Deforestation in indirect supply chains

Deforestation in indirect supply chains

The chocolate industry is a multibillion-dollar global business, with around 8 million metric tons consumed every year! With an ever-growing demand and pressures on supply and the environment, traceability is becoming a necessity.

Traceability within chocolate production is a known challenge, producer countries struggle to account for the sourcing goods, and this undermines zero-deforestation targets. Often growers sell through local traders or co-operatives creating a challenge for traceability down to the farm level.

Unfortunately, large amounts of production are linked to untraced deforestation, this is due to undirect supply chain and production falling outside sustainability programs.

Cocoa alone is responsible for 7.5% of all EU-driven deforestation globally and new regulations are designed to halt the import of goods linked to deforestation. Together Ghana and Côte d’Ivoire who are the world’s biggest cocoa producers and account for over 60% of global cocoa bean production, source around 20% of cocoa from farms located inside protected areas, according to a 2021 study. It’s becoming an ever more serious problem which EU and UK will address over the next three years with new regulations on deforestation-free imports.

The incoming legislation addresses not just cacao, but other “deforestation risk” commodities, including Coffee, Timber, Cattle, Palm oil and Soy in the EU and cocoa, coffee, maize, palm oil, rubber, and soy in the UK. Corporations will be responsible for evidencing the due diligence they’re undertaking to ensure the land these commodities originate from has not been subject to deforestation since 31 December 2020.

Trade in Space have spoken with many organisations involved in the coffee and cacao supply chains, and we understand the apprehension and concern involved in meeting these new requirements. Compliance is a challenge that can only be addressed at scale by utilising geospatial insights.

Trade in Space have solutions to help organisations prepare for the legislative changes. We specialise in combining satellite derived intelligence, peer reviewed data and distributed ledger technologies to create unique visual and traceable insights. We have created a blockchain backed supply chain integration tool, which uses geospatial analysis to map commodities and create a digital ID while they’re still in the field. We’ve analysed and reported on over 250,000 coffee farms in Africa, Asia and Latin America to bring visibility on deforestation to some of the largest cacao and coffee organisations.

“Deforestation is becoming an ever-increasing concern in our supply chain. Our clients and financiers demand action and upcoming regulation focuses on analysis at the farm level. Working with Trade in Space shines a light on our supply chains to separate clearly sustainable farming practices from at risk areas. By offering transparency on deforestation, we can be empowered to follow up directly and locally with the farmers rather than through theoretical NGO/sustainability initiatives” – Ilya Byzov, Quantitative Trader, Sucafina.

The legislative changes are a challenge which has been set to those involved in supply chains, we believe the answer lies in insight and preparation through the use of innovative technology solutions and addressing the complexity of indirect supply chains for traceability and auditability.

Sources:

Chandrasekhar, A. (2022) “West Africa braces for tough sustainable cocoa rules in Europe”. Link: West Africa braces for tough sustainable cocoa rules in Europe – SWI swissinfo.ch (26/08/22)

Gardner, T., Godar, J., Bastos Lima, M.G., et al., (2022) “Action on deforestation must address indirect sourcing ‘blindspot’” Link: Action on deforestation must address indirect sourcing ‘blindspot’ – SEI (26/08/22)

Mowbray, S. (2022) “Delectable but destructive: Tracing chocolate’s environmental life cycle”. Link: Delectable but destructive: Tracing chocolate’s environmental life cycle (mongabay.com) (26/08/22)

zu Ermgassen, E. K., Bastos Lima, M. G., Bellfield, H., et al. (2022) “Addressing indirect sourcing in zero deforestation commodity supply chains” Science Advances, 8(17). Link: Addressing indirect sourcing in zero deforestation commodity supply chains | Science Advances (26/08/22)