Soy sourcing spotlight: Traders lag in legislative alignment

By Jane Byrne

- Last updated on GMT

© GettyImages/Virginia Yunes
© GettyImages/Virginia Yunes

Related tags Soy Cargill deforestation Moy Park Grieg Seafood

The fourth annual soy trader assessment by the Soy Transparency Coalition (STC) has highlighted significant gaps in efforts toward achieving fully deforestation- and conversion-free soy.

Out of the 11 assessed traders, only three have an aligned requirement with the European Union Deforestation Regulation (EUDR) for ensuring no deforestation is occurring in their supply chain since December 2020, according to the findings of the report​.

The STC assessed key soy importers' supply chains, evaluating progress and action taken on deforestation, land, and climate challenges. Conducted by 3Keel on behalf of the coalition, the review combines desk-based research and direct engagement with the buyers.

STC's membership includes Cranswick, Casino, Grieg Seafood, Hilton Food Group, KFC Europe, M&S, Metro, Moy Park, Pilgrim’s, Sainsbury’s, Sofina, Tesco, and Waitrose & Partners.

Traders who do not have a universal cut-off, or one later than 2020, show no signs of changing commitments to align with a 2020 cut-off date, reads the report.

This trend creates a risk that the supply chain will split and that recent deforestation is tolerated, particularly as traders have not been transparent about actions taken to mitigate these risks, warn the authors.

“There is a risk of the global supply chain splitting, with high-risk soy sent to regions that do not yet have the same level of regulations as the EU," commented Charlotte Williams, consultant at 3Keel and lead author.

Under land-use change (LUC) accounting it takes 20 years following the cut-off date for LUC for emissions to be counted as zero, so prolonging cut-off dates undermines forthcoming emissions reduction targets, notes the STC publication.

Soy traders, said Williams, will be able to comply with the EUDR due to their ability to control their purchasing and logistic supply chains.

“Several traders have implemented systems that will enable them to use the 2020 cut-off date in the EUDR to screen which purchases are compliant with the legislation and enable them to capture and communicate the polygons needed to create a due diligence statement. However, these practices are not universal, and some traders are more advanced than others in applying these tools across 100% of their supply chains."

Focus areas

A summary of other key findings from the report:

  • Tracing the origin of soy purchased indirectly through intermediaries is difficult, and traders are facing pressure to improve traceability.
  • There are gaps in monitoring and verifying sustainability commitments within traders' supply chains, although some progress has been made in disclosing non-compliance.
  • While many traders are addressing GHG emissions from their own operations, commitments to tackle emissions from the entire value chain and land use change are insufficient, with increasing pressure expected in the future.
  • Traders are investing in landscape initiatives in sourcing areas, but there's a lack of transparency regarding the impact and scalability of these initiatives.

Traceability of indirect soy supply

Elaborating on the challenges faced by traders in achieving traceability of indirect supply​, and the steps being taken to address this issue, Williams told us commercial sensitivity is one of the most significant challenges soy buyers face:

“There is a culture of a lack of collaboration amongst traders in the sharing of such information, and therefore there is a gap in a single tool or approach being used to allow the seamless sharing of this information. Traders talked about looking to technological solutions to overcome this as well as providing financial incentives to encourage the disclosure of this information. Outside of private sector action, we are seeing the rapid development of national systems - like VISEC in Argentina - to provide market-level traceability.”

Core definitions - everyone needs to be on the same page

As regards how soy traders currently monitor and verify sustainability policy commitments within their supply chains, she explained: “There is little consistency in how policies and commitments are being implemented. Gaining universal alignment on core definitions of key policy provisions - such as ‘conversion’ and ‘high risk’ - will be critical for effective monitoring and having a clearer benchmark for producers to understand. Traders also need to ensure their monitoring programs cover their whole supply chain to enable them to evidence that it is fully deforestation- and conversion-free.”

Scope 3 and LUC emissions

Soy traders are considering some strategies to address gaps in climate change commitments, particularly regarding scope 3 emissions and emissions from land use change (LUC):

“Eight of the 11 assessed (including four Agricultural Sector 1.5C roadmap​ supporters) did not disclose any details on emissions from LUC or plans to set targets to address them. This remains a significant gap, not just for soy but for the whole agricultural sector, as the methods used to assess Scope 3 emissions from land use change continue to evolve.

Financing schemes

But some of the players participate in landscape initiatives:

“One of the main investment initiatives is through the Soft Commodities Forum Farmers First Clusters​ initiative. This provides compensation to Cerrado farmers for preserving surplus legal reserves and using existing degraded pastureland for soy crops. It also provides financial incentives, technical assistance, and capacity-building to reduce deforestation for soy production and conserve native vegetation.”

It is unclear, though, how these programs are performing due to a lack of transparency on the initiative’s operation and impact, reported Williams.

Risk of soy chain supply split

Looking to the potential consequences of the soy supply chain splitting due to differing regulations on deforestation, a risk for palm oil supply​ as well, and how can this risk be mitigated, the consultant said that the main danger is that companies will simply alter their logistical supply chains to bring deforestation-free soy to regulated markets whilst not changing their procurement practices to eliminate the procurement of soy linked to deforestation.

“Europe consumes approximately 10% of global soy production. It’s been estimated that 97% of soy in the world in 2023 was produced on land that was not deforested after 2020, so there is no shortage of theoretically compliant soy in the market. Policy makers need to align on the requirements for deforestation and conversion-free production to send strong signals and create systemic change.” Photo credit: GettyImages/Tarcisio Schnaider

Increasing scrutiny

In terms of how soy traders plan to address increasing pressure and scrutiny on their targets to reduce emissions, both within their own operations and across the value chain, Williams pointed out that supporters of the Agricultural Sector 1.5C roadmap, launched during COP27, have made a time bound commitment to address LUC emissions.

Traders included in the STC assessment who are supporters of that roadmap include Amaggi, ADM, Bunge, Cargill, COFCO, LDC, and Viterra.

“The roadmap states that by July 2024 they should have calculated and disclosed LUC emissions and reduction targets to the Science Based Targets Initiative (SBTI) or published third-party validated LUC emissions reduction targets.

“Three traders disclosed that they were aiming to meet this deadline, but there was a lack of disclosure from the remaining, as well as the traders who are not roadmap supporters.”

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