A consensus is growing that new traceability requirements that the European Union (EU) wants to impose on the leather manufacturing industry and on other sectors cannot work in practice, at least not in the ambitious timeframe the EU has set out.

Because it wants to minimise its contribution to deforestation worldwide, and to reduce its contribution to greenhouse gas emissions and global biodiversity loss, the EU has laid down new rules regarding products coming into the 27-state trading bloc or being exported from it. It wants to make sure products that derive from a list of seven commodities have no links to deforestation if they are to be made, bought or sold in the EU. The new rules are called the EU Deforestation Regulation (EUDR) and the commodities it affects are cocoa, coffee, palm oil, rubber, soya, wood and cattle.

Some by-products from these commodities secured an exemption from EUDR, often on the basis that they were products or materials that would go to waste if manufacturers did not make use of them. Attempts to secure an exemption for hides, skins and leather, which can also lay claim to this criterion, were unsuccessful. At a vote at the European Parliament’s plenary session in September 2022 in Strasbourg, 277 of the elected members voted in favour of an exemption for leather, but 338 voted against. The leather industry’s representative body in the European Union, COTANCE, described losing the Strasbourg vote as “a low blow”. COTANCE said leather could not be considered as a driver of deforestation, adding: “It is scientifically demonstrated that demand for leather does not drive livestock production or slaughter. Leather is a recycling success-story and a front-runner in the circular economy.”

EUDR cleared all its approval hurdles in the months that followed and the regulation came into force on June 29, 2023. As things stand, companies in the EU that distribute hides, make leather or use leather to manufacture finished products must comply with EUDR. This means meeting compliance requirements from December 30, 2024, (for larger companies) or from June 30, 2025 (for smaller companies). All of their global supply chain partners will, of necessity, have important roles to play in  this compliance effort.

Lie of the land

In concrete terms, this is what the EU is demanding. Before relevant products come to market or go for export, operators must “exercise due diligence”. This involves collecting information and compiling supporting documents to show what the product is, the country it comes from and, beyond that, “the geolocation of all plots of land where the commodities that the product contains, were produced, as well as the date or time range of production”. If they can compile this extremely detailed information, operators will then have to carry out to their own risk assessment “to establish whether there is a risk that the relevant products are non-compliant”. Non-compliant here would mean the product had a link to deforested land. If there has been deforestation on any of the plots of land listed, all the commodities involved will be “automatically disqualified” from coming into the EU or being exported from it.

Everyone is affected

The ability to reassure brands, retailers and consumers that leather and leather products have no links to deforestation is something that affects everyone in the European leather industry, the secretary general of COTANCE, Gustavo González Quijano said at the 2023 Sustainable Leather Forum in Paris. Mr González Quijano points out that systems for providing all the necessary reassurance about hides, skins and leather are not ready yet, although he says work is under way to try to make it possible for the European leather sector to fulfil the requirements. Whether it can complete this work in time for the existing deadlines is a separate question, but the work will not be without reward.

If the demands are steep, being able to deliver the reassurances the EU is asking for will, in the end, be to the European leather industry’s advantage, he says. “We need to work right now to try to put all the necessary bureaucracy in place, not only because 2025 is just around the corner, but because the cattle whose hides our tanners will process under the new regulations are being born now,” he explains. “Transparency is a good thing. It will bring credibility for European leather and credibility will bring authority.” 

A gap to bridge

Nevertheless, if the EU has its way, the geolocations of the plots of land those new calves occupy today will, all too soon, have to form part of the due diligence declarations tanners will need to prepare.

The institute director at FILK Freiberg, Professor Haiko Schulz, has added his voice to those warning that the leather industry will find it difficult to meet these new traceability requirements in time. Speaking to World Leather at Lineapelle in Milan in September, Professor Schulz said the research and testing body he represents is part of a group that is working with COTANCE to address traceability. But it seems certain to him that it will take longer to put the necessary systems in place than the 2025 deadlines allow.

He explains that there is already substantial coverage of traceability in OekoTex leather certification and that, in parts of Europe including Germany, there is also a high level of traceability in place in the meat industry showing the origin of cattle going back to the farms the animals come from. At the same time, Professor Schulz insists there are high levels of transparency concerning a hide’s movement from the tannery gate, from the end of the leather manufacturing process to the finished product. “Between the two, though, between the abattoir and the tannery, there is a gap,” he says, “and the work we have to do is to bridge that gap.”

He says data about the farm does not normally transfer to the hide at the abattoir and he adds that the way hide traders work with the abattoirs at the moment does not lend itself to bringing about a change in these practices. However, if that change does not materialise, Professor Schulz says the leather industry should seek to work with politicians to encourage them to force this change through. “And of course, this too would take time,” he observes.

