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The Green Deal by the EU; An Attempt Towards Restoring The Global Environment



With an aim to fight climate change and biodiversity loss, the European Union, on December 6th introduced a historic new legislation, making it the first international trading country to do so. The law to fight global deforestation or forest degradation, also known as the Green Deal is an attempt by the government that will make it obligatory for companies to verify and issue a so-called “due-diligence” statement, that goods placed on the EU market have not led to deforestation and forest degradation anywhere in the world after 31st December 2020.


As stated by the MEPs in the text, no country or commodity shall be banned, but if companies do not issue such statement, they shall not be allowed to sell products in the European Union. According to the Global Forest Resources Assessment, released by the Food and Agriculture Organization of the United Nations, in the 2020, EU consumption represented around 10% of global deforestation. Moreover 420 million hectares of forest were lost to deforestation between 1990 to 2020. In consideration to this, the Green Deal guarantees the European customers that the products purchased by them do not contribute to the destruction and degradation of forests. This includes the irreplaceability of primary forests, henceforth reducing the European Union’s contribution to climate change and global biodiversity loss. The political agreement has arrived 12 months after the Commission's 2021 proposal.


In the new legislation’s text, the products covered includes cattle, cocoa, coffee, palm-oil, soya and wood. Products that contain, have been fed with or have been made using these commodities are also included. Furthermore, rubber, charcoal, printed paper products and a number of palm oil derivatives have also made it to the list.

To reduce the environment risk, and simultaneously enhance the success of the green deal, the competent EU authorities will also have access to relevant information provided by the companies, such as geolocation coordinates and conduct checks. The European Union will be able to use satellite monitoring tools and DNA analysis to check where products come from.


Apart from this, the commission will also classify countries, or part thereof, into low, standard and high risk, within 18 months of the regulation entering into force. The proportion of checks on operators will be performed according to the country’s risk level: 9% for high risk, 3% for standard risk and 1% for low risk. For high-risk countries, member states would also have to check 9% of total volumes. Failure to comply with regulations may lead to a fine of up to 4% of the total annual turnover in the EU of the non-compliant operator or trader.


All in all, the green deal is a big win for consumers in the European Union, who will be able to relax safe in the knowledge that what they purchase is not contributing to future deforestation. But, there’s another side to this story too. One where the businesses lie, the picture here, is a little more complicated.


If we look from the business perspective, the new laws will work by enforcing a mandatory due diligence upon businesses, which will be selling goods into the European market. This means that companies will be legally responsible to produce a statement showing that their supply chains are not contributing to the destruction or degradation of forests. Also, companies will be required to collect precise geographical information regarding the farmland where the commodities that they source have been grown, so that these commodities can be checked for compliance. Member states will also need to make sure that cases where companies will fail to comply with these regulations shall face effective and dissuasive penalties, as we have also mentioned above. In addition to this, the list of commodities will be regularly reviewed and updated, which will entirely depend on the factors that will contribute towards the changing deforestation patterns.


Moreover, engagement with farmers will increase as an effect of the green deal. Multinational companies will have to provide “verifiable” evidence to the EU legislators in relation with commodities such as coffee bean, chair leg and beefburger. The legislature will also have the power to satellite monitor and DNA test the origin of these products. Additionally, the European countries where the commodities are sold, will be responsible to carry our spot checks on traders. In such cases, penalties shall be set at a hefty 4% of turnover made within the member states where infringements have occurred. Hence, to sum up, operators and traders will only be able to sell their products in the European market, if they fulfil the below two criteria-


  1. Proof that the products are both deforestation-free (produced on land that was not subject to deforestation after 31 December 2020)

  2. legal (compliant with all relevant applicable laws in force in the country of production).


Moving on, the announcement was received positively from corporations, many of whom stated that they have already been making efforts to make their supply chains even more clean. For instance, Nestle, Europe’s largest consumer goods company welcomed this change by mentioning that it has already been making progress on deforestation. The company claimed that 97.2% of its key ingredients are now deforestation-free. But the response was not the same from everyone. Arguing that this policy will increase cost for companies, take much time and effort, countries including Colombia, Canada, Brazil expressed their objections.


Supply chain will witness a massive change with the implementation of this policy. The same can also be said about the efforts which would be required, especially in the initial stage to comply with these rules. Operators and concerned authorities will have to deal with questions such, whether spot-checking process is enough to capture the picture or not? Whether tracking the origin of the commodity is possible or not? But as of now, these questions do not get a seat at the table, at least not for the coming few years. Nevertheless, it is on these answers only that we will be able to see whether such approach is an appropriate response to control the climate change and global environmental concerns or not?


 

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