European Green Deal becomes a reality for the cocoa sector
Increasing concerns about the climate crisis have led the European Union (EU) to develop an ambitious set of actions. These actions form the European Green Deal (EGD). The EGD’s impact goes far beyond Europe. It has an impact on cocoa producers and exporters across the globe. The EGD makes it even more important for producers and exporters to show sustainability and integrate it into their business operations. More and more European buyers are looking for suppliers that can be accountable and transparent.
The European Green Deal and the cocoa sector
The European Green Deal plans to make Europe climate neutral by 2050. The EGD is an ongoing political and legislative process. It involves many different actions, but some policies still have to be defined. 2 EGD-related regulations are particularly relevant for cocoa exporters.
The first one is the EU regulation on deforestation-free products. The EU published a legislative proposal for this regulation in November 2021. The regulation bans the sale of goods produced on deforested and degraded land. The list of targeted products includes cocoa and derived products like chocolate. Another important regulation involves human rights and environmental due diligence laws. The EU published a draft due diligence regulation in February 2022. This regulation requires companies that do business in Europe to address human rights and environmental issues within their value chains.
What does this mean for cocoa exporters?
These laws will have significant consequences for SMEs in cocoa-producing countries. Buyers will be monitored more strictly, and part of the responsibility to follow these laws will shift to suppliers. Because of this, the need for accountability, traceability and transparency will increase across the supply chain. Companies in the supply chain will need to generate and share information better. And better monitoring of actors across the supply chain will be necessary, especially those at the origin.
To ensure that cocoa is deforestation-free, the EU will characterise producing countries as low, standard or high risk through a benchmarking system. Traceability requirements will depend on the country’s risk level. High-risk regions will have to meet more due diligence requirements than low-risk areas.
Producers, exporters and other market players with high environmental standards, for example, through practices like agroforestry and regenerative agriculture, have a clear advantage. Similarly, businesses with high social standards like fair pricing and gender equity, as well as tighter supply chain controls, will stand out.
What can you do to meet these demands?
All cocoa exporters are required to collect detailed information about their operations. Digitalisation and other tools are therefore very important. To prove that your cocoa is deforestation-free, you may have to record the geographical coordinates of your cocoa farm or plantations. Another way you can do this is through GPS polygon mapping. GPS polygon mapping traces the entire perimeter of a farm, offering increased transparency and traceability. For other ideas on how to monitor activities in your supply chain, read our tips to go digital in the cocoa sector.
Also, look out for new cooperation programmes that help with the transition to a more sustainable business. As part of the EGD, the EU is starting projects to support its new policies and actions. An example is the recent €25 million investment in West Africa to boost sustainable cocoa production.
- To learn more about the EGD and how it will affect you, read our study: The Green Deal - How will it impact my business?
- To learn more about the cocoa sector in Europe, visit our cocoa market intelligence page.
Gustavo Ferro and Lisanne Groothuis from ProFound – Advisers In Development wrote this news article for CBI.
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