Leading European chocolate makers, including Nestlé and Ferrero, alongside over 50 other companies, are voicing strong opposition to the European Union’s decision to delay its groundbreaking deforestation law. This law, aimed at banning the sale of products linked to deforested land, was initially set to come into effect on 30 December. However, due to significant opposition from producing nations like Indonesia, Brazil, and Malaysia, the European Commission recently announced a one-year postponement, which has sparked concerns among businesses.

The law targets commodities frequently linked to deforestation, including cocoa, palm oil, rubber, and wood. It is designed to prevent products derived from deforested land from entering the EU market, as part of the bloc’s broader commitment to environmental sustainability and reducing its global deforestation footprint. However, with the delay already approved by member states and the final vote by the European Parliament expected this month, several major companies are concerned that the postponement and potential amendments to the legislation could increase uncertainty and put their sustainability investments at risk.

Business Concerns Over Delays and Potential Amendments

In a joint statement issued recently, companies emphasised the importance of keeping the law’s framework intact to avoid derailing the progress they’ve already made towards compliance. Francesco Tramontin, Ferrero’s Vice-President of Global Public Affairs, stressed that avoiding a “reopening of the regulation” is crucial to safeguarding businesses’ efforts to align with the law and ensure continued investment in sustainable practices.

Nestlé, a global leader in food and beverages, has also raised concerns. Bart Vandewaetere, Vice-President of ESG Engagement at Nestlé Europe, stated that the company has made significant efforts to comply with the law’s requirements, encouraging EU policymakers to retain the regulation’s core framework without introducing further changes. Michelin, Pirelli, Carrefour, Mars, and Unilever are among other prominent companies urging the EU to move forward with the law as initially planned.

The rubber industry has also made strides to meet the forthcoming regulation, investing in advanced mapping tools and providing financial support to smallholder farmers to ensure compliance. SIPH, Africa’s largest producer of natural rubber, has voiced frustration over the delay, citing “instability across the entire supply chain” as a result. Marc Genot, Managing Director of SIPH, highlighted that any prolonged uncertainty could jeopardise the industry's substantial investments and compliance efforts.

Economic Impact of the Deforestation Law

The delay could have significant economic ramifications. According to a report by Thailand’s Krungsri Bank, the law is projected to impact around $401 billion worth of EU trade annually, or approximately 5.5% of all imports into the bloc. The European Commission’s own impact assessment estimates that the cost of compliance for businesses could range from $170 million to $2.5 billion per year.

The penalties for non-compliance are substantial, with companies facing fines of up to 4% of their annual turnover, depending on the severity of the breach. With such financial stakes, companies across the affected sectors are urging the EU to provide clear and timely guidelines to help them meet the regulatory standards without further delays.

Pushback from Producing Nations

The EU deforestation law has faced resistance not only from businesses but also from exporting nations whose economies depend heavily on commodities like palm oil and soybeans. Ministers from 18 countries, including Brazil, Ghana, Malaysia, and Peru, recently sent a letter to the European Commission calling for the delay to be supplemented with more extensive consultations. They argued that several issues, particularly the EU’s benchmarking system, which ranks countries by their deforestation risk, remain unresolved.

The ministers expressed that the postponement alone is insufficient and requested that the EU engage more actively in addressing their concerns. For these nations, the benchmarking system could create unfair barriers and damage their economies by restricting access to the EU market.

EU’s Response and Next Steps

The European Commission, however, has defended the delay, stating that the proposed extension does not alter the law’s objectives or its core principles as agreed upon by EU member states and the European Parliament. The Commission is keen to ensure that the deforestation law remains effective while addressing concerns from both EU companies and international stakeholders.

As the European Parliament’s vote approaches, businesses and policymakers alike are closely watching to see if any amendments will be introduced. Many companies are hopeful that the EU will keep the original framework largely intact, allowing them to move forward with their preparations for compliance and support sustainable supply chains.

In summary, while the EU’s deforestation law aims to curb environmental degradation linked to imported goods, the delay has introduced uncertainty that risks undermining significant business investments in sustainable practices. European chocolate producers and other stakeholders are urging the EU to stick to its initial plan and enact the law without further changes, fostering a clearer path towards a more sustainable and deforestation-free future.