A massive gap is forming in the race to comply with the European Union’s antideforestation rules, as smallholder farmers and suppliers struggle to meet the new requirements while agribusiness giants express confidence about being ready in time.

Olam Agri and ofi, both subsidiaries of Singapore-headquartered food and agribusiness conglomerate Olam Group, told Mongabay they’re using advanced traceability and information systems to get ahead. By contrast, smallholders in countries like Honduras and Indonesia still lack critical information and resources to even begin the compliance process before the EU Deforestation Regulation (EUDR) takes effect.

In response to these and similar concerns from trade groups and exporting countries, the EU has agreed to delay the law’s implementation by a year from the initial start date of end-2024.  

Coffee is one of the seven commodities subject to the EUDR; the regulation will prohibit imports into the EU market of commodities sourced from land that was deforested after Dec. 31, 2020. Coffee will be heavily impacted by the new regulation: between 2001 and 2015, 1.9 million hectares (4.7 million acres) of forest, an area about half the size of Switzerland, was cleared for coffee cultivation. And in 2023, half of the coffee exported from Honduras was destined for the EU.

Miguel Pon, executive president of the Association of Coffee Exporters of Honduras, told Mongabay by email that he believes “no more than 20 percent of all Honduras [coffee] producers are prepared with the points and polygons of their farms.” These refer to the collection of geographic coordinates of the plots of land where the commodities were produced or harvested, which must be submitted to an information system as part of compliance with the EUDR.

The main challenges, Pon said, are access to technology, lack of knowledge of national legislation and the EUDR, as well as a lack of financial and human resources to carry out the data collection on each farm. 

Race to compliance

Companies like ofi, previously known as Olam Food Ingredients, are also racing to meet the requirements. A spokesperson said it’s been a “herculean task” to map ofi’s entire supply chain, especially the . Those responsible for collecting data for ofi “often have to travel to remote areas, sometimes only accessible by moped or on foot, and explain to each farmer why they need to walk the farm boundaries,” Christopher Stewart, global head of sustainability impact at ofi, told Mongabay by email.  

Despite having hundreds and thousands of smallholder suppliers in their sourcing networks, these enumerators often manage only three to four farms a day, he said.  

As pressure to meet the EUDR obligations mounts, there’s the danger that large companies will simply drop suppliers to meet their own compliance needs, said Mairon Bastos Lima, a senior research fellow at the Stockholm Environment Institute.

Large European companies face fines of up to 4% of their turnover if they import noncompliant products. “At the end of the day, the companies have their balance sheets on the line,” Bastos said.  

In Ethiopia’s Kafa region, said to be where coffee was first cultivated and made into a drink, the crop is mostly grown by poor farmers who don’t have the expertise or technology to collect the complex data required to meet with EUDR requirements. That’s already led to some European buyers cutting back on orders. “Buyers are hesitating to buy our coffee because they are not confident we can demonstrate compliance,” Tsegaye Anebo, manager of a coffee farmers’ union, told The Guardian. 

“Whilst we are confident our systems are robust within our own supply chains, we are concerned that many smallholders in producing countries will not be ready for the EUDR, as the FAO reported this year for coffee farmers in Honduras and Guatemala,” ofi’s Stewart said. “The unintended consequence will be that they are locked out of EU markets — which could make solving the challenges of poverty or deforestation even more difficult.”

Tools and technology 

ofi says its coffee teams have carried out more than 135,000 deforestation assessments and registered 63,500 farmers via the Olam Farmer Information System (OFIS), a digital survey tool used for collecting data, training and tracking. 

To track their coffee and cocoa supply chains from farm to customer, ofi uses an internal digital traceability tool, known as Track & Trace, which integrates all the information gathered from OFIS and other on-the-ground digital apps, as well as enumerators and local buying agents. Data from the apps will appear on Track & Trace, ready to be uploaded to the EU’s TRACES platform.  

To avoid locking out unprepared farmers, the company’s global cocoa and coffee teams have equipped farmers with the resources needed to meet the EUDR’s requirements, via ofi’s sustainability programs. According to Olam’s most recent annual report, ofi delivered training and support to more than 530,000 farmers across its supply chains in 2023. 

Selorm Kugbega, a research fellow at the Stockholm Research Institute who has carried out research on smallholders in Ghana, told Mongabay that smallholder coffee and cocoa farmers are generally less prepared for compliance than rubber farmers, as the latter produce rubber on a contract basis and rubber estate owners are better organized and more protective of their contract farmers.  

