Cocoa Coalition joint position paper
The proposed EU regulation on deforestation
23 March 2022

The signatories to this position paper welcome the publication of the proposed regulation on
deforestation (‘Regulation of the European Parliament and of the Council on the making available on
the Union market as well as export from the Union of certain commodities and products associatedwith deforestation and forest degradation and repealing Regulation (EU) No 995/2010’).
We believe that the proposed regulation represents an important step forward in driving thenecessary transformation of the cocoa and chocolate sector, by helping to minimise the risk of
deforestation associated with cocoa and chocolate products placed on the EU market. We called forlegislation of this type in the first position paper we published in 2019, and in our more detailed
position paper published in October 2021.
We welcome in particular the application of the due diligence requirements throughout the cocoa
and chocolate supply chain within the EU; the potential use of independent means of verification,such as satellite imaging, to underpin the information requirements; the application of thebenchmarking risk analysis system within, as well as between, countries; the clear obligations oncompetent authorities for minimum levels of checks on companies, and minimum levels of penalties;
and the inclusion of ‘substantiated concerns’ provisions for third parties to raise concerns overinfringements of the legislation.
With regard to cocoa, we also support the inclusion of the requirement for full geolocation
information on the origin of the products covered by the regulation. The efforts made by companies
in the Cocoa Coalition and in the wider cocoa sector have shown how traceability systems, including
geolocation information, can be implemented effectively even in complex supply chains featuring avery high proportion of smallholder farmers. We recognise the critical role of producer-country
governments, alongside companies, certification organisations and others, in rolling out traceability
systems to the farm level, and the progress led by the governments of Côte d’Ivoire and Ghana insetting up national traceability systems. We also recognise the inherent challenges in expanding
these systems to cover the full supply chain, which is made up of millions of smallholder farmers,
many of which are currently not part of formal farmer organisations. For this reason, we believe that

Cocoa Coalition joint position paper: the proposed EU regulation on deforestation|2

support from the EU for establishing and rolling out such systems to cover the entire supply chain
should be a priority.
We are confident that the regulation has the potential to reinforce producer-country efforts toestablish a sustainable cocoa sector for the long term as long as the burdens of compliance areshared fairly throughout the supply chain and cocoa farmers are not left to bear additional costs
without adequate support.
In particular, we believe it essential that the European Commission conducts a comprehensive needs
assessment of the challenges that will be faced by smallholder farmers in complying with theregulation, and the support that they will require. The assessment should pay particular attention to
support for smallholder farmers, including for the establishment and comprehensive roll-out of
traceability systems, which will prove particularly challenging for those smallholders who are
currently not part of farmer organisations. It should also be gender-sensitive, taking into account thedifferent barriers, needs and capacities of women farmers. This needs assessment will inform thescale and type of support that will need to be mobilised by the EU and its member states and bycompanies in the sector. This assessment should be initiated as soon as possible; it should not wait
until the regulation has entered into force.
This needs assessment should also analyse the need for support for smallholders who have farmedin compliance with national law but in a way that caused deforestation after 31 December 2020 but
before they had any knowledge of the regulation, to ensure that they are not left destitute.
We believe the regulation could be further strengthened through the steps outlined below. (In the
proposed amendments, new or changed text is highlighted in red.)

1 Scope of regulation: natural ecosystems as well as forests
The scope of the environmental harm the regulation is designed to prevent is currently restricted todeforestation and forest degradation. We believe that this should be extended to include othercritical ecosystems, in order to avoid displacing negative environmental impacts from forests tothese other natural systems. We welcome the commitment in the regulation to review the need andthe feasibility of such an extension, and we recognise the complexities inherent in drawing up therequisite definitions. However, we believe that the case for doing so now is strong enough, andtherefore propose the following amendments, which draw on definitions used by, among others, the
Accountability Framework Initiative and Rainforest Alliance.
Existing text in regulation
Article 1 (Subject matter and scope)…
a) minimising the Union’s contribution to
deforestation and forest degradation worldwide

Proposed change toa) minimising the Union’s contribution to
deforestation and forest and natural ecosystemdegradation worldwide

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Existing text in regulation

Proposed change to

Article 2 (Definitions)

Add para:(3) ‘natural ecosystem’ means an ecosystem that
substantially resembles (in terms of species
composition, structure, and ecological function) one
that is or would be found in a given area in theabsence of major human impacts, including bothmanaged and unmanaged wetlands, savannah, andgrasslands;

