Collateral damage of the EU deforestation regulation on commodity supply chains in cocoa, coffee, palm oil, soy, and cattle value chains

Abstract

The European Union Deforestation Regulation (EUDR), formally adopted as Regulation (EU) 2023/1115, seeks to reduce global deforestation by requiring deforestation-free and legally compliant supply chains for commodities including cocoa, coffee, palm oil, soy, cattle, wood, and rubber. While the regulation addresses urgent environmental concerns, it may generate significant collateral impacts on smallholder farmers in developing countries who play a central role in global commodity production. This review synthesizes evidence from selected value chains cocoa in Côte d’Ivoire and Ghana, palm oil in Indonesia, coffee in Ethiopia, and soy and cattle in Brazil to assess differentiated exposure to EUDR compliance requirements. Smallholders account for approximately 90% of global cocoa production, 80% of coffee, 30–40% of palm oil, and over 85% of natural rubber, yet often operate under informal land tenure systems and limited access to digital infrastructure. The EUDR’s mandatory due diligence requirements including plot-level geolocation, traceability systems, and risk mitigation may therefore impose disproportionate compliance costs. Evidence suggests that EU-driven deforestation risk is concentrated in a few commodities, with palm oil (34%), soy (32.8%), wood products (8.6%), cocoa (7.5%), and coffee (7%) accounting for the majority of embodied deforestation in EU imports. Across case studies, potential unintended impacts include exclusion from EU markets, increased administrative burdens, market consolidation, and deforestation leakage to less regulated markets. However, impacts vary significantly by commodity structure: while cocoa and coffee are smallholder-dominated systems, soy and cattle in Brazil are characterized by large-scale mechanized production supported by advanced land registry systems and producer associations, enabling comparatively stronger compliance capacity. The review concludes that EUDR outcomes will depend less on farm size alone and more on institutional infrastructure, digital readiness, and supply chain organization, highlighting the need for differentiated and inclusive implementation pathways.