The European Union is getting serious on deforestation. By the middle of this year, it will ban the import of 14 types of commodities if they have been produced on land deforested or degraded since 31 December 2020. Producers and traders in these commodities – which include beef, cocoa, coffee, oil palm, rubber, soy and wood – will have 18 months to fall in line with the new rules. Advocates have hailed the legislation as ground-breaking. The EU’s environment commissioner describes it as “the most ambitious legislative attempt to tackle these issues worldwide ever”, while the US-based campaign group Mighty Earth calls it “historic and momentous”.
Farmer in Ara Permai Village, Siak © Perdana Putra/CIFOR-ICRAF. ►
But the countries producing these commodities are up in arms. At a WTO meeting in November, representatives from the Global South accused the EU of adopting “inherently punitive” protectionist measures against developing countries in agriculture. In a letter to the EU Parliament, dated 27 July 2022, leading producer countries from Latin America, West Africa and Southeast Asia – including Brazil and Indonesia – argued that “trade restrictions or the threat thereof cannot be a preferential means to achieve environmental ends.” They warned that the EU’s new regulation “is likely to penalize producers in developing countries, especially smallholder farmers and SMEs [small and medium-sized enterprises]”, leading to “increased impoverishment, with limited if not negative effects for the conservation of forests.”
With the battle lines drawn along a North-South latitude, the Tropical Forest Alliance (TFA) initiated a series of South-South Dialogues (SSD) in late 2022, in a bid to build a shared understanding between leading producer countries in the Global South around the challenges and opportunities they face in embracing deforestation-free trade and investment in these commodities. In line with the UN’s definition of south-south cooperation, the SSD is proposed as a complement to, rather than a substitute for, North-South dialogue. The dialogues have two clear goals. First is to create an open, safe space for all actors, but especially the private sector, to say what they think about the challenges they face in achieving deforestation-free supply chains. “Each country in the Global South has its own challenges,” says Rizal Algamar, the TFA’s regional director for Southeast Asia. “We’d like to understand those challenges and opportunities – such as access to markets, access to finance, access to capacity.” The second goal is to develop a common narrative around those challenges and opportunities. “Once we achieve that common narrative, then we can start to understand how we address each challenge, how Southeast Asia can learn from Latin America and vice versa,” explains Algamar. Identifying best practice solutions is as important as highlighting challenges. “Our approach is a way of building solutions from the ground up”, explains Javier Ortiz, regional director of Latin America for TFA. “But what makes it different is that this is not an NGO- or government-driven initiative. Instead, we put the perspectives of the private sector first, along with their worries about what these new market rules will mean for their businesses”, says Ortiz. “These are local producers talking, not only multinationals. They feel that this legislation has been imposed on them from the Global North and they’re calling for support to tackle the root causes of deforestation”, he adds.
▲ Local community transporting palm fruit in Kayu Ara Permai village. © Perdana Putra/CIFOR-ICRAF
Each country in the Global South has its own challenges. We’d like to understand those challenges and opportunities – such as access to markets, access to finance, access to capacity.
There is no doubt about the destruction to tropical forests caused by growing global demand for, especially, beef, soy and palm oil. From 2001-2015, seven agricultural commodities accounted for nearly 72 million hectares of lost forest – double the area of Germany. But there’s good news too. The rate at which oil palm plantations replaced forests has dropped sharply since 2012. Leading oil palm producer Indonesia – once a poster child for commodity-driven deforestation – saw three consecutive years of reductions in primary forest loss from 2017-2019. Clearly the Global South has some learning to share with the Global North about how to preserve standing forests while continuing to support its agriculture sector. In the opening round of TFA dialogues in Brazil, Colombia and Indonesia, discussions between private companies, academics, government departments, industry associations and non-profits brought to light a series of nuanced, producer-specific perspectives which leaders in Europe and the US need to hear. We look at some of these perspectives in a little more detail below. When considered together, these perspectives make a strong case for arguing that commodity-driven deforestation is a challenge shared by the Global North and South which demands a shared approach to finding solutions – not a top-down trade embargo.
