy objectives in the context of the rules on non-financial reporting, and initiatives on sustainable corporate governance and on environmental accounting

2021

All

Proposal for a regulation on substantiating green claims

Q2 2021

All

EU Strategy for Textiles

Q3 2021

Apparel, Home Textiles

Proposal for a directive on reducing (over)packaging and packaging waste

Q4 2021

All

Proposal for a directive on sustainable product policy initiative

Q4 2021

Apparel, Home Textiles

Source: Profundo summary based on the European Commission’s reference on CEAP implementation and other European Commission announcements. Note: “Relevant policies and legislation” means relevant to the CBI sectors covered in this research and relevant to production/trade in non-EU countries

In the short term (1-2 years), there will be little difference in the way European companies import goods and services because of the CEAP, since no laws will be implemented in this time.

There are, however, changes in the market from bigger players in affected sectors who are responding to changing norms and practices. Already, there are signs that buyers want more recycled packaging, more recycled textiles and generally more information from suppliers about sustainability aspects in the supply chain.

Figure 4: There are indications that EU buyers want more recycled textiles

There are indications that EU buyers want more recycled textiles

Source: CBI

In the long term (3-10 years), laws and regulations may be put in place to determine how products are made, packaged and reported on in the European market. The main things that SMEs exporting to Europe will likely need to adapt to are:

  • Laws on creating sustainable products which minimise waste throughout the life cycle;
  • Laws limiting how much packaging and what type of packaging you can use for your products;
  • Demands for more information on processing and production practices so that buyers can make ‘green claims’ and European consumers can be informed about their purchasing choices.

See the section below for more information on each potential law which may emerge from the CEAP and tips for how to deal with it.

Tips:

  • Watch this introduction video to the Masterclass on the EGD.
  • Read the sections below for more information on each potential law which may emerge from the CEAP and tips for how to deal with it.

4. How does the European Green Deal impact imports to Europe?

Imports into Europe will be impacted by the EGD in different ways. In addition to setting higher sustainability standards in primary production and industrial processes, the EGD will require SMEs to provide more information about the products they export to Europe. This will mean increased costs in the short term and increased competitivity in a sustainable global market in the long term.

The European Green Deal will change existing norms to make businesses and supply chains more sustainable. This will impact imports to Europe in the following ways:

  • Higher standards for social and environmental sustainability in production and processing of goods and services

Even if laws and regulations do not change, or do not come into practice for many years, the market is shifting towards products that are proven to be made in a sustainable way that is respectful of human rights. In other words, buyers, especially larger companies, are looking for goods that are produced, processed and packaged using high standards for respecting human rights and the environment. Major global retailers have agreed on a 2-year pact with garment workers and factory owners in Bangladesh, extending a pre-existing agreement that makes retailers liable to legal action unless their factories meet labour safety standards.

Basically, all large food and beverage brands have made commitments to sourcing agricultural products responsibly, and fisheries sectors are also following suit. In the area of apparel and textiles, companies are also communicating their intention to create a sector that respects human rights and sources sustainable materials. For example, high street retailer Zara announced 2 years ago that it would only be using sustainable fabrics by 2025.

All of this means there is an increased demand for sustainably produced goods and services. The laws and measures being proposed under the European Green Deal will only make this demand stronger. This presents a huge opportunity for SMEs which are already producing food and textiles in conformance with high sustainability standards, like organic.

  • Increased demand for information on production and processing practices

Various laws are being discussed to increase the responsibility of European manufacturers and retailers to explain where and how goods are being produced and what impact these have on people and the environment. These include new laws on human rights and environmental due diligence, as well as regulations on non-financial reporting. See the sections below for more information on these types of regulations.

In addition to this, voluntary sustainability initiatives from certification schemes and companies’ own initiatives have also increased the availability of goods marketed as sustainable. Today, in some sectors, sustainable-certified goods occupy a significant portion of the market (Figure 3). Coffee has been sustainable-certified the longest, for over 30 years. Other certified commodities have seen their share in their markets grow in the last 10 years. In some cases, this growth started even earlier. Seafood production, from both wild catch and aquaculture, is also increasingly expected to comply with basic sustainability standards.

