As you are enjoying a steaming cup of coffee, flipping through a magazine, indulging in a rich chocolate dessert, or savoring a dish made with palm oil and your favorite beef burger, all these actions share a common thread: they rely on products that could be connected to deforestation and potential human rights violation often occurring thousands of miles away from where they're consumed.
To address the impacts of these occurrences, the concept of due diligence has emerged as a key instrument for ensuring corporate accountability, safeguarding human rights, and protecting the environment. Central to this shift of mandatory Human Rights and Environmental Due Diligence (MHREDD) standards is the European Union Green Deal, which sets ambitious sustainability goals.
Among the Green Deal Policy initiatives on Global Supply Chain Sustainability, are the Corporate Sustainability Due Diligence Directive (CSDDD) and the European Union Regulation on Deforestation-Free Products (EUDR).
The combined EU legislations require a fully traceable value chain from the production plot to the EU importation port, with the product demonstrably grown on deforestation-free land since December 31st, 2020 (for EUDR).
But why is the EU concerned with the supply chains of non-EU countries? Perhaps a hidden agenda!. This has glued the discussions amongst the different stakeholders in Uganda that interface with the two pieces of legislation.
As Dr Walter Rodney noted, "When the terms of trade are set by one country in a manner entirely advantageous to its self, then the trade is usually detrimental to the trading partner."
Behind the eyeballs, the recent data sets indicate that the EU consumption of globally traded agricultural products associated with deforestation have an estimated annual deforestation risk of 190,000 hectares, particularly due to a set of commodities (palm oil, soybeans, forest products, cocoa, and coffee).
This represents 5.6 percent of the global deforestation . In 2021, 1.3 million hectares of tropical deforestation was associated with international trade, of which the EU was responsible for 16 percent, making it the second largest importer of tropical deforestation after China (24 percent)
What this means for Uganda?
The CSDDD and EUDR requirements are expected to be passed on to exporters in Uganda, who will be responsible for providing necessary value chain information to their European buyers and implementing mitigation measures in case of high risks of non-compliance.
Failure to meet these requirements will effectively close the European market to Ugandan products.
The discussion on compliance to EUDR has taken a center stage with main focus on the coffee sector. This is mainly because the sector accounts for 18% of Uganda's total exports and 63 percent of those are destined for EU markets. With this wide market, Uganda's coffee sector is at a high exposure rate to the two pieces of legislation.
While coffee is at the highest risk of exposure, it is key to note that there are other products that will be hugely affected including Cocoa, cane sugar among others.
The extract below shows Uganda's export potential in the EU. Realising this potential requires addressing all the likely challenges that arise in the quest to seek this EU market.
Extracted from the International Trade Center (ITC) Export potential map
The clock is ticking as the EUDR is set to take effect in January 2025, yet the critical question remains: who will bear the cost of its implementation?
Unfortunately, within the Ugandan context, it is likely that the burden will fall on the farmers.
The significant expenses associated with EUDR compliance could lead to reduced income for farmers, particularly if consumers are unwilling to pay higher prices resulting from the regulation. This decrease in farmers' welfare may ironically contribute to further deforestation, not only for farm expansion but also for charcoal and firewood production, ultimately undermining the very objectives of the EUDR.
This prompts another question: with the EU market becoming more difficult to access, can't companies simply turn to less regulated markets? Unfortunately, this may not be a quick fix to the EUDR. Other markets are also following the EU's lead.
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The UK is developing a Due Diligence Act that will encompass much of what is included in the EUDR, and the US is also implementing similar measures. Additionally, many commodities exported to other major markets, like China, are often processed and then re-exported to Europe, meaning that the source requirements will still be enforced.
In terms of the market, the unrealized potential of the individual counties in Asia and Africa at $68m and $38m respectively is still below half the unrealized potential to the EU market.
With that in mind, there is need for collective effort in ensuring that Uganda is able to address the EUDR and CSDDD compliance requirements.
Leveraging co-investment by Government and the private sector in addressing the compliance requirements is a blueprint for making Mandatory Human rights and Environmental Due Diligence work for all.
Ms Brendah Akankunda is a trade and investment policy analyst