Article 2 (Definitions)

Add para:(7) ‘natural ecosystem degradation’ means changes
within a natural ecosystem that significantly andnegatively affect its species composition, structure,
and/or function and reduce the ecosystem’s capacity
to supply products, support biodiversity, and/or
deliver ecosystem services;

Article 2 (Definitions)(8) ‘deforestation-free’ means(a) that the relevant commodities and products,
including those used for or contained in relevant
products, were produced on land that has not been
subject to deforestation after December 31, 2020,
and(b) that the wood has been harvested from theforest without inducing forest degradation after
December 31, 2020;

All references throughout regulation to:‘deforestation and forest degradation’Add sub-para:(c) that the relevant commodities and products,
including those used for or contained in relevant
products, were produced on land that has not been
subject to natural ecosystem degradation after
December 31, 2020.
Change to:deforestation and forest and natural ecosystemdegradation

2 Scope of regulation: company size
As we have argued in our previous papers, due diligence obligations: ‘should apply to all companies
placing cocoa, cocoa products and chocolate (among other commodities) on the EU market,
including those that import, process and sell cocoa, cocoa products and chocolate. The legislation
should apply to companies regardless of where they are based or registered or their legal form orsize, including state-owned enterprises. We recognise that smaller companies may possess simpler
supply chains. We do not believe, however, that these companies should be exempted from the due
diligence obligation. In a very fragmented end market, the inclusion of smaller players is critical toCocoa Coalition joint position paper: the proposed EU regulation on deforestation|4

establish a level playing field and to ensure that all companies do their part and work closer together
to improve the sustainability of the cocoa sector.’
Accordingly, we believe that the exemption of SME traders from the due diligence obligations andthe requirement to file due diligence statements should not be maintained, particularly given that
99 per cent of companies in the EU, by number, are SMEs. We propose a change in the thresholdcompany size for traders from SMEs to micro-enterprises (defined as companies which employ
fewer than 10 persons and whose annual turnover and/or annual balance sheet total does notexceed €2 million).
Existing text in regulation

Proposed change to

Article 6 (Obligations of traders)

Change all references to ‘SMEs’ to ‘microenterprises’

Article 11 (Maintenance of due diligence systems andrecord keeping)

3 Smallholder ownership of geolocation data
As stated above, we welcome the inclusion of the requirement for geolocation coordinates of theplots of land where commodities are produced in the information requirement stage of the due
diligence procedure. Providing this data, however, along with the specific time or period of time of
production, will pose significant challenges to cocoa cooperatives and smallholders. It will require asignificant improvement and modernisation of many producer organisations’ management systems,
and intensive capacity-building measures for cooperatives and farmers, particularly thosesmallholders outside formal organisations. As we have highlighted above, these should be highpriorities for EU support.
We refer below (in sections 6 and 7) to the provision of support to producer countries andsmallholders, but there is also a specific issue round the ownership of the geolocation data. It will be
important to ensure that data and access to EU markets does not become the exclusive preserve oflarger companies with more effective management systems and technologies. We therefore
propose the following amendment designed to ensure that data ownership remains with producers.
Existing text in regulation
Article 9 (Information requirements)(3) The Commission may adopt delegated acts inaccordance with Article 33 to supplement paragraph
1 concerning further relevant information to beobtained that may be necessary to ensure theeffectiveness of the due diligence system.

Proposed change to(3) The Commission may adopt delegated acts inaccordance with Article 33 to supplement paragraph
1 concerning further relevant information to beobtained that may be necessary to ensure theeffectiveness of the due diligence system, as well as
the application of information requirements tosmallholders and related safeguards on their right toretain ownership and control over proprietary data.

