Nana Agyepong l Palladium - Jan 09 2024
Ambitious Regulations, Complicated Reality: 3 Takeaways from the Sustainable Commodities and Landscapes Forum

How do businesses adapt to new legislation and regulatory pressure for more inclusive, safeguarded supply chains? What do these changes mean for the farming communities on the ground?

Regeneration’s Director of Green Commodities, Simon Breure, recently attended the Innovation Forum’s Sustainable Commodities and Landscapes Forum in Amsterdam. The forum, which was focused on incoming legislation and what supply chain transformation really means on the ground, provided an opportunity for Regeneration, a partnership between Palladium and Systemiq, to exchange with fellow experts on what to expect from the future landscape of climate and nature-based regulations, and what this entails for sourcing regenerative commodities.

Regeneration supports sustainable cocoa and coffee businesses across East and West Africa, matching corporates to nature-positive tropical commodities, and helping businesses to increase the resilience of their supply chains and deliver on climate and nature goals. With the arrival of new regulations and standards, Regeneration’s work will also have to adapt to meet the needs of the industry.

We caught up with Simon to discuss his key takeaways from the event:

1. Most companies and countries are not ready for the European Union Regulation on Deforestation-Free Products (EUDR).

Under the EUDR, as of January 2025, traders who bring commodities like soy, beef, palm oil, wood, cocoa, coffee, and rubber to the EU market, or export from it, must prove that the products are not harvested from recently deforested land nor have contributed to forest degradation. This requires companies to source from deforestation-free areas and create fully transparent supply chains, and have the monitoring, reporting, and verification systems in place to prove it.

However, Breure shares that “most companies will not be ready to meet these EU requirements within the stipulated timeline.” With just over a year until the EUDR comes into effect, many do not have enough visibility on what the EUDR means in practice in terms of import documentation, information exchange, and reporting.

He suggests a combination of solutions.

On the one hand, organisations like Regeneration are well-positioned to deliver support to companies and farmer groups to meet the new standards as quickly as possible. On the other hand, an interim grace period could be implemented, during which penalties would be voided and companies could scale toward meeting the requirements.

2. Creating truly sustainable supply chains at scale requires innovative finance mechanisms.

Many tropical, smallholder supply chains face systemic challenges, including low yields, low farm gate prices, and limited access to credit. To improve the sustainability of their supply chains, companies are beginning to implement targeted measures and programs, such as training their employees in good agricultural practices, providing increased access to inputs, and adopting measures towards eradicating deforestation and child labour, in line with certification schemes.

“Unfortunately, most of these measures and programs do not unlock sufficient external capital and this prohibits the critical mass of impact to create lasting change.”

True supply chain transformation requires long term supply agreements, he explains, such as the development of new farm service delivery models - bundling extension services, inputs, credit, aggregation - and innovative blended finance solutions.

“Programs should be holistic and designed from a regional perspective to avoid a waterbed effect where local improvements are offset by new detriments nearby.”

3. Achieving Net Zero Goals Requires An Overall Supply Chain Scope

The majority of western food and agriculture companies have now made commitments to strong net zero goals that cover regenerative agriculture.

Nevertheless, Breure warns that the widespread adoption of this new focus on carbon raises the risk of dilution of other sustainability programs. “Net zero and regenerative agriculture commitments can only be successful when they are fully integrated in overarching supply chain transformation programs, taking the full landscape into consideration, and including the adoption of multi-layered agroforestry models as well as forest protection and restoration initiatives in the landscape.”

Breure’s reflections are a stark reminder that policy decisions require deeper understanding of the realities facing producers and companies at the end of commodity value chains. But if responded to in the right way, these new regulations are a critical opportunity to build inclusive supply chains that create fair returns for farmers and producers around the world.

Regeneration offers leading corporates opportunities to transform their existing supply chains, taking into consideration the impacts on and capacity of all stakeholders involved. Regeneration has 8+ years of on-ground expertise to shift tropical commodity supply chains to agroforestry and other regenerative practices. Regeneration is a partnership between Systemiq and Palladium.