Coffee and cocoa farmers, on the other hand, are viewed as individual entrepreneurs by commodity sourcing companies, Kugbega said.

An Olam Agri representative told Mongabay by email that the company has established “complete traceability” in Côte d’Ivoire, where it sources its rubber. It attributes this to a suite of applications and tools recording detailed chain-of-custody information, as well as monitoring deforestation. These tools are also being used to prepare the company’s rubber suppliers in Indonesia.  

“So far, we have onboarded over 4,000 direct farmers in Côte d’Ivoire and nearly 5,000 suppliers in Indonesia covering more than 20,000 hectares [about 50,000 acres],” the representative said.

Risk assessment

Among the EUDR requirements, companies must carry out risk assessments to ensure products comply with the rules. If any risks are discovered, they’re expected to adopt risk mitigation procedures and measures.

At the start of each year’s crop season, all of ofi’s suppliers are expected to sign the ofi Agri Supplier Code (ASC). This is the first stage of their human rights and environmental due diligence approach. An ofi representative told Mongabay they already carry out farm-based audits on verified and certified supply chains, but in 2024, they introduced a sampling-based internal verification procedure for uncertified suppliers, which tracks back to the farm level. This is currently being tested in multiple product supply chains and origins, covering the key topics of the ASC.

“Due to our long-term focus on reducing deforestation in smallholder supply chains and advancing sustainability programs we already regularly perform extensive deforestation risk assessments including the use of Google Earth Engine planetary libraries and Global Forest Watch,” the same ofi representative told Mongabay. “This provides near-real time and historical monitoring of more than 1 million farm plots (including other commodities) mapped using ofi digital solutions.” 

In Olam Agri’s case, risk assessment involves background checks on potential suppliers, deforestation assessments using Global Forest Watch, and GPS data collection for plantation-level traceability. The company’s risk mitigation measures include using digital tools for end-to-end traceability, as well as training suppliers and factories on environmental, labor and human rights issues to address sustainability gaps.

A head start  

As a result of its commitment to other global standards, such as the U.K. Timber Regulation (UKTR) and the U.S. Lacey Act, Olam Agri was already well-placed to meet the traceability requirements of the EUDR. This put it at an advantage over those needing to comply with its rigorous requirements from scratch.  

According to a company spokesperson, its wood operations “exceed the regulation’s requirements,” as they source exclusively from Forest Stewardship Council (FSC)-certified forest concessions in the Republic of Congo. This means it hasn’t had to face the complexities of managing traceability across diverse external suppliers. 

“To further enhance compliance, we integrate advanced monitoring tools such as satellite image deforestation tracking and digitize our entire processing chain with robust tracking and barcode systems,” the spokesperson said. “These efforts reflect our longstanding commitment to responsible forest management, reinforced by advanced traceability systems, ensuring full compliance with EUDR standards while upholding transparency and accountability for our stakeholders.” 

The main challenge for Olam Agri was the detailed data collection, verification and reporting required. To deal with this, it had to develop and implement tools that systematically organize and report the vast amount of data for each contract.  “This required significant investments in technology to ensure that data collected in the field translates seamlessly into transparent and actionable reporting for our clients and auditors,” a spokesperson said.  

The company uses geographic information system-based mapping applications and GPS-enabled devices to geolocate individual trees throughout the inventory process. This information is then integrated into its databases, allowing it to maintain a detailed chain of custody for each log.

Kugbega told Mongabay many smallholders feel a sense of regulatory fatigue, as these new rules have been forced on them by national or international actors “without their input.” As a result, some farmers are considering transitioning to crops like oil palm, banana or cashew, which have robust domestic or Asian export markets with less stringent deforestation compliance requirements, he said.  

“Attention has not been paid to millions of farmers that are not part of cooperatives with valid certifications,” Kugbega said. “They stand risk of noncompliance to EUDR simply because of the inability provide the needed evidence of compliance.”

He said there needs to be a greater effort to reduce the challenges and costs of compliance for individual farmers and farmer cooperatives. Rather than training farmers and offering “token gifts that provide little incentive for compliance,” there should be more investment into household, cooperative and community-level mapping and deforestation monitoring infrastructure. 

Sustainability is also about social issues, said Bastos from the Stockholm Environment Institute. “Abandoning people in poverty is not the kind of social impact a sustainability policy should strive to have.”

Banner image: Cattle roaming on degraded pastures in the Brazilian Amazon, in the municipality of São Felix do Xingu, Pará State. Image by: Mairon G. Bastos Lima.