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4 Engagement with stakeholders
One potential unintended adverse consequence of the proposed regulation’s market-accessapproach is to create an incentive for companies placing products on the EU market to abandon
high-risk sources in favour of low-risk sources (where this is a feasible option), where the regulatory
requirements are less strict. In order to promote a shared approach to challenges and todisincentivise disengagement, the regulation should ensure meaningful engagement with all
relevant stakeholder groups, including smallholders, throughout the risk assessment andrisk mitigation steps of the due diligence process – which is in line with the general approach to due
diligence expressed in, among other documents, the OECD Due Diligence Guidance for Responsible
Business Conduct. The amendment below inserts that element in the regulation.
We also believe that the EU should foster long-term sourcing relationships between retailers, brands
and traders and smallholders and their producer organisations, recognising the role companies canplay in providing appropriate support, addressing counter-productive purchasing practices, andcreating an enabling environment for smallholders to invest in sustainable and deforestation-freecocoa production. Some of these measures will be encouraged by the amendments we propose
below in sections 6 and 7, on partnership agreements and impacts. We also believe that they should
be addressed in the proposed Corporate Sustainability Due Diligence directive, and we intend toraise the issue in that context.
Existing text in regulation

Proposed change to

Article 10 (Risk assessment and risk mitigation)

Add new para:(8) Operators shall meaningfully engage with
relevant stakeholder groups throughout the risk
assessment and risk mitigation process. They shallengage with stakeholders prior to taking any
decisions that may impact them.

(8) The Commission may adopt delegated acts inaccordance with Article 33 to supplement
paragraphs 2, 4 and 6 as regards relevant
information to be obtained, risk assessment criteria
and risk mitigation measures that may be necessary
to supplement those referred to in this Article toensure the effectiveness of the due diligence system.

(9) The Commission may adopt delegated acts inaccordance with Article 33 to supplement
paragraphs 2, 4, 6 and 8 as regards relevant
information to be obtained, risk assessment criteria
and risk mitigation measures that may be necessary
to supplement those referred to in this Article toensure the effectiveness of the due diligence system.

5 Benchmarking risk assessments
The benchmarking process sets out a series of factors to be taken into account in assessing the risk
level of the source country or part of country. One of these (in Article 27(2)(f)) is an assessment of
the national laws that prevent deforestation, and the standards of their enforcement. We believethat this should be widened to include a wider range of relevant laws, including the categories listed
in the definition of the ‘relevant legislation of the country of production’ in Article 2, which underlies
the prohibition and due diligence obligations.

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Among other things, this will assist operators in carrying out their risk assessment and risk mitigation
procedure, as outlined in Article 10, which includes a requirement to assess conditions in producer
countries such as the prevalence of corruption and document and data falsification. It will notalways be straightforward for companies to make these assessments, and we believe it would be
helpful if the benchmarking process could be extended to cover additional relevant factors.
Existing text in regulation
Article 27 (Assessment of countries)(2) (f) whether the country concerned has nationalor subnational laws in place, including in accordancewith Article 5 of the Paris Agreement, and takes
effective enforcement measures to avoid andsanction activities leading to deforestation andforest degradation, and in particular whether
sanctions of sufficient severity to deprive of thebenefits accruing from deforestation or forest
degradation are applied.

Proposed change to(2) (f) whether the country concerned has nationalor subnational laws in place, including in accordancewith Article 5 of the Paris Agreement, and in the
categories of relevant legislation defined in Article 2(28), and takes effective enforcement measures toensure that those laws are implemented and to
avoid and sanction activities leading or contributing
to deforestation and forest degradation, and inparticular whether sanctions of sufficient severity todeprive of the benefits accruing from deforestationor forest degradation are applied.

6 Partnership agreements
The Cocoa Coalition has consistently argued that the effectiveness of due diligence legislation will belimited unless it is coupled with the creation of the enabling environment required to address theroot causes of deforestation and make progress on sustainable cocoa farming within cocoaproducing countries. Accordingly, we believe that it is essential for the EU to pursue theestablishment of long-term partnership agreements with the governments of cocoa-producing
countries, ensuring that all relevant stakeholders are involved, including local community
representatives, farmers, industry, and civil society. We set out our proposals at more detail in ourpaper of June 2021.
We welcome the inclusion of the commitment in the regulation of an obligation on the Commission
to ‘develop partnerships and cooperation’ with producer countries ‘to jointly address deforestationand forest degradation’ (Article 28(1)). However, the nature and timing of this support is not yet
clear, nor are the Commission’s plans to build such partnerships with all major cocoa-producing
countries.
We call on the Commission to develop proposals to build partnership agreements or frameworks
with all major cocoa-producing countries as a matter of urgency, aiming to address not justdeforestation but also its root causes, which generally include poverty and weaknesses ingovernance and law enforcement.
These partnership agreements should include time-bound frameworks for action agreed by both the
EU and the partner country. They should place a particular emphasis on actions at the policy level byproducer governments, and should include meaningful incentives and rewards for cocoa farmers