Overall, this means that SMEs exporting to European buyers will certainly need to adjust to providing more and more information about how goods are produced and will potentially be audited on this information. For SMEs, this may mean putting in place systems for collecting information from your suppliers about production and labour practices and justifying where your goods are coming from (also called traceability). It may also mean becoming compliant with a voluntary sustainability standard, whether a certification scheme or a company’s own initiative.

What is traceability?

Traceability is the ability to track down all processes involved in a product cycle: from procurement of raw materials to production, consumption, and disposal. The purpose of traceability if to clarify where the product was produced, in what time period, and by whom.

For animal products and by-products imported to the EU, there are already some traceability requirements in place for food and safety reasons. More and more, traceability is required by buyers with high social and environmental sustainability standards for all types of products, including agricultural products, fisheries and raw materials for textiles.

  • In the short term, increased costs of transitioning to new models of sustainable production

There will certainly be costs associated with the transition to a more sustainable and circular economy. Some examples of these costs are for recycled materials, adjusting production and processing to higher standards of sustainability, determining traceability of products and ensuring adequate auditing of these processes. The question of who will be responsible for these costs is still very much being debated.

Overall, it is too early to know how the Green Deal will be passed and implemented and what exactly this will mean for the investment that producers exporting goods to the EU will be expected to make as well as the impact on costs of goods. What is known is that the EU has promised a just transition, which means that it will account for impacts on small businesses and the people they employ and that there will be time to adjust to the costs of transitioning. This might also mean the EU will create support programmes through supply chains or in bilateral/cooperative funding agreements with countries. Notably, in Africa, several green cooperation programmes exist already.

  • In the long term, the EGD is preparing exporters of goods for a sustainable global market

Europe is not the only important market considering legal measures to increase sustainability of traded products. The UK passed a Modern Slavery Act requiring companies to report on the risk of forced labour in supply chains, and the US has a ban on imports of forced labour goods. International treaties on climate change mean all nations have to draw up plans to achieve lower emissions in the next 30 years, which will impact supply chains everywhere. In theory, in the long term, no market should be immune to demands for sustainable production of materials, goods and services.

The European Commission recognises explicitly that it cannot achieve the aims of the EU Green Deal solely within the EU’s boundaries. It has stated that “[…] circularity goals are unlikely to be met without ensuring that suppliers in developing countries also adopt circular business practices.” Not only does the EU need and want goods and services from outside its borders, it also knows that the impacts of climate change, inequality and environmental degradation are global. Because of this, the EU has already made statements about ensuring a just transition which positively impacts small businesses and production of sustainable goods outside of Europe. This means that it will need to support this transition in 1 form or another.

Tips:

  • Get to know the main sustainability certification schemes and standards relevant to your sector. The State of Sustainability Initiatives has good summaries for many products, including bananas, coffee, cocoa, cotton, palm oil, soybean, sugar, tea, timber, wild catch and aquaculture.
  • Refer to this briefing from Proforest for more information on how to obtain traceability in your supply base and what types of information your buyers are looking for.

5. What extra requirements must suppliers to the EU comply with at what time?

The EGD aims for ambitious GHG emissions reductions by 2030 and climate neutrality by 2050. But to achieve those goals, it is necessary to act much earlier. Some policies that will likely affect your business were already introduced in 2020, and more policies will be announced in the coming 2 years. This is what to look out for.

Timeline of upcoming EU Green Deal policies

Figure 6: European Green Deal timeline, including the main goals

European Green Deal timeline, including the main goals

Source: EU Parliament (n.d.), “Legislative Train Schedule. A European Green Deal”

Regulations planned for Q2 2021

Substantiating ‘green’ claims

This initiative will require companies to substantiate or prove the claims they make about how ‘green’, or environmentally sustainable, their product is. Specific objectives include creating a standard for providing reliable environmental information, as well as reducing and simplifying the administrative burden of collecting this information, especially for SMEs. This will build on the previous Single Market for Green Products Initiative, which developed and tested Environmental Footprint methods in various sectors between 2013 and 2018.

A proposal for a regulation on substantiating green claims was planned to be adopted by the Commission in Q2 2021 but has not yet been released. There will be a public feedback process on the proposal, after which it will need to be reviewed and approved by Parliament and Council to become a law.

