New EU Deforestation Regulations Impact Leather Production

The European Union's new deforestation regulation, which came into force on June 29, 2023, marks a significant shift in the global trade landscape, particularly for industries tied to cattle ranching and leather production. As part of the broader effort to curb deforestation, this regulation mandates that companies importing products into the EU, including beef and leather, must ensure that these products are not linked to deforestation. This has profound implications for the cattle industry, particularly in Brazil, a major player in global beef and leather markets.

Cattle Ranching and Deforestation: The Brazilian Contex

Brazil has long been scrutinized for its role in the deforestation of the Amazon, largely driven by cattle ranching. The Amazon often called the “lungs of the Earth,” has been a focal point in global climate discussions due to its critical role in carbon sequestration. However, cattle ranching has been a primary driver of deforestation in this region, leading to significant environmental degradation.

In response to the EU's stringent requirements, Brazil is implementing new measures to ensure compliance. Brazilian banks, for instance, have introduced new rules for releasing credit to meatpackers and slaughterhouses in Amazonian states. By 2025, clients must implement traceability and monitoring systems to demonstrate that their cattle are not linked to illegal deforestation. This move is part of a broader shift in the Brazilian beef industry, where even the powerful Brazilian Agriculture and Livestock Confederation (CNA) has acknowledged the need for better cattle tracking and proposed a traceability model to the federal government.

Progress in Cattle Traceability

The concept of cattle traceability is not new, but its implementation has gained significant momentum in light of these new regulations. A study highlighted that existing zero-deforestation commitments by cattle companies have already reduced deforestation in the Brazilian Amazon by 22% for the 2022-2023 period, the lowest level since 2019. This reduction could be halved if supply chain monitoring is scaled up and more robust traceability systems are implemented.

In practice, the ideal model for traceability would involve the individual identification of each animal, akin to systems used in countries like Australia and Uruguay. However, this task is daunting in Brazil, where only 2% of the 200 million cattle herd is individually identified. Nevertheless, progress is being made, with initiatives like the "Boi na Linha" program, which aims to enhance herd monitoring to prevent cattle raised on illegally deforested land from entering slaughterhouses.

Challenges and the Path Forward

While these measures are promising, challenges remain. The issue of “cattle laundering,” where cattle raised on deforested land are moved to legally compliant farms before being sold, is still prevalent. Addressing this requires integrating multiple data sources, such as the Animal Transit Guides (GTA) and the Rural Environmental Registry (CAR), to cross-reference and verify the origins of cattle. However, resistance from some sectors, including cattle farmers and parts of the government, complicates the implementation of such comprehensive systems.

Despite these challenges, the pressure from both the EU regulations and market forces is pushing the Brazilian cattle industry towards greater transparency and sustainability. The traceability of indirect suppliers, who are often the primary contributors to deforestation, remains a critical issue that needs urgent resolution. A centralized, transparent traceability platform maintained by the federal government could be a solution, but this requires significant political will and cooperation across various sectors.

Conclusion: A New Era for Leather Production

The EU’s deforestation regulation is set to reshape global supply chains, particularly in industries like leather production that are heavily reliant on cattle ranching. For the fashion industry, this means a shift towards more sustainable sourcing practices. Brands and manufacturers will need to ensure that their leather is not only high quality but also ethically sourced, with full traceability from farm to finished product.

As Brazil works to implement these changes, the global fashion industry must adapt to these new standards, which are likely to become the norm rather than the exception. In the long run, these regulations could lead to a more sustainable and transparent leather supply chain, benefiting both the environment and consumers.