- Former WWF leader says EUDR is an “effective ban” on palm smallholders
- Each shipment requires more than six million data points for compliance
- The EU needs to negotiate with exporting countries to ensure smallholders maintain access to EU markets
The complexity of the task of implementing the EUDR has been laid out in stark detail by one of Indonesia’s – and the world’s – leading sustainability practitioners.
Agus Purnomo, former WWF Executive Director, former special adviser to President Yudhoyono on climate change, head of Indonesia’s National Council on Climate Change, and Director at GAR/SMART, outlined the required complexity of the task at a CIFOR conference in Jakarta earlier this week.
According to Purnomo, there are two clear and related complexities in the implementation of the EUDR when it comes to palm oil.
The first is smallholders. Purnomo stated that there only 1 per cent of smallholders across Indonesia can be considered “cleanly and clearly” certified, and this means that the EUDR is an “effective ban” on the remainder of the smallholders from accessing the European market.
The second, and this is related to the smallholder situation, is the complexity of palm oil traceability. The EUDR essentially requires that palm oil supply chain be segregated. This doesn’t simply mean ensuring that the materials from the plantations meet the EUDR requirements, but also require segregation of all trucks, storage tanks and processing batches at mill and refineries.
Even for a company like GAR – which has been the first mover on sustainability such as NDPE measures – this is “technically possible but cost wise it is unaffordable.”
To illustrate the point, Purnomo traced back the number of required sources for a single sales order of one product. This would come from nine different batches at a refinery, which itself comes from 72 bulk batches, taken from 25 mills and back to 90 estates or plantations.
At each stage of the process, materials are continuously mingled. This is complicated further by the use of smallholders, where small ‘contaminations’ can result in a shipment losing its ‘deforestation free’ status.
GAR has closely examined its supply chain even further, noting that their 26 bulk products are derived from 641 different batches; and their 179 branded products are derived from 9,748 different batches. It’s worth remembering that these batches are at the end-point of the traceability process, not the start.
There were two further data points worth noting in the presentation. The first is that single shipment effectively contains 6 million data points, and that it takes 2-3 days to manually trace a single sales order.
This prompts the question: can the EUDR actually be implemented? If a single shipment contains 6 million data points, an audit with a 1 per cent sample size still requires the manual checking of 60,000 data points.
The EU has said that proportion of checks will be performed on operators according to the country’s risk level: 9% for high-risk countries, 3% for standard-risk and 1% for low-risk. So does this mean that – if Indonesia is considered high risk – one in ten shipments will be checked? And if so, will this be done manually?
It’s quite possible – even likely – that the EU has not considered the size of the task it has set itself given that it has effectively ignored Indonesian protestations about the complexity of palm oil supply chains. EU Commission presentations on the palm supply chain indicate they are woefully uninformed.
This prompts another question: how effective will EU implementation actually be?
The EU has stated implementation will take place via the EU’s broader customs data platform, known as CERTEX. But submitting and storing the information is one thing – checking its accuracy is another.
The concerns of the palm oil industry about the EUDR – which Palm Oil Monitor first raised more than four years ago – are now spreading to other commodities. Coffee growers across the globe number more than 12.5 million, with most on areas less than 5ha.
As a specialist at the Inter-American Development Bank noted, “There is a lot of concern from smaller countries on how to achieve [EUDR compliance]”. Yet coffee growers in countries like Vietnam have only just woken up to the many uncertainties and compliance requirements from the EUDR.
So, what’s the next step from here according to Purnomo? He puts forward a “realistic road map with clear milestones” that can bring at least of 50 per cent of Indonesia’s palm smallholders into ‘clean and clear’ certification. And this “needs to be negotiated” between exporters and the EU.
However, the forum for any negotiation needs to be identified. The EU has made it reasonably clear that the Joint Task Force is not a negotiation but consultation – and there’s a clear difference. Indonesia is aware of this and continues to reach out at multiple levels – from the President to bilateral negotiations – to get its point across. Malaysia –at this stage at least – is not following suit and is leaving the work to the JTF.
For Europe, the stakes remain high. If it continues on this path – even with multiple objections from development banks and multilateral agencies – it can continue to expect rebuffs from developing country partners and kiss any regional influence goodbye.