The EU believes that the further development of common and global standards for circular goods is necessary, whether this is through a regulated certification scheme or voluntary soft standards’. It is not yet clear if and when this legislative proposal will proceed, but the 2 key options it is considering to change the status quo are:

  • A voluntary system where companies choose to make standardised green claims alongside existing methods (e.g., sustainable certification schemes); or
  • A mandatory EU-wide legal framework requiring companies making ‘green’ claims to do so in a standardised and verified way.

The Commission claims that any proposed regulation will consider world trade rules on fair competition. This means that, for example, any labelling/information tool should result in no less favourable treatment of imported products compared with goods produced in the EU.

Tip:

Sustainable corporate governance

This initiative aims to improve the EU regulatory framework on company law and corporate governance. It aims to help companies to better manage sustainability-related matters in their own operations and value chains as regards social and human rights, climate change, the environment, etc.

While no other details have been published about this regulation yet, its adoption is planned for Q2 2021. It may lead to far-reaching legal reforms for all companies in the EU, as well as their suppliers in non-EU countries. Specifically, it could be that the European Commission will introduce a duty of care that will require businesses to consider the environmental, human rights and social impacts of their activities and to integrate these in the company’s strategy and decision-making.

Moreover, it could be that identifying, preventing and mitigating negative impacts and ensuring stakeholder risk through adequate procedures and measurable targets will become mandatory. This could mean that companies may be required to actively trace the conditions under which production processes further up the supply chain take place. For SMEs exporting to the EU, this might mean more rigorous traceability mechanisms.

Regulations planned for Q3 2021

EU Code of Conduct on Responsible Food Business and Marketing Practices

The EU Code of Conduct on Responsible Food Business and Marketing Practices is 1 of the first deliverables of the Farm to Fork Strategy and an integral part of its action plan. It sets out the actions that the actors ‘between the farm and the fork’, such as food processors, food service operators and retailers, can voluntarily undertake to improve and communicate their sustainability performance. These actions can be implemented within a company or in collaboration with industry peers and other food system stakeholders (such as farmers and consumers). The Code entered into force on 5 July 2021 and constitutes a voluntary industry initiative, but it will be revised and maybe turned into a law if the European Commission decides that voluntary commitments are insufficient.

The Code includes a set of 7 aspirational objectives, each with specific targets and actions which make healthy and sustainable food choices easier for European consumers. Commitments may take the form of a declaration of engagement and actions in major areas, together with an agreement to move towards higher levels of ambition within a defined timeframe. For the more advanced companies that wish to make greater commitments, the Code also includes a framework for more ambitious, measurable actions.

For you as an exporter to Europe, this might mean more strenuous traceability requirements, as well as corporate social responsibility (CSR) policies.

Tips:

EU Strategy for Sustainable Textiles

The EU is developing a strategy to apply circular economy principles to the production, products, consumption, waste management and secondary raw materials relevant to the textiles industry. This will result in a communication which is planned to be published in Q3 2021 and which will propose the set of conditions and incentives necessary to boost the competitiveness, sustainability and resilience of the EU textile sector.

For now, it is not clear which aspects of this strategy, if any, will become law. However, some implications of a circular textiles economy for SMEs outside Europe include:

  • Demand for recycled content in textiles (in the short term, likely to be mostly recycled polyester, as this is the most available), including designing less complex material combinations to make textiles more recyclable;
  • A trend of reshoring formerly outsourced supply chains. This means that EU retailers will want to cut down supply chain costs that are determined by proximity between R&D, product development and manufacturing, time to market and increased wages in offshoring destinations (such as China, the Philippines and India);
  • A growing secondary material market in Europe that is focused on reuse, repair and return. In theory, this means there will be greater availability of quality second-hand textiles products and materials and less consumption of new products, which may translate to decreasing demand for newly produced textiles from outside of Europe; and
  • Implementation of extended producer responsibility in promoting sustainable textiles and in the treatment of textile waste.

Tip:

Regulations planned for Q4 2021

Sustainable product policy

This initiative aims to make products placed on the EU market more sustainable. This will build on a law which already exists called the Ecodesign Directive and aims to widen the scope of this law to cover more products. The textiles industry is 1 of the priority sectors to cover.