Cocoa Coalition joint position paper: the proposed EU regulation on deforestation|7

farming sustainably, and support, including development assistance, from the EU and its member
states to ensure that the necessary actions can be implemented successfully.
Article 28(3) lists a number of issues that ‘partnerships and cooperation mechanisms’ are to focus
on. We believe this list should be extended, to include in particular:•

The use of multi-stakeholder processes in producer countries to define the scope of relevant
legislation, and a focus on strengthening national systems of governance and law
enforcement, drawing on the experience of implementing the Voluntary Partnership
Agreements negotiated between the EU and timber-exporting countries to control illegal
logging and the trade in illegal timber.

•

The clarification and protection of land use rights, which is critical to any strategy for asustainable cocoa sector.

•

Support for smallholder farmers, from both governments and companies, including for theestablishment and comprehensive roll-out of traceability systems, which, as noted above,
will prove particularly challenging for those smallholder farmers who are currently not partof farmer organisations.

Existing text in regulation
Article 28 (Cooperation with third countries)(1) The Commission shall engage with producer
countries concerned by this Regulation to develop
partnerships and cooperation to jointly address
deforestation and forest degradation. Suchpartnerships and cooperation mechanisms will focus
on the conservation, restoration and sustainable useof forests, deforestation, forest degradation and thetransition to sustainable commodity production,
consumption processing and trade methods.
Partnerships and cooperation mechanisms may
include structured dialogues, support programmes
and actions, administrative arrangements andprovisions in existing agreements or agreementsthat enable producer countries to make thetransition to an agricultural production thatfacilitates the compliance of relevant commodities
and products with the requirements of thisregulation. Such agreements and their effective
implementation will be taken into account as part ofthe benchmarking under Article 27 of thisRegulation.

Proposed change to(1) The Commission shall engage with producer
countries concerned by this Regulation, including, asa priority, all countries exporting significant volumesof the products listed in Annex I, to develop
partnerships and cooperation to jointly address theroot causes of deforestation and forest degradation.
Such partnerships and cooperation mechanisms will
focus on the conservation, restoration andsustainable use of forests, deforestation, forest
degradation and the transition to sustainablecommodity production, consumption processing andtrade methods. Partnerships and cooperation
mechanisms may include structured dialogues,
support programmes and actions, administrative
arrangements and provisions in existing agreements
or agreements that enable producer countries tomake the transition to an agricultural productionthat facilitates the compliance of relevant
commodities and products with the requirements ofthis regulation. Such agreements and their effective
implementation will be taken into account as part ofthe benchmarking under Article 27 of thisRegulation.

Cocoa Coalition joint position paper: the proposed EU regulation on deforestation

Existing text in regulation
Article 28 (Cooperation with third countries)(3) Partnerships and cooperation shall promote thedevelopment of integrated land use planning
processes, relevant legislations, fiscal incentives andother pertinent tools to improve forest andbiodiversity conservation, sustainable management
and restoration of forests, tackle the conversion offorests and vulnerable ecosystems to other land
uses, optimise gains for the landscape, tenure
security, agriculture productivity andcompetitiveness, transparent supply chains,strengthen the rights of forest dependentcommunities including smallholders, indigenous
peoples and local communities, and ensure publicaccess to forest management documents and otherrelevant information.

Article 28 (Cooperation with third countries)|8

Proposed change to(3) Partnerships and cooperation shall promote thedevelopment and strengthening of integrated land
use planning processes and government-mandated
sector wide traceability systems, relevant legislations(including multi-stakeholder processes to define thescope of relevant legislation), fiscal incentives andother pertinent tools to improve forest andbiodiversity conservation, sustainable management
and restoration of forests, tackle the conversion offorests and vulnerable ecosystems to other land
uses, optimise gains for the landscape, tenure
security, agriculture productivity andcompetitiveness, and transparent supply chains,protect the rights of ownership, tenure and access toland, including rights of tree tenure for local andindigenous communities, and the right to give or
withhold free, prior and informed consent,
strengthen the rights of forest dependentcommunities including smallholders, indigenous
peoples and local communities, strengthen national
systems of governance and law enforcement, andensure public access to forest management
documents and other relevant information.
Add new para:(4) The Commission shall ensure that there aresufficient resources to support smallholders in third
countries to comply with the requirements of thisRegulation and facilitate their access to the EU
market.