In 2021, demand for forestry and agricultural commodities from the Global North amounted to $215 billion. Almost half of these imports were sourced from just eight countries in the Global South – including China, Indonesia, Brazil and Côte d’Ivoire. The same interdependency is mirrored by producers: for example, the top five agri-commodities exported in 2021 by Indonesia (palm oil, timber, rubber, cacao and coffee) totalled $40 billion (17% of the country’s exports) – with one third going to the US, EU and Japan.
Countries in the Global South do not feel they receive enough recognition for the progress they’ve made in recent decades. In 2011, for example, Indonesia issued its National Forestry Plan (2011-2030) as well as the world’s first national-level standard for sustainable palm oil (ISPO). Since then the government has issued regulations on peatland restoration, forest degradation and forest management to address its commitments under 2015’s Sustainable Development Goals (SDGs). Then in 2022, Indonesia established the Green Economy Index (GEI), which sets some remarkable targets, such as increasing the forest cover threshold from 30% to 54% and decreasing the proportion of degraded peatland to zero.
Producer countries point to a lack of global agreement on sustainability metric frameworks and even on definitions of deforestation. They argue that global sustainability standards and regulations are biased against them and keep changing. “The Global South has ratified the Paris Climate Agreement and the SDGs and integrated them into long-term development planning”, says Rizal Algamar. “But in the middle of this process, the EU then introduces its own deforestation regulation without any constructive dialogue. What Indonesia is saying is, ‘Hang on for a second, we already have these multilateral commitments – let’s focus on them rather than developing another instrument that could hinder the implementation of the current roadmaps’.”
▲ Smallholder Seu Manoel picking palm fruit in his own plantation. © Miguel Pinheiro/CIFOR
A common concern centres on the high costs of certifying commodities as deforestation-free and ensuring compliance with new regulations. The responsibility and cost for these processes usually fall almost entirely on producers, many of whom – especially smallholders – lack either the financial resources or technical understanding required. “In Latin America, there are large differences of capacity between each geography and between sectors as well,” explains Javier Ortiz. “For example, soy is dominated by large producers, but with beef, coffee and cocoa there are many small producers with limited access to the funds and technology needed to comply with new regulations.”
Soy is dominated by large producers, but with beef, coffee and cocoa there are many small producers with limited access to the funds and technology needed to comply with new regulations
In Colombia, systemic factors contributing to deforestation include illegal activities, such as drug crops, land grabbing and corruption. In Brazil, systemic factors include law enforcement and transparency. However, efforts from the Global North to reverse deforestation often fail to consider these systemic factors. To address them will take bold, creative and collaborative approaches that focus on sustainable, inclusive rural development and territorial governance.
▲ Rubiel Rios Andrade dries cacao on his farm in township of La Paz, Colombia. © Dominic Chavez/World Bank
◀︎ A local community member participating in Peatland Restoration Action arenas in Bukit Batu, Riau, Indonesia © Aris Sanjaya/CIFOR
These early SSDs have proposed some practical solutions, as follows:
Indonesia is making positive progress with its jurisdictional approach to “green growth”. The government in each district – or “regency” – has the ability to issue its own policies and regulations around green growth that are specific to its circumstances. “A jurisdictional approach enables local governments and the private sector to work collaboratively around a shared agenda”, says Rizal Algamar. “It’s more manageable because only those stakeholders with a presence on the ground can join the discussion and contribute to the strategy,” he adds. In January 2022, for example, Siak regency passed district-level laws and regulations on green growth that had been formulated collectively by all stakeholders including companies. “The next step is to jointly develop a jurisdictional collaborative governance framework from the ground up – that’s the missing link that defines how every stakeholder can work together,” says Algamar.
A gulf currently exists between the different perspectives and understanding of value chain actors in the Global North and South. A forum that embraces all relevant state and non-state actors – with a balanced representation from Southern organizations – would help address the core complaint that sustainability standards and regulations have been developed with an unfair bias against the Global South. Such a forum could build on existing platforms, such as the Indonesia-EU Comprehensive Economic Partnership Agreement (CEPA) or through leveraging the influence of the ASEAN Economic Community.