A proposal for a directive on creating sustainable products is planned to be adopted by the Commission in Q4 2021. There will be a public feedback process on the proposal, after which it will need to be reviewed and approved by Parliament and Council to become a law.

Because of the precedence of the EcoDesign Directive, aspects of the proposal will likely be approved into law, alongside other rules of relevance to SMEs in exporting countries, such as:

  • Making producers responsible for providing more circular products and intervening before products can become waste (see green box);
  • Mandatory sustainability labelling and/or disclosure of information to buyers;
  • Preventing unsustainable production processes, including use of harmful chemicals in production processes; and
  • Banning the destruction of unsold durable goods.

Extended Producer responsibility (EPR)

EPR is a policy that makes a producer responsible for what happens to a product after it has been consumed, when it becomes waste. The idea is to encourage producers to take environmental considerations into account during the design and manufacturing of products, and ultimately support an economy that reuses and recycles materials as much as possible.

This approach is already being applied in specific contexts and sectors. For example, in the EU, producers of certain products like batteries and vehicles are responsible for the financing of collection, recycling and end-of-life disposal.

Tip:

  • Watch this webinar on the Sustainable Product Policy. It discusses concrete ways to make products in the EU more sustainable and resource efficient.

Reducing packaging and packaging waste

The European Commission is currently reviewing the essential requirements of an existing Packaging Directive in order to reinforce how to design packaging for reuse, promote high-quality recycling and strengthen the enforcement of the rules. These measures may include requiring all packaging to be reusable or recyclable and reducing the complexity of packaging materials, including the number of materials and types of plastics used.

If the goods you export require a lot of packaging, or a special type of packaging, these rules will apply to you and to your buyers in Europe. You may need to find ways to reduce the amount of packaging and/or use different materials that are, for example, lighter, have more recycled content, have no plastic content or can be reused.

A proposal for a directive on reducing packaging and packaging is planned to be adopted by the Commission in Q4 2021. There will be a public feedback process on the draft, after which it will need to be reviewed and approved by Parliament and Council to become a law.

Tip:

  • Visit Glopack’s page for links for ongoing EU projects developing innovative packaging solutions, or join its stakeholder’s platform to connect with innovators developing sustainable packaging.

Biopesticides – approval criteria for microbial active substances

Reducing dependency on chemical pesticides is 1 of the aims of the EU’s ‘farm to fork’ strategy. This includes making it easier to place biological active substances on the market, including microorganisms.

This initiative will specify approval criteria for microbial active substances in Annex II to Regulation (EC) No 1107/2009. The aim is to reflect the particularities of these substances, which are different from chemical substances. While no other details have yet been published about this regulation, its adoption is planned for Q4 2021.

For SMEs that are primary producers exporting to Europe, this might mean that they will have to adopt other agricultural practices or apply different products (thus, new investments and to involve technical experts as well as some degree of experimentation). For processers of agricultural products, this might mean closer involvement with their suppliers to assist them in adopting different agricultural practices that comply with the biopesticide initiative.

Tips:

  • Tradin Organic offers technical support globally to farmers who would like to switch from conventional to organic agriculture.
  • Check out the website of the Integrated Pest Management (IPM) Coalition, which provides several resources aimed at helping farmers worldwide reduce their use of hazardous pesticides. These resources include a pesticides database and the ’Pesticides & Alternatives’ app, a free telephone application to learn about the toxicity levels of over 700 pesticides as well as measures to prevent and control almost 3,000 agricultural pests without the use of chemicals. The app can be downloaded from GooglePlay or the iTunes app Store and is available in English, Portuguese or Spanish. Once you have downloaded it, you will be able to use it offline.

Regulations planned for Q1 2022

New organics legislation

On 1 January 2022, the new Regulation on Organic Production and Labelling of Organic Products (also called the new organics legislation) will enter into force. Apart from the general labelling requirements that exist for all food products, additional rules will apply to labelling of organic products and raw materials.

The aim of the new organics legislation is to strengthen the control system, helping to further build consumer confidence in the EU organics system. It is supported by the action plan for organic production in the EU, which was launched by the European Commission in March 2021.

