We’re pleased to bring you a short interview with our Director of Sustainability, Kate Monteiro, on the progress of our preparation for the forthcoming EUDR regulation.
“Falcon is in a really strong place. I want to make sure that our partners know that. We are aware of how difficult this is because we have been doing our homework for a really long time”.
Hi Kate.
Last summer we published some thoughts about the potential impacts of EUDR. In the time since, we’ve worked to increase our readiness. As it stands, it’s now well inside a year until it becomes reality. But recently, some industry voices have called for the European Commission to push back the deadline for the implementation of the regulation into law.
1. Does this signal that the industry consensus is that we’re not ready?
KM: I think all of these voices are an acknowledgement of just how long it’s taken for the entire supply chain to even become aware of EUDR, let alone to respond to it. It’s felt like upstream communication was left largely to the industry itself and, with 25 million smallholder coffee farmers around the world, there are still many producers – particularly those not a part of any producer organisation – that remain out of the loop and will therefore, unfortunately, most likely be cut out of this market.
If you couple that with what I believe can generously be described as limited guidance from the EU about putting the regulation into practice, you’re left with an industry that feels ill-prepared to exhaustively evaluate its deforestation risk on the current timeline.
2. Last summer when we spoke about EUDR in detail, the main concerns were (i) costs (who pays), (ii) data protection (for those on producing land), (iii) the regional grey areas around defining illegal deforestation, and (iv) the one that seems to have captured the industry’s main ethical concern – the threat of market access restrictions for smallholders. So, can you summarise where we are? Is the industry reasonably unified in terms of preparation and understanding of what we all need to do come 1st Jan 2025, or are there still some unknowns? And Where is Falcon up to?
KM: I love that we’re checking back in on this a year later and I think there are two parts to revisit. In terms of “who pays”, I think there are two things to highlight. One, it is more than just the “importer of record” who has invested in supporting EUDR. Large producer organisations, exporters, importers, and roasters have invested in either additional technology, labour, or both. I suspect we may be able to reduce some possible redundancies in the future, but initially, this will add up.
Secondly, if there was one thing we all could agree to early on, it was that the producers should not bear the financial burden of this data. Yet where the bulk of the work starts for EUDR is mapping and we can’t underestimate the task of walking dozens of polygons on a mountainous slope – terrain that can be hard to navigate, inaccessible or, with conflict, dangerous. While exporters, importers and NGOs are leaning in to help, the work seems to still largely be falling on the producer groups themselves. These groups are footing the bill and that cost does not seem to be immediately translating into income for most.
On a positive note, in terms of data, there have been many organisations leaning in to provide no-cost technology to producer groups so they may create and own their geolocation data. You have preexisting basic tools like Global Forest Watch and Google Maps Pro, but then Technoserve has just developed an app that’s a way to capture polygons at a producer level and Rabobank’s Acorn has also developed an app where you can capture your polygons (whether you’re in the Acorn programme or not) but also assess them against Global Forest Watch and the JRC map- JRC is an EU developed forest map.
You also have the third-party certifications that are stepping up and creating their own tools and support systems, including Rainforest Alliance (whether you’re certified or not), and FLO’s Satelligence program.
So to summarise where we are, I can say that Falcon is in a really strong place. I want to make sure that our partners know that- we are aware of how difficult this is because we have been doing our homework for a really long time. The last 18+ months have been dedicated to understanding this regulation, how to apply it, and achieving compliance. From a customer standpoint, come time, our clients will have to do very little differently.
3. As the timeline moves along, roasters are starting to express concerns about the day-to-day operational impact of EUDR. One line of thought is that EUDR is a problem for origin and a problem for the middle of the supply chain, i.e. importers. But so long as EU roasters can just keep buying bags of whatever is sitting on importer warehouse spot positions, it isn’t their problem. Is this an accurate assumption or somewhat naïve?
KM: It’s an accurate assumption. Yes, you will be absolutely fine buying from our spot position. Even people buying outside of the EU who may need to import it into the EU later themselves will be fine as well. Part of the role of our sales staff is to work with our customers to ensure we understand what they need from their coffees. And just as someone might need a Fair Trade coffee, if someone needs an EUDR-compliant coffee, that’s something that we’ll be able to do. That’s part of our service.
4. Let’s go through some of the practical day-to-day concerns. These questions have come directly from our clients with specific worries, so it would be great to clarify where we stand.
Will it make coffee more expensive?
KM: To be candid, we don’t know yet. As an industry, there is no escaping that we will incur costs as a result of these requirements. There are labour costs that have been incurred at the producer level, technology and labour costs among many others. In Brazil, as an example, a public/private partnership with the government and CECAFÉ has produced technology that may be able to quickly provide polygons for every Brazilian coffee producer, but the current price is significant. One Brazilian supplier has estimated this expense at several cents a pound. How will this affect customers on a cents-per-pound basis? I think it’s a little tough to say at this stage. But it’s not unrealistic to think those costs won’t trickle down, potentially to us as end consumers.
That said, one of the things that our customers might really love is the fact that this regulation is likely to be an amazing Trojan horse to what will eventually be pretty complete industry traceability on coffee – and that unlocks the opportunity to do so many different things.
If you think about just the power of being able to tell where every pound of coffee comes from on a geolocation basis, it’s the ability for us to explore environmental and social investment on a scale that we may not have been able to do before.
Imagine being able to look at a biodiversity assessment and overlay that with all of the geolocations of the purchases you’ve made in the last year and then decide how you as a customer or as an importer are impacting biodiversity in this particular area. Biodiversity, agroforestry, water conservation… you can start looking at a more granular level on living income. It may grant us a new form of opportunity.
What do I risk if a coffee isn’t compliant?
KM: That risk lives with the importer of record (typically Falcon). The EU does outline those outcomes and if you are the importer of record, it would be good to familiarise yourself with them.
What if I export roasted coffee outside the EU?
KM: Similarly, our customers have nothing to worry about. We will have imported compliant coffee, so we can provide all the documentation customers will need to export.
How about Switzerland, Iceland and Norway? (in Schengen but not in the EU).
KM: If they are not part of the EU and are not part of the countries that have joined EUDR then this is optional to them. In the UK, we have found that some customers are adopting EUDR, either because they have to import roasted goods into the EU and want to have that compliance for their entire operation, or frankly, because they support anti-deforestation measures and are following suit.
Who will be auditing and how?
KM: The auditing of EUDR compliance is left to the countries within the EU. Each country is given latitude on implementation, as long as they’re complying with the regulation. This is one of the many questions that we’re looking for more clarity on from the EU.
What will we have to do?
KM: At this stage, as far as we know, very little, but stay tuned because we will continue to update you and expand upon our blog. We’re looking forward to answering your questions as you have them.
