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Nestlé, Michelin and more than 50 other companies have said the EU’s decision to delay its landmark deforestation law is causing uncertainty across business and putting investment at risk.
The law, which was due to come into force on December 30, bans goods from being sold within the bloc which are made with commodities grown on deforested land from seven sectors including cocoa, palm oil, rubber and wood.
But it has been fiercely contested by producing countries such as Indonesia, Brazil and Malaysia, prompting the European Commission to say last month that it would postpone its enforcement by a year.
Member states had already approved the delay in October, with the European parliament vote due later this month. The new vote has opened the door for MEPs to add amendments, and leading companies, especially those reliant on cocoa and rubber imports, are concerned about reopening the legislation to changes.
In joint statement on Wednesday — the deadline for MEPs to submit amendments — companies warned of further uncertainty over the legislation.
Francesco Tramontin, vice-president of Ferrero’s EU institutional relations, said the potential for new negotiations on the deforestation law risked “unnecessary delays, increasing uncertainty and undermining the investments — millions, in many cases — already made across the industry”.
Marc Genot, managing director of SIPH, the biggest producer of natural rubber in Africa, said that the rubber sector had already invested in mapping tools and funds to support smallholders in order to comply with the rules. He said that the delay had created “instability across the entire supply chain”.
Bart Vandewaetere, vice-president of ESG engagement at Nestlé Europe, told the FT that the Swiss multinational had “worked to comply with the regulation’s current provisions” and its suppliers had taken “significant steps towards compliance”.
“We encourage policymakers to maintain its core framework without reopening it,” he added.
Other companies opposing the delay include tyre companies Michelin and Pirelli, the supermarket chain Carrefour and the consumer companies Mars and Unilever.
According to a report from the Thai bank Krungsri this year, the deforestation law will impact around $401bn of EU trade annually — around 5.5 per cent of all imports into the bloc in 2022.
In its own impact assessment for the law, the commission estimated that the cost of compliance could amount to between $170mn to $2.5bn per year.
Heavy lobbying from particularly palm oil and soya bean exporting countries led the European Commission to postpone the introduction of the law. Companies in those sectors also voiced concern that Brussels had yet to provide guidance for how to comply with the rules.
S&P Global warned in August last year that the introduction of the law was “likely to reconfigure trade and supply chains across deforestation-linked commodities over the next decade”.
Penalties for non-compliance could reach 4 per cent of a company’s annual turnover, depending on the scale of the offence.
Ministers from 18 countries, including Brazil, Ghana, Malaysia and Peru sent a letter to the commission last week arguing that the delay was not enough.
“This postponement needs to be followed by extensive efforts to resolve many of our concerns with the [EU’s deforestation regulation] that have not been addressed,” the ministers said in the letter.
They had been opposed to the EU’s benchmarking system which grades countries’ deforestation risk.
The commission said: “The extension proposal in no way puts into question the objectives or the substance of the law, as agreed by the [EU member states and MEPs].”