EU Deforestation Regulation Update

Following the EU Deforestation Regulation (EUDR) article shared in the ECOM July internal newsletter, we wanted to share a further update with everyone about the impact of this regulation and what we are doing as ECOM to prepare. 

Please note that this communication is for internal ECOM staff only. Further external communication will be shared soon.  

Recap:

The new EU legislation requires all cattle, cocoa, coffee, palm oil, soya, rubber, and wood products imported into, or exported from, the EU to be deforestation-free by December 2024. 

Non-compliance with EUDR carries the risk of costly fines, as well as a loss of market access and reputational risk to ECOM. For more information about the EUDR regulation please see the article from our July newsletter here.

Challenges of the EUDR Regulation: 

While the industry awaits the EU-approved guidance (expected early 2024)  and regulatory clarifications, uncertainties remain regarding the ultimate impacts of the EU regulation. Nevertheless, the requirement for farm-level traceability of all products entering and leaving the EU is evident, presenting numerous challenges due to the complex nature of the global supply chain.

To ensure compliance with the regulation, it will be imperative to establish strong tracking and verification systems, coupled with effective data management and standardization.

What this means for ECOM:

Within ECOM, this regulation impacts two of our primary origin integrated commodities (cocoa and coffee), in addition to some activities within our smaller developing venture. As a result, we are faced with a substantial range of responsibilities and potential exposure to associated risks arising from this new regulatory framework.

Despite the challenges, the new EU regulation has the potential to create substantial positive impacts, seeking to strengthen traceability and reduce worldwide deforestation to create a positive climate impact. It also provides an opportunity for improved supply chain collaboration and raises awareness amongst all actors and stakeholders about the negative impact of deforestation. This new regulation resonates with ECOM's dedication to protect nature and, consequently, mitigating deforestation.

What is ECOM Doing: 

At ECOM, we are taking proactive steps to align with the upcoming EU regulations to ensure our readiness for ourselves and for our partners. Our approach is underpinned by a collective dedication to compliance, transparency, and sustainability. Here's our strategy for preparation:

• 1. Unified Approach: We have a One ECOM approach to EUDR compliance with an aligned response towards customers, financial institutions and regulators regarding our actions and readiness. This strategy not only ensures alignment with the new EU regulation, but also harnesses the advantages of shared resources and standardized data.

• 2. Centralized Data Lake: We are establishing a robust centralized data repository for data input and storage that, in time, will be used across all ECOM projects. This centralized hub will enable us to conduct automated data checks, ensuring data standardization and maintaining governance throughout our processes, with the goal of identifying and fixing data problems as early as possible

• 3. Automated Farm Deforestation Check: Using geolocation data and spatial modeling, we're developing an automated pipeline to assess deforestation on farms. This tool, using information fed by the data lake, will enable us to generate lists of EU import-approved and non-approved farmers based on EU deforestation criteria.

• 4. Clear Communication: Meetings are being booked with trade teams, PC and origin managers, and sustainability staff for early September to further discuss the regulation, ECOM approach and team engagement and support that will be needed. 

• 5. Data Gathering and Integration: As we move into Q4, we are starting EUDR readiness testing. This exercise will work with origin operations to understand local procedures, check traceability methods, and support quality data standardization and integration to ensure origin teams have compliant processes in place and access to up to date information regarding any deforestation activity within their supply chain. 

We are not only adapting to the EU regulations, but ECOM is also embracing this opportunity to refine our processes and further fortify our position as a leader in sustainable practices within our industry. Through these efforts, we're reinforcing our commitment to sustainability while enhance our capabilities to ensure uninterrupted business operations and trading

What is needed from you:

We request your engagement and dedicated time during the testing and integration phases as your participation is crucial for our collective progress.

If you have any questions, wish to convey customer requests, or have industry updates or information you come across that you would like to share, please don't hesitate to reach out via email: ESGcompliance@ecomtrading.com

Frequently Asked Questions on EUDR: 

Please find the full EU Commissions FAQ document here for further information. 

Thank you,

Kakay Halle - Business Transformation Manager