Open dialogue

Because the political pressure Professor Schulz talks about could only really apply in Europe, his gap-bridging ambitions will help tanners and leather product manufacturers who source hides there, where the risk of deforestation is low. The product-flow EUDR is more concerned with begins beyond Europe’s borders. The ambassadors of 17 countries where the deforestation risk is higher sent a joint letter at the end of September to the European Commission, which is the EU’s executive arm, and to European parliament officials. They described EUDR as an “inherently discriminatory and punitive unilateral benchmarking system”, and they suggested the new regulation could, potentially (this is the sort of thing the courts must decide), fall foul of World Trade Organisation rules. They called for changes to the EUDR demands and an open dialogue on the subject of deforestation and on the impact on suppliers of the far-reaching ambitions that EUDR expresses. As things stand, the impact on suppliers of all the commodities under scrutiny, especially small operators, will be severe.

The 17 countries whose ambassadors signed the joint letter were Argentina, Brazil, Bolivia, Colombia, the Dominican Republic, Ecuador, Ghana, Guatemala, Honduras, Indonesia, Ivory Coast, Malaysia, Mexico, Nigeria, Paraguay, Peru and Thailand. This list shows that there are concerns about deforestation in several continents and the range of commodities mentioned above shows that many industries in Europe are in line to have to execute complex changes to the way they source raw materials. A number of the 17 countries on the list are important players in the global leather industry, but when it comes to high volumes of hide exports, much of leather’s deforestation discussion has focused on Brazil.

Brazil earned more than $150 million from its exports of hides and leather to EU countries in the first eight months of this year. It has paid close attention to the entire EUDR discussion and has a keen interest in what happens next. As World Leather reported in the April-May 2023 issue, leather manufacturers in Brazil have been in dialogue for some time with partners in the meat and livestock supply chain to try to put in place a national traceability programme, and all parties agree that there can be no turning back on this.

More time, please

In September, a delegation of senior people from the Brazilian leather industry spent time discussing deforestation and EUDR with the authorities in Europe. Through the South American country’s diplomatic mission to the EU in Brussels, tanning industry body CICB sat down in the Belgian capital with senior officials from three of the European Commission’s policy departments (it uses the term ‘directorate general’ or ‘DG’ for each of these). Officials from three DGs, Environment, Trade and International Partnerships, took part. CICB has told World Leather that one of the proposals it was able to present to  the DGs, was another new traceability solution that the federal government of Brazil is trying to put in place. “The Brazilian government would like more time to weigh this up,” CICB says. “Everyone would like more time.”

A major issue is that the companies, as far as cattle are concerned, that are at the front line of the challenge of combatting deforestation are not leather manufacturers but meat producers. Meat companies, CICB points out, typically react “when it is in their interests”. Foot-and-mouth disease (FMD) offers an interesting case in point. We have been covering outbreaks of FMD in Brazil since 1999, but the situation now is that a vaccine is available and packer companies are rolling that vaccine out. Brazil is now in a position to say it will be FMD-free within two years.

Powerful dynamic

Many times between 1999 and now, meat importers, not least in China, the South American country’s biggest export market for meat, have been able to make distinctions between the parts of Brazil affected by FMD and those that were free from the disease. When outbreaks occurred, imports from affected areas were halted, but hard work, sincere dialogue and investment in transparency and traceability made it possible to avoid a blanket ban on Brazilian beef.

“Brazil is a continent, it is like five different countries, at least,” CICB says. “Importers could say no to hides from regions where there could be a risk of deforestation, but also recognise that there are large areas of Brazil that are many thousands of kilometres away from, for example, the Amazon Biome, and that are risk-free. It should be possible to continue exporting hides and leather from those risk-free areas.”

This is what Chinese meat importers did with regard to FMD, and as a result, the necessary traceability for food safety is already there. It is the meat industry that has invested in the roll-out of the FMD vaccine programme. The problem with EUDR is that, as far as packer companies in Brazil are concerned, investing in another traceability system to comply with the EU-imposed regulations is not worth it; only 3% of the country’s beef exports go to the European Union, whereas 60% of those exports go to China. The Brazil-China beef export dynamic is powerful enough to have driven the FMD programme and its traceability requirements. Exports to the EU matter much less in the packers’ eyes.

Unintended consequences

Meanwhile back in Brussels, no immediate change seems to have arisen from the September discussions between the leather industry and the European Commission officials. Some observers say they are beginning to pick up signals from DG Trade that a postponement of EUDR for hides and skins would be a good idea. Colleagues at DG Environment are far less keen on any talk of a delay. Much of the momentum behind EUDR came from DG Environment, inspired by the blue-sky thinking of lobby groups and other advocates who believe it is possible to bring about a perfect world through ambitious legislation. But EUDR is not a real-world solution and there appear to be too many unintended consequences to make it feasible  to put it into practice in time.

In early June 2024, there will be elections to the European Parliament across all 27 member states. Many of the political leaders of the current European Commission will have served their time and each of the DGs faces a shake-up, with new leaders coming in. By the time these leadership changes take effect, the end of 2024 and the first EUDR deadline will be just around the corner. It is not clear at the moment if this changing of the guard will make a postponement of the deadlines more or less likely. It certainly will not make the implementation of EUDR any easier.

The European Parliament building in Strasbourg, where a majority of members voted against proposals that leather, hides and skins be exempt from EUDR.
Credit: European Commission

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