Three by Three Questions: EUDR challenges and implementation – INSIDE NKG

We are currently finalizing our due diligence system down to the individual plot level – finding the right balance between on the ground realities and expectations by the EU and customers. Through a set of mitigation measures we aim to aid individual producers to remain within the value chains. NKG Verified sets a beautiful stage for this work. To do this in the best possible manner, we are working with the Legal Department to iron out as many of the ambiguities left by the regulation as possible. We are further actively informing NKG companies, and through them the suppliers and customers about their respective responsibilities.

The complexity and bureaucratic nature of the regulation is challenging from a mere data collection, data sharing and traceability perspective, and in particular for the 12.4 million small-scale coffee producers. Unfortunately, no common methodology for checking deforestation was provided by the EU. I would have hoped for a stepwise, incentive-based process that embraces the challenging realities of producers on the ground. Beyond no-deforestation, the due diligence requirements further cover a broad set of relevant legislation in each individual origin. While it is of course laudable to fully comply with these laws and principles, this may at times remain beyond our scope as intermediary traders.

Halting deforestation and ensuring climate adaptation and mitigation is in our best interest as a ‘climate-sensitive’ sector. Being a forester by training, I see this as an opportunity to contribute to preventing future deforestation, which does not only impact global climate change, yet also microclimates which play a large part in coffee cultivation. There is no doubt that the application of this regulation is challenging and uncertain. Yet it also has the potential to improve traceability and advance our existent certification schemes. The EUDR is also an opportunity for us to harness synergies, make use of our global presence and tremendous expertise in coffee.

Marcel Starfinger,
Program Manager Sustainable Business Unit, Neumann Gruppe, Germany

What are your most effective measures to implement the EUDR?

Which EUDR requirements do you find particularly challenging?

How can we as NKG benefit from the implementation of the EUDR?

Our most effective measures for implementing the EUDR involve contracting a deforestation risk analysis platform and conducting GPS surveys for conventional and certified coffee production. One advantage we have is that we use the Farm Information System (FIS) for data collection and a designated a dedicated person to analyze the results. These steps enable us to thoroughly assess deforestation risks, identify areas needing mitigation, and ensure compliance.

The primary challenge arises from the escalated costs, with each GPS point and polygon survey amounting to approximately USD 25. Another challenge we face is the lack of trust producers have in providing their data, especially those who work with intermediaries, such as conventional coffee producers. Many projects have requested information and promised things that never materialized, leading to a significant level of distrust in sharing information. Moreover, the constrained implementation timeframe compounds our difficulties, especially considering the regulation's significance. Non-compliance could potentially jeopardize authorization for EU exports from our accredited producers.

Firstly, from an environmental perspective, the adoption of a no-deforestation law constitutes a fundamental step in combating illegal logging and preserving our ecosystems. This not only contributes to the conservation of natural resources but also strengthens our reputation as a company committed to sustainability and environmental protection. Additionally, given that 60% of our [Becamo’s] production is exported to the EU, it is crucial to comply with the established regulations. Complying with the regulations would not only ensure our continued access to the European market but also enable us to maintain solid and reliable commercial relationships with our partners in the EU.

Manuel Calero,
Head of Unit for Sustainable Services to Producers, BECAMO, Honduras

What are your most effective measures to implement the EUDR?

Which EUDR requirements do you find particularly challenging?

How can we as NKG benefit from the implementation of the EUDR?

A question difficult to answer, considering there is still so much that is not well defined by authorities, but we have four factors that do put us in a good position:

Extensive daily compliance screening of all business partners, automatically and overnight. This screening is backed up by a team of lawyers who check potential compliance issues.
Our centralized IT system allows us to track all purchases back to our supplier. In case the supplier is a farmer, we can register the “CAR” reference for every farm owned. The “CAR” is a national registration that takes us to the respective polygons using the Cecafé proposal with Serasa Experian. We already have all these references for all project farms we work with in our system.
The Cecafé proposal with Serasa Experian, which can provide not only the polygon data, potentially using API, but is also working on a countrywide protocol, that if accepted by EU authorities, could serve as evidence for precautions taken.
The engagement of our staff, here at Stockler but also in Hamburg. The engagement of all colleagues clearly puts us one if not more steps ahead of our competitors here in Brazil.

We operate in a country where laws and regulations can change on a daily basis, on various administrative levels, national, state or municipal. Many of the estimated 300,000 producers in Brazil have difficulties keeping up with these changes and even if they receive the information, it is often presented in a way that required lawyer for interpretation, making it exceedingly difficult for producers. So, different from the original expectation, it is not deforestation itself that is the biggest challenge.

The group structure, with a strong and proactive compliance and sustainability team in Hamburg sets us apart from many of our competitors. It puts us ahead of what other exporters can offer and show and should provide for excellent business opportunities in the coming months.

Ole Kerbsties,
Head of Sustainability, NKG Stockler, Brazil

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