In a perfect world all coffee would be totally organic, shade grown, bird friendly, and of gourmet quality. In the real world coffee farmers need to work with what they have to grow their crops. They need to deal with buyers who commonly do not want to pay higher prices than they have to in order to pad their profits as they pass coffee along the supply chain. Meanwhile, well intentioned individuals and organizations try to enforce strict regulations in order to accomplish an ideal such as preventing deforestation by the coffee industry. Such is the case with the EU deforestation-free supply chain law (EUDR). Although the intentions behind the law are good the end result might not be. Will good intentions kill the coffee industry in this case?
What is the EUDR Law?
The European Regulation on deforestation free products is meant to protect global forests from deforestation. It prohibits businesses from selling products in European Union markets unless they are “proven” to be deforestation-free and produced legally. Additionally, such products will be banned from export from the European Union. A recent estimate of the total cost of compliance with this law is between $170 million and $250 million in US dollars.
For this plan to work, companies will need to do their due diligence and produce reports regarding the products involved, their origin, and proof of lack of deforestation, existing land claims, presence or absence of indigenous communities, and more.
For this plan to work companies will need do their due diligence and produce reports regarding the products involved, their origin, and proof of lack of deforestation, existing land claims, presence or absence of indigenous communities, and more.
Problems With the EUDR Law
An issue with the well intentioned EUDR law is similar to something we have written about in regard to small coffee farmers maintaining certification for organic coffee. It costs money and takes times to get certified. As a practical matter the coffee farmers who seek certification need to make enough extra money selling their coffee to make the process worthwhile. The same is very likely to be true with small coffee operations across the world
What Will Be the Results of the EUDR Law?
In all likelihood the EUDR law will result in deforestation not being an issue with coffee sold in the European Union. It will also likely result in having only coffee from large international suppliers being available to European buyers as smaller operations will not be able to deal with the costs of compliance. To a degree this will reduce the variety of coffee available in the EU and result in a lot of excellent coffee going to local consumption instead of export.
Organic or Deforestation Free Coffee in Fact if Not in Name
What we expect to see with the EU law is that the EU will reduce the amount and variety of coffee that it can import and sell locally. Meanwhile there will be a lot of coffee that cannot get into the EU because it is deforestation free just like being truly organic but not certified as such. To the extent that the process reduces deforestation it will be a good thing overall. However, it threatens to consolidate the global coffee industry because only large, global companies will be able to comply and smaller companies as well as small family coffee farmers will be excluded.
Shade Grown Coffee and Coffee Diversity
The EUDR law has to do with preventing deforestation. Another argument could be made that by keeping trees on coffee farms we end up with more shade grown coffee. Studies have shown that in Latin America coffee species diversity increases on farms where coffee is grown in the shade. Thus, in theory, the EUDR law might help coffee diversity in Latin America. However, because so many small coffee growers will be unable to take advantage of this law to sell their coffee to European companies.