International Environmental Barriers and Reflections on Brazilian Agroindustry

The expression “Brazil is the breadbasket of the world” is commonly used when trying to justify the agro-productive characteristics that the country has, whether due to its privileged geographical position, which provides favorable soil, climate and hydrography, or due to new technologies implemented with the modernization of the agricultural sector, ensuring that the nation establishes itself as an agro-economic power based on the production and export of commodities.

In parallel to this narrated context and with the exploration of agricultural frontiers, an increase in caution with the Environment was noted, with the term “sustainability” gaining prominence in recent decades, which has become an inseparable part of modern agricultural production and which can be represented, in short, as: the point of balance between production development and the conservation of environmental resources. Furthermore, according to the concept of the United Nations (“UN”): “Sustainability is meeting the needs of the present without compromising the ability of future generations to meet their own needs”[1].

Thus, environmental discussions gained new contours, new demands emerged, social and climatic pressures led to the “ruler” adopted by the vast Brazilian environmental legislation – without going into the merits of its sufficiency/efficiency – was not always considered sufficient to meet the needs of external markets, composed, as a rule, of developed countries and which appear as importers of commodities national authorities.

As a reflection of these changes, the discussion about the so-called “environmental barriers”, which can be translated as commercial restrictions on raw materials from deforested areas, has gained strength, so that companies that sell commodities they must prove that their production chains do not involve deforested areas. The initiative to impose such restrictions was proposed by the European Union (EU), under the pretext of preserving the biodiversity of threatened forests and containing the emission of greenhouse gases.

Thus, recently, in December 2022, the EU approved a law with the aim of combating global deforestation and forest degradation driven by the bloc's consumption. The way to make its objective viable was through the imposition of trade barriers to commodities selected (palm oil, soybeans, beef, coffee, cocoa, wood and rubber), as well as their derivative products[2], which were produced in areas deforested after 31.12.2020/XNUMX/XNUMX.

Despite the greater rigidity in combating deforestation, it is worth clarifying that the “environmental barriers” are only related to the Amazon Forest and Atlantic Forest biomes, and do not refer to other sensitive Brazilian biomes such as the Cerrado. Extension to other ecosystems must be evaluated within one year, counting from the entry into force of the normative text.

It is also important to highlight that the regulations under discussion do not only intend to combat deforestation illegal, but also covers the suppression of vegetation legal, which will certainly generate a conflict with Brazilian laws, since the Forest Code allows such a practice, requiring the preservation of 20 to 80% of native vegetation in the area of ​​the rural property, depending on the biome in which it is located ( article 12 of Law 12.651/2012).

The apparent regulatory conflict and potential discussions about market protectionism certainly create a warning for the specialized sector. The consequences of the new European regulations tend not only to affect large exporting companies, but the entire production chain of commodities, reaching the “end of the line”, that is, the rural producer himself, who, depending on the situation of his property, will face difficulties in selling his products to the foreign market. Furthermore, it cannot be ruled out that such requirements will also affect production costs and, consequently, the values ​​of commodities negotiated with the most demanding external markets, such as the EU.

Furthermore, it is worth highlighting the requirement for traceability of the origin of commodities listed and which will be exported to countries that are part of the European bloc, and it must be possible to relate them to the agricultural lands where they were cultivated, through precise geographical information, so that it can be proven that they were not produced in deforested areas.

In this sense, exporting companies will have to carry out due diligence processes of their chains, detailing the origin of their products and certifying that their goods comply with the new requirements imposed, under penalty of suffering fines on the value of their transactions, as well as being banned of marketing with the European bloc, in line with the proposal for an EU Directive on due diligence of corporate sustainability.

In the midst of discussions to approve the EU regulation, the United States of America (USA) also moved, through Bill S.2950 – Forest Act of 2021, to define commercial restrictions aimed at banning commodities originating from areas deforested as of December 2020. The topic was submitted to the public consultation process, with the aim of receiving opinions on possible ways of limiting chains of commodities linked to deforestation and encourage the commercialization of sustainable agricultural products.

In Brazil, there are new developments in line with this movement. On 7.12.2022/XNUMX/XNUMX, IBAMA implemented a new control tool for the national forestry production chain: the DOF + Traceability. The system is an important milestone for forest management in the country, containing parameters that allow the traceability of forest product credits throughout the production chain, through a code, from origin to final destination.

Although this topic is still new for Agro and many standards are under construction, what is known is that the restrictions will come into force 18 months after the publication of the European regulations. So all the big players who sell the commodities selected by the regulation must already carry out a rigorous due diligence of its products and suppliers, paying attention to the required requirements, in order to guarantee its permanence in the European market.

Amid the discussions on the topic, added to the pressure from external agents linked to the cause, it appears that large companies are already mobilizing internally, with the aim of preventing and adapting to the new required scenario, fulfilling another step in the sustainability of your chain – remembering that such movements tend to intensify when the rules under discussion and possible new agreements related to “environmental barriers” come into force.

[1] Concept extracted from the report “Our Common Future”, published by the UN in April 1987.

[2] The listed commodities must be updated regularly, taking into account new data, such as possible changes in deforestation patterns.

João Pedro Sab Zacharias, Environmental lawyer at Lobo de Rizzo