New EU rules reshape the cocoa industry
The European Union has introduced new regulations that will significantly impact the cocoa market. These changes are in response to the upcoming EU Deforestation Regulation (EUDR). The new rules require companies to prioritize sustainability in cocoa production. As a result, companies must now address environmental and social issues in their supply chains.
The Corporate Sustainability Due Diligence Directive (CSDDD) is key to these changes. Large companies are required to identify and address human rights abuses and environmental damage within their supply chains. This directive applies to firms in the EU that have over 1,000 employees and generate at least €450 million in global turnover. Additionally, non-EU companies with over more than €450 million in EU turnover must also comply. While smaller companies (SMEs) are not directly impacted, they may face pressure from larger EU clients to provide compliance data. This requirement is expected to have a ripple effect throughout the entire cocoa market.
The European Commission is proposing to simplify the Corporate Sustainability Due Diligence Directive (CSDD) using an “Omnibus approach.” The Omnibus approach aims to align the CSDDD with the Corporate Sustainability Reporting Directive (CSRD) and the EU taxonomy. The CSRD, which will be effective starting January 2025, mandates sustainability reporting, while the taxonomy outlines what qualifies as sustainable investments.
The proposed Omnibus would significantly weaken the makes the CSDDD. It would reduce the number of companies covered by the directive by 80% and limit obligations to their direct suppliers. Additionally, it removes requirements for climate transition plans and lowers the penalties for non-compliance. The proposal has not yet been accepted, so the final text is still subject to change. Major cocoa companies and NGOs are calling on the EU to uphold the current standards and timelines. Examples are Ferrero, Mars, Nestlé and Unilever, and Tony’s Chocolonely, Hershey’s, Mondelez and several NGOs.
In addition to the CSDDD, the Forced Labour Regulation will also take effect in 2027, impacting all EU companies. This regulation applies to any product sold in the EU, regardless of its origin or production stage. To assist companies in preparing for this change, the EU plans to release guidance by mid-2026. Non-compliance with the regulation will result in penalties, including market bans and fines.
For cocoa producers, these new regulations represent a significant change. They emphasize the need for traceable cocoa, which poses challenges for many buyers and suppliers. However, it also presents opportunities for those who are proactive in adopting ethical and sustainable practices. Companies that embrace compliance may gain a competitive edge.
None of these regulations have been implemented yet. However, many companies in the cocoa sector are actively working on traceability and striving to create a sustainable business practices. One example is Bara Union from Côte d’Ivoire. You can learn more about their efforts to enhance sustainability in our cocoa webinar on meeting sustainability requirements for the European market (from minute 21 onwards).
You can also read tips to enhance your sustainable endeavours in our tips to become more socially responsible in the cocoa sector.
Tjalling de Boer wrote this article for CBI.
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