As noted above, we also call on the Commission to conduct a comprehensive needs assessment of
the challenges that will be faced by smallholder farmers in complying with the regulation, and the
support that they will require.
We plan ourselves to publish a more detailed paper on the types of support that should be madeavailable to producer countries and cocoa farmers, from the EU and its member states and fromcompanies in the sector.

7 Reviews of impacts on producer countries
While welcoming the regulation overall, we remain concerned at the likely impact on farmers in
producer countries, particularly smallholders, facing the need to change their behaviour over a shortperiod of time or see their products excluded from the EU market. The reviews of impacts envisaged

Cocoa Coalition joint position paper: the proposed EU regulation on deforestation|9in the regulation should therefore include more timely and more comprehensive assessments ofimpacts and corresponding needs.
Existing text in regulation
Article 32 (Review)(2) No later than five years after the entry into force
and at least every five years thereafter, theCommission shall carry out a general review of thisRegulation, and shall present a report to theEuropean Parliament and the Council accompanied,if appropriate, by a legislative proposal. The first of
the reports shall include in particular, based on
specific studies, an evaluation of:(a) the need for and feasibility of additional tradefacilitation tools to support the achievement of theobjectives of the Regulation including throughrecognition of certification schemes;(b) the impact of the Regulation on farmers, inparticular smallholders, indigenous peoples and local
communities and the possible need for additional
support for the transition to sustainable supply
chains.

Article 32 (Review)

Proposed change to(2) No later than two years after the entry into force
and at least every five years thereafter, theCommission shall carry out a general review of thisRegulation, and shall present a report to theEuropean Parliament and the Council accompanied,if appropriate, by a legislative proposal. The reports
shall include in particular, based on specific studies,an evaluation of:(a) the need for and feasibility of additional tradefacilitation tools to support the achievement of theobjectives of the Regulation including throughrecognition of certification schemes;(b) the impact of the Regulation on farmers, inparticular smallholders, local businesses, indigenous
peoples and local communities, specific measuresthat have been put in place to support smallholders
in third countries to comply with the requirementsof this Regulation and facilitate their access to the
EU market, and the possible need for additional
support and other legislative and non-legislative
measures for the transition to sustainable supply
chains.
Add new para (5):(5) The Commission shall continuously monitor the
impacts of this Regulation on smallholders,indigenous peoples and local communities in third
countries. Such monitoring shall take place throughmulti-stakeholder dialogues and informationexchanges with third countries, intergovernmental,
non-governmental, civil society and smallholder
organisations, as well as indigenous peoples andlocal communities. The findings of this monitoring
shall be taken into account in the review referred toin Article 32.2(b).

Cocoa Coalition joint position paper: the proposed EU regulation on deforestation

Contact details for supporting organisations
Fairtrade International
Jon Walker, Senior Advisor, Cocoa (press@fairtrade.net)
Fair Trade Advocacy OfficeCharlotte Vernier, Policy and Project Officer (vernier@fairtrade-advocacy.org)
FerreroFrancesco Tramontin, Vice President Group Public Policy Center and EU Institutional Affairs(Francesco.Tramontin@ferrero.com)
The Hershey Company
Tim McCoy, Director, Cocoa Partnerships (TMcCoy@hersheys.com)
International Cocoa Initiative
Sarah Dekkiche, Director of Policy and Partnerships (s.dekkiche@cocoainitiative.org)
Mars Wrigley
Louisa Cox, Senior Director of Public Affairs Sustainable Sourcing (louisa.cox@effem.com)
Mondelēz International
Virginie Mahin, Global Head of Social Sustainability & Stakeholder Engagement(Virginie.Mahin@mdlz.com)
Nestlé
Paolo Giro, European Affairs Advisor (Paolo.Giro@be.nestle.com)
Rainforest Alliance
Wendy Schutte, Senior Manager Advocacy (wschutte@ra.org)
Solidaridad
Gert van der Bijl, Senior EU Policy Advisor (gert.vanderbijl@solidaridadnetwork.org)
Tony’s Chocolonely
Paul Schoenmakers, Head of Impact/Impactus Prime (pauls@tonyschocolonely.com)
VOICE Network
Antonie C. Fountain, Managing Director (antonie@voicenetwork.eu)| 10