Rather than simply imposing a cut-off date for compliance with strict regulations, the SSDs have proposed a staged approach through a joint roadmap that features agreed sustainability benchmarks to be met by defined deadlines.
This roadmap process should be accompanied by a programme to support producer countries in the Global South to implement agreed roadmaps and regulations. Countries from the Global North need to provide capacity-building support and technology transfer to producer countries. In return, producer countries would undertake unilateral reforms to strengthen the awareness of sustainability among key stakeholders.
Producing and certifying commodities as deforestation-free will take far greater investment across producer countries than is currently available. The problem is not simply farmers who lack the knowledge, credit history or collateral to access financing – it is also that many investors do not understand the opportunity. “Investors still privilege low-cost supply”, says Javier Ortiz, “but this has been accumulating environmental and social costs. The finance sector just lends money to whoever produces efficiently, without internalizing these costs and risks. But unless we drive towards sustainability as a rule, not an exception, then it will be very difficult for things to change.”
An investment hub is needed with three clear roles – pooling funds from investors at a jurisdictional level; aggregating producers and prioritizing projects; and managing the staged distribution of funds. These funds need to include soft loans de-risked with grants, as well as payments for ecosystem services to reward farmers for conserving standing forests. The dialogues have already begun to demonstrate that there is a will among private actors to be part of the solution. This is important because, as Ortiz points out, “The EU doesn’t want to feel they have to solve everyone’s problems.” And this is not just about Europe, adds Ortiz: “As long as we generate solutions for the EU Regulation in terms of traceability, conversion, monitoring and so on, this will also be useful for other markets, such as China, as well as for domestic markets.”
The finance sector just lends money to whoever produces efficiently, without internalizing environmental costs and risks. But unless we drive towards sustainability as a rule, not an exception, then it will be very difficult for things to change.
Farmers and experts from the Global South are unanimous in their call for the EU to engage in more constructive dialogue with producer countries to help them deliver on Europe’s new deforestation law. “This EU regulation is trying to shape the behaviour of upstream users in the supply chain. This is risky because it goes into the sovereignty of other countries with their own strategies for the same goal,” says Felipe Carazo, Head of Public Sector Engagement for the TFA. “For the regulation to be successful, it’s vital to forge channels of dialogue with producer countries,” he maintains, adding: “If you can tap into initiatives that exist in other countries then you can have a win-win situation.”
While countries in both the Global North and South might share the same goals, the cost and complication of implementing these goals is unequally spread. “For many consumer countries it’s a straightforward accounting issue of preserving nature and reducing emissions,” says Carazo, “but for producing countries it involves changing entire systems of governance and livelihoods.” Added to which, every producing country and sector is different. So the value of the SSDs is in creating common narratives between Southern producer countries around what works, what doesn’t work and how a shared journey towards deforestation-free commodities might look. With consensus forged around a unified approach, Southern actors are then better placed to engage in constructive conversations with Northern actors.
However, creating such a consensus will take time, especially between private and public sector players. “We already have the big companies ready to showcase their approaches”, says Rizal Algamar. “Now, we need Southern governments to get behind these strategies by providing regulatory support and incentives.” This is where TFA can play a key role, in harnessing the corporate perspectives of agri-businesses in the Global South to influence the policies of their governments in forums such as the G20. While the process of the SSDs may be one of dialogue, the end goal is very much one of action. Voicing the perspective of the Global South, Carazo captures what this goal is: “The South-South Dialogues tell us what the key stakeholders are saying about the trends, challenges and solutions they see coming. They put these issues on the table to discuss and create a common narrative. And they showcase to international stakeholders how much progress we’ve made – but also how much support we need to implement the final mile of transformation.”
It’s in the best interests of consumer countries that are trying to tackle deforestation to forge a more balanced approach with producer countries
◀︎ A worker fertilizing an oil palm plantation in Papua, Indonesia.© Agus Andrianto/CIFOR