The EU regulations on organic farming are designed to provide a clear structure for the production of organic goods across the whole of the EU. This is to satisfy consumer demand for trustworthy organic products while providing a fair marketplace for producers, distributors and marketers.

Imported organic food is also subject to control procedures to guarantee that it has been produced and shipped in accordance with organic principles.

In this context, changes that will be made under the new organics legislation include:

  • The rules on ‘Labelling’ in the new organics regulation will not only cover the label on the product, but apply to all statements, indications, trademarks, trade names, pictures or signs concerning a product on packaging, documents, signs, labels, rings or bands accompanying or referring to that product.
  • Using terms such as organic and ecological (or shorter terms like ’bio’ and ’eco’), will only be permitted if the product is certified organic. Likewise, producers must observe that product packaging design is not too similar to the colours (green and white) and shapes (leaf) of the EU Bio logo, as this could mislead consumers into believing a product is organic.
  • Labels for organic products entering the EU market must include the code number of the control body to which the producer is subject and the place where the agricultural raw materials of which the product is composed were grown (e.g., EU/non-EU agriculture and whether the product and its raw materials were partially or entirely produced in third countries).

Tip:

  • Read CBI’s article on the implications of the EU Organic Regulation for exporters of grains, pulses and oilseeds.

Figure 7: The new organics legislation will require that products marketed as ‘organic’ or ’ecological’ be certified organic

The new organics legislation will require that products marketed as ‘organic’ or ’ecological’ be certified organic

Source: CBI

Regulations planned for Q1 2023

New Common Agricultural Policy

The New Common Agricultural Policy will start in 2023. It builds from the existing Common Agricultural Policy (CAP), and its aim is to promote sustainable and competitive agriculture that can support the livelihoods of farmers and provide healthy and sustainable food for society. Compared to the previous CAP, the New Common Agricultural Policy makes stronger commitments to achieve the goals of the EGD:

  • An obligation to display a higher ambition on environment and climate action;
  • The national CAP strategic plans will contribute to the Green Deal targets;
  • Enhanced conditionality: beneficiaries of the CAP will have their payments linked to a stronger set of mandatory requirements (such as a higher percentage of arable land dedicated to biodiversity);
  • At least 25% of the budget for direct payments will be allocated to eco-schemes, providing stronger incentives for climate and environment-friendly farming practices and approaches as well as animal welfare improvements;
  • At least 35% of funds will be allocated to measures to combat climate change and support biodiversity, the environment and animal welfare;
  • In the fruit and vegetables sector, operational programmes will allocate at least 15% of their expenditure towards the environment (compared to 10% during the current programming period);
  • 40% of the CAP budget will have to be climate relevant and strongly support the general commitment to dedicate 10% of the EU budget to biodiversity objectives.

The New Common Agricultural Policy will be tailored by EU Member States into national programmes, and these will be guided by the Farm to Fork Strategy and the Biodiversity Strategy. As such, the impact of this policy on SMEs in developing countries will be related to the regulations and actions of F2F and other relevant policy areas of the EGD. In this context, SMEs exporting to the EU will have to comply with lower use of pesticides and chemical fertilisers as well as better living conditions for livestock and more strict labelling regulations.

Tip:

  • Read the section on the Farm to Fork Strategy, its likely impacts and different tips to anticipate these impacts.

6. What are the main obstacles to export caused by the EU Green Deal?

In the short term, exports to the EU will face some uncertainty regarding the content of some regulations

  • The lack of consistent information about emerging rules and policies will likely continue for at least 2 more years. Not only will this be a challenge for non-EU SMEs, their EU-based buyers will also be struggling with this in the coming years.
  • Buyers currently have different systems for collecting sustainability information from their supply chains. This often means that SMEs exporting to the EU must answer many demands for similar sustainability information, all in different formats. Increased need for sustainability reporting for EU buyers under the EGD will likely increase this burden in the short-term, until a harmonised system is put in place. In the long term, exports to the EU could potentially face higher costs.
  • Costs of transitioning current processing/production operations will likely increase through the adoption of technologies and materials that meet standards from the EGD. While it is not yet clear who will be responsible for all these costs, this may include, for example, potentially high prices of materials with recycled content and/or costs associated with certification and auditing for ‘green’ claims, such as hiring an independent auditor.
  • Increased competition from EU-manufactured products. EU-based producers will benefit from institutional support (subsidies, inclusion in R&D programmes) and will likely adopt regulations faster than producers in non-EU countries. While collaboration with and support for non-EU producers is also being considered as part of the EGD, the budgets destined for programmes overseas are much lower than those planned for EU-based enterprises.

