The European Commission made the most recent reform to the CAP in June 2020. Now voted on, it will come into effect from 2023. However, the evolution of the CAP over time has led to significant criticisms. The most recent reform is no exception. So, what are the new changes exactly, and how can your business adapt to them?
Since coming into force in 1962, the CAP is now the longest-serving EU policy. Its inception was due to the negative impacts following World War II. As agriculture supported the economy and fed the people, the European Communities created the CAP. The aim of the CAP was to build a united approach to agricultural practices.
Intending to improve agriculture for Europe, the original objectives of the CAP were:
By creating the CAP, farmers could rely on a set income for their produce. This allowed for growth in the agricultural sector, as farmers received fair compensation for their work. The CAP was also designed to offer resistance and protection against market fluctuations. Unfortunately, however, the policy didn’t always provide support in the way intended.
Even with the best intentions for improving the agricultural sector, the CAP has undergone some criticisms. The most significant relate to environmental sustainability and the distribution of economic support. A major complaint is that the EU has unfairly awarded agricultural subsidies between farmers.
Historically, the EU has set aside a significant proportion of its budget to support the CAP. In 1985, nearly three-quarters of the budget was set aside for subsidising agriculture. In 2018 this figure was approximately 38 per cent. However, the unrest lies not in the overall budget awarded but in the disparity between those awarded. As funding gets awarded per hectare of land, this resulted in 80 per cent of the subsidies going to 20 per cent of the farmers.
Regarding environmental concerns, the main criticism is that agriculture accounts for 10 per cent of Europe’s total greenhouse gas emissions. Therefore, introducing elements into the CAP to incentivise sustainable farming practices is required.
Intensive farming practices have been proven to degrade the landscape. These result in soil degradation, biodiversity loss and deforestation. From 1990 until 2020, the amount of forest lost is approximately 420 million hectares. Cited as the driving factor for this loss is agricultural expansion. The primary commodities behind large scale agricultural expansion include:
Deforestation by agricultural expansion usually occurs in stages. In order to gain access to the forest, road networks may be the first reason for clearing the land. Following this is the agricultural technique known as slash and burn. Once the remaining forest gets cleared, it’s ready for use as either cropland or pastureland for cattle.
Deforestation and degradation are the second biggest contributor to greenhouse gas emissions. In tackling them, the EU is fighting against climate change. The EU can reduce the rate of deforestation by tackling agricultural expansion through policy changes.
The reformed CAP will come into force from 2023 to 2027 and is already creating a stir in the agricultural community. While discussing the CAP for reform, key objectives were to ensure that any new policies meet the European Green Deal. In line with this objective, there has been a focus on reducing deforestation caused by agriculture.
By ensuring only “deforestation-free” products are allowed on the EU market, the Commission hopes to reduce deforestation directly. At the same time, they will also reduce the associated greenhouse gas emissions and biodiversity loss that it causes. Along with this, the CAP reform will reward sustainable farming practices. This will be achieved through direct payments within an “eco-scheme“.
A new system of eco schemes is proposed to reward farmers who take action in a shift towards more sustainable farming practices. Across the EU, there are 166 eco schemes available to 21 member states. These schemes represent a significant proportion of EU funding. The aim is to encourage agroecology, agroforestry and organic farming.
Although a step in the right direction, there is still much debate over the requirements for these schemes. Adjustments are still needed to ensure they have the intended environmental impact.
The European Commission aims to tackle deforestation with the introduction of new rules. These rules will require that companies do their due diligence for agricultural commodities. These checks will need to be completed before they’re allowed access to the EU market. These changes will guarantee that EU citizens can only buy, use or consume products that in no way contribute to global deforestation.
Such a level of traceability will keep environmentally damaging products off the EU market. It will also encourage more sustainable farming practices. Additionally, these changes should reduce the unfair competition within the agricultural market. This competition often comes from unsustainable products produced outside the EU.
Relevant member state authorities will monitor the new regulations using an electronic database. All product details will be recorded and made available via this database for transparency to the authorities and the public. Information required includes geographic coordinates and the country of origin of the products.
New due diligence checks are required for companies still wanting access to the EU market to sell products. All commodities will need to be checked to ensure that they were not from deforested land to comply with these regulations. These checks need to be made for all products from the 31st of December 2020. Along with product checking, supply chains should also be analysed. Doing this will ensure they support the new regulations.
Supply chain management is a notoriously complex and often opaque process. It’s hard to track products from the source of origin through shipping, manufacturing, warehousing and retailing. Achieving the level of accuracy required for commodity tracing by the new CAP regulations is, needless to say, causing some unrest within the agricultural sector. However, some technologies can make the transition to compliance much more effortless.
One such method is the use of Blockchain technology. Although initially created for cryptocurrency transactions, it has many other applications. One of these is using blockchain to manage supply chains to improve efficiency and transparency throughout the entire process. Blockchain technology helps companies manage their supply chain better than ever before using smart contracts and decentralised ledgers.
Using blockchain for agricultural supply chains will reduce costs, improve efficiency, and eliminate fraud and errors in data entry. Blockchain not only improves efficiency in supply chain management. It also provides more information than ever before about where a product came from and how it was made.
Tracing the origins of products can be easily satisfied using innovative technologies such as Radio Frequency Identification (RFID) and blockchain. RFID tags are small chips embedded in products and scanned by readers to get information about the product. Blockchain is a distributed database that allows for a secure and transparent way of tracking transactions.
The Brandzledger asset management platform combines both these technologies. This gives companies the ability to track the origins of their products with great accuracy and security. Using Brandzledger, businesses will know the entire history of a product – from where it was made to who handled it along the way. This helps ensure that agricultural commodities are “deforestation-free” and come from legitimate sources.
The Brandzledger platform is used by multiple industries, including food and beverage. It allows for the safe management of complex and fragmented supply chains. It also easily integrates with any existing system and is highly customisable. Once set up, companies can be sure they have complete traceability of their products. This results in reliable, auditable data every time.
The new CAP is a massive step in the right direction towards tackling deforestation and climate change. However, there are still many unanswered questions about how the changes will work in practice. For companies requiring access to the EU market, the uncertainty is over what these new regulations on traceability mean.
Brandzledger can help you understand your options for managing supply chains. We achieve this using cutting-edge technologies like RFID tags and blockchain technology. This enables you to track your products back to origin. With Brandzledger, you can keep all your products “deforestation-free”. Not only that, but you can do it with complete visibility while also ensuring data security.
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