What can businesses do to deal with these obstacles?

  • Have your say and submit feedback during the consultation processes – there are various times you can do this throughout the process of making a law. You can also channel feedback during the consultation process through you sector association, exporter association or government. On the Welcome to Have your say page of the EU, you will find an overview of new policies and existing laws that offer the opportunity for input. Some of the upcoming opportunities to provide feedback on EGD-related policies and regulations include:
  • Start gathering supply chain traceability information and consider sharing this information with your buyers so that, together, you can identify and address potential gaps. You can refer to this briefing from Proforest for more information on how to obtain traceability in your supply base and what types of information your buyers are looking for.

7. What opportunities to export does the EU Green Deal offer?

In the short term, SMEs can benefit from increased partnership opportunities

  • Larger buyers in Europe will be responsible for ensuring that products entering the EU market comply with Green Deal principles. Buyers with sustainability commitments are already looking for ways to form supply chain partnerships with the aim of improving environmental and social practices. These buyers will be willing to help you transition to more sustainable processing and production of goods, which they might eventually need by law. Currently, platforms such as AtSource (which is an initiative by Olam) are leading the harmonisation of sustainability information for buyers of agricultural products.
  • Likewise, SMEs could benefit from the EU’s increasing efforts for international cooperation on research and innovation, as both are central elements of the EGD and of the F2F and CEAP. The European Commission has published a list of Green Alliances and Partnerships to achieve the goals of the EGD through international trade.

In the long term, better tools will help SMEs improve their businesses

  • The EU and your own national governments may be setting up support programmes, especially directed at SMEs, to transition to compliance with new EU Green Deal regulations.
  • There will be better tools and mechanisms to provide information on your product and improve your processing/production practices in a harmonised way, such as a digital product passport. This means you will no longer need to comply with a multitude of information requests from your different buyers.
  • Many of the policies and legislative measures of the EGD build on existing regulations that you likely already comply with if you currently export to Europe (or that you will have to comply with if you aspire to export to Europe). Mainstreaming sustainability in your industrial processes will not only give you the opportunity to conduct business with Europe but could also give your business a competitive advantage in other international markets.

 How can my business seize these opportunities?

  • Talk to your relevant EU delegation about what support will be offered to SMEs. Since the launching of the EGD, the EU Delegations and Offices have been working through different regional cooperation programmes, as well as through the governments of the Central and South American and East and West African countries in order to provide information about its new green policies. The European Union External Action Service has published a list of its Delegations and Offices worldwide that you can contact for further information.
  • Talk to your buyers in the EU about the potential for a supply chain programme that benefits their responsible sourcing. Large EU players are providing their suppliers in countries outside the European Union with information about EGD developments and how this could potentially affect them.
  • If you are part of an association or a sectoral initiative on sustainability, discuss how you can confront the challenges together and with other supply chain actors. Likewise, find out whether your sector association is a member of Enterprise Europe Network (EEN). Some of EEN’s regular brokerage events cover policy developments in the EU that affect SMEs, including the EGD.
  • Inform yourself about relevant sustainability certifications in your sector to understand what high sustainability standards for production and processing of your goods may entail and what might be needed to comply with future buyers’ expectations and/or EU regulations. Click on the relevant sector on CBI’s market information webpage to find information on certification schemes that apply to your sector.

8. What more should I know about the EU Green Deal?

Other important EU Green Deal policies that will impact SMEs from developing countries that export to Europe include the Environmental and Human Rights Due Diligence Law, the Biodiversity strategy for 2030 and the Carbon Border Adjustment Mechanism (CBAM).

The Environmental and Human Rights Due Diligence Law

While an environmental and human rights due diligence law is in the making, this is not technically linked to the EU Green Deal. However, it will complement many of the measures proposed for increasing corporate accountability and supply chain information on environmental performance and human rights, including voluntary mechanisms of F2F such as the EU Code of Conduct on Responsible Food Business and Marketing Practices. CBI has written a piece about its implications for your business in a news article on its website with the title: The European Due Diligence Act.

The Biodiversity strategy for 2030 and the legal framework to halt and reverse EU-driven deforestation

  • Closely linked to the development of a sustainable and fair food system is the preservation and defence of biodiversity and ecosystems. This is why the European Commission has also published the Biodiversity strategy for 2030. Like F2F, the Biodiversity strategy seeks to build society’s resilience to future threats such as food insecurity, outbreaks of diseases that spread between animals and people (also known as zoonotic diseases), the impacts of climate change and forest fires. The Biodiversity strategy will establish protected areas for at least 30% of land and 30% of sea in Europe. Moreover, it will restore degraded land and sea ecosystems by increasing organic farming and biodiversity-rich landscape features on agricultural land, halting and reversing the decline of pollinators and reducing the use and risk of pesticides by 50% by 2030.
  • In a resolution published on 9 June 2021 on the EU Biodiversity Strategy for 2030, the Parliament asked the Commission to urgently present a proposal for an EU legal framework based on mandatory due diligence that ensures that value chains are sustainable and that products or commodities placed on the EU market do not result in or derive from deforestation, forest degradation, ecosystem conversion or degradation or human rights violations.
  • Although nothing has yet been communicated publicly, possible instruments in the proposal may include mandatory labelling, voluntary commitments and labelling, due diligence and verification schemes. It is not yet clear how ‘deforestation-risk’ products will be defined, but the initial impact assessment mentions the palm, soy, beef and timber sectors. It may be that forest-risk crops such as cocoa, coffee and rubber will also come under the proposal.

The Carbon Border Adjustment Mechanism

  • The EGD recognises that, to reach climate neutrality by 2050, the EU needs the cooperation of its suppliers in Africa, Latin America and Asia. Without this cooperation, companies in Europe could transfer their processes to countries where GHG emissions regulations are less strict. This is called carbon leakage. The Carbon Border Adjustment Mechanism (CBAM) aims to discourage carbon leakage by putting a carbon tax on imports of certain goods from outside the EU.
  • In this context, EU importers will buy carbon certificates corresponding to the carbon price that would have been paid if products had been produced under the EU's carbon pricing rules. Likewise, once a non-EU producer shows proof that it has already paid a price for the carbon emitted during production in a country outside the EU, the EU importer does not have to pay the corresponding costs (Figure 4). To provide businesses and non-EU countries with legal certainty and stability, the CBAM will be phased in gradually and will initially apply only to a selected number of goods at high risk of carbon leakage.
  • What is important for SMEs exporting products to the EU is that, while CBAM will initially apply only to fertilisers, iron, steel and energy, there is no guarantee that other goods will not be included at a later stage. Likewise, there is no clarity regarding the applicability of CBAM to fertilisers used in the production of imported agricultural goods. In terms of opportunities for non-EU SMEs, there are concerns that CBAM will increase the cost of agricultural production in Europe, thereby making imports of food more competitive and attractive.

Figure 8: Carbon Border Adjustment Mechanism explained

Carbon Border Adjustment Mechanism explained

How can I stay informed of future developments related to the EU Green Deal?

This study has been carried out on behalf of CBI by Diana Quiroz and Jasmine Arnould from Profundo.

Please review our market information disclaimer.

  • Share this on:

Search

Enter search terms to find market research

Do you have questions about this research?

Ask your question

One of our key messages when we are engaging in policy discussions with the EU is to take into account the voice of producers, because we see that is often lacking.

Kim Schoppink

Kim Schoppink, Global Policy Lead, Rainforest Alliance

 The biggest piece of advice for suppliers right now is to get visibility on your supply chain. And the important thing is to be willing to share this information with buyers!

José Nogueira de Brito

José Nogueira de Brito, Chief Commercial Officer
Jerónimo Martins

 

Webinar

The EU Green Deal: How will it affect my business?