#31: Sustainability or Strain? EUDR’s Ripple Effect on Coffee Farmers with Etelle Higonnet

This episode of the Business and Society podcast features a conversation with Etelle Higonnet, founder of Coffee Watch, Yale alumna, and renowned environmental activist. The discussion centers on the European Union’s Deforestation Regulation (EUDR) and its profound implications for smallholder coffee farmers worldwide.

Main Topics Covered
EUDR Impact: The episode explains the intent and scope of EUDR, emphasizing how the regulation aims to halt deforestation linked to key commodities—especially coffee—and the challenges faced by smallholder farmers in meeting new compliance demands.

Coffee Supply Chain Realities: Listeners gain insight into poverty, labor exploitation, and the systemic issues affecting coffee growers, with Etelle breaking down statistics and stories from global coffee farming communities.

Activism and Solutions: The importance of activism in driving policy change is highlighted, alongside hope-filled examples of collaboration between NGOs, governments, and industry to foster transparency, traceability, and a transition to regenerative, farmer-centric coffee production.

Key Guest Insights
Etelle discusses the broader context of global poverty, biodiversity loss, and climate change, making the case for urgent reforms and a science-based approach to business leadership.

The episode candidly addresses obstacles such as land tenure, literacy, and technological access for smallholders, while exploring the possibility for creative solutions and capacity building.

Etelle shares concerns around compliance burdens for marginalized groups and suggests that regulatory action like the EUDR can be a catalyst for industry-wide transformation.

Closing Reflections
The interview concludes with Etelle’s book recommendations, essential leadership skills—courage and scientific literacy—and a call to action for business leaders to champion responsible sourcing and planetary well-being.

Please visit our website, www.businessandsociety.net, for more inspiration.

Transcript

Senthil (00:00)
Hey, welcome to the Business and Society podcast. I'm your host, Senthil. Each fortnight, we take a topic at the intersection of business and society.

and discuss with some of the influential thinkers. Today, we are going to talk about European Union's deforestation regulation or EUDR and its impact on smallholder coffee farmers. To discuss this topic, I'm joined by Etelle Higonnet Etelle is the founder and director of Coffee Watch, a Yale graduate and award-winning environmental activist. She has led international campaigns against deforestation and slavery in agriculture.

and was knighted in France for her impact. Now she is dedicated to transforming the global coffee industry for people and the planet. Here's my conversation with Etelle

Senthil (00:50)
Hey, Etelle a welcome to the show. Such a pleasure to have you. I know it's a long due, but very welcome.

Etelle Higonnet (00:54)
It's

lovely to be here. Thank you so much for having me on.

Senthil (01:02)
Excellent. Let me start with a bit of a controversial question. You're an activist used to controversial questions. Am I fair to call you as an activist?

Etelle Higonnet (01:07)
Yes.

Yes, of course you can call me an activist. That's, think, probably the leitmotif of my whole career.

Senthil (01:13)
Okay.

One of the stories we are sold often is we live in era of multi-sectoral collaboration. ⁓ I'm keen to understand, given your experience, you have seen the world in a different lens, which many of us have not. What makes activism work? Does activism have a place in the world we live in, which is getting increasingly fragmented?

Etelle Higonnet (01:41)
Yeah, I think it activism has a key place in the world we live in because, you know, although there so many things that are getting better, right, humanity is really shrinking global poverty and global extreme poverty, we can see the numbers for child labor are going down and public health is better.

than it was in our parents' generation. And there's so many good things happening in the world that I think get short shrift in mainstream media, and they're more often highlighted in what's called solutions journalism, quote unquote. But although there's all these good things happening in the world, there's also terrible things. Climate change is upon us. We still have widespread and systematic slavery, child labor, farmer exploitation, worker exploitation.

income inequality. And I think as long as we have, you know, crimes against humanity and war crimes and exploitation and environmental destruction, there's a real role for activists to play to kind of ring the alarm and fight, you know, these titanic battles, right? I mean, it's hard to imagine how the fossil fuel industry would have been curbed to the point that it is today without

all the activism of lawyers and protesters and scientists who are really engaged and communicators and I think that, you know, women's rights is the same. We wouldn't have women voting today if it wasn't for the suffragettes and the suffragettes and, you know, it was, of course, to get, you know, to ⁓

things like the weekend, which was brought to us by unions, well, largely by unions, that was a hard fought battle. People died for workers' rights. And I think there's of course a role for softer, gentler engagement always. I'm not one of those people who thinks that...

soft engagement is worthless, not at all. It's all part of an ecosystem of change making, you know, to have good cops and bad cops, people who do it in a gentle way, people who do it in a more feisty way. But yeah, I'm a huge believer that the world can get better, that we can do better and to do that we need to fight.

Senthil (04:18)
Wow. I think you lived that through in your career, right? As looking at the companies you've worked for and the reports you have authored or co-authored. That's quite impressive. Really appreciate your brave career. ⁓ Well, I know today we are going to talk about EUDR and coffee small holders, not about activism. Let's get the basics right, Etelle ⁓ Why is deforestation such a big issue?

Etelle Higonnet (04:35)
Yeah.

Okay, you're kind of hitting the nail on the head. This is one of the most important questions, I think, for our generation, right? Most people know that we're facing catastrophic climate change, right?

But most people think of that as like problem with cars and fossil fuels. Like they think, oh, coal fire power plants and SUVs. But it turns out that all of those are incredibly important to work on. I have worked on fossil fuel battles, of course, for a long part of my life. 30 % of climate change probably is from big ag. And 80 % of biodiversity loss is from agriculture.

So we're in a polycrisis, Senthil We're in a polycrisis. What does that mean? We're in a climate crisis. We're in a biodiversity crisis. ⁓ If we think of those separately, we don't see.

that there are solutions that work for both of those crises. There's no point running a solutions marathon twice if you can run it once, right? So let's think about how big ag is both driving the climate crisis and driving the biodiversity crisis. What does that boil down to? A lot of it boils down to deforestation by big agriculture. There are seven.

drivers of deforestation in the world today that are the top drivers. You can think of them as the seven deadly sins of forest destruction. And by the way, forests do not need us, but we need them if you like breathing and being in a habitable planet. They really, they're pretty necessary. So we've got to save them. And the bad news is, of course, that there are seven deadly sins, but the good news is

That is a finite number. We can get our hands around those seven commodities, which is cattle, soy, palm oil, pulp and paper, cocoa, coffee, and rubber. We can fix this. That's a fixable problem that you met. We went to the moon. We can do that. That's not an unfixable disaster. And so think deforestation is both one of the greatest

disasters to befall our planet, but it's something that we can reverse. Our generation, this is our moment. This is our moonshot. It's an earth shot, if you will. We can do this. And with coffee, we could absolutely do deforestation free coffee tomorrow, like a switch. The industry could decide and make that operational for the whole world and in Europe.

There's a regulation coming, the EU deforestation regulation that will force industry to halt deforestation for coffee headed to Europe and the other high-risk commodities that I mentioned. But coffee can go further than do no harm. Coffee can do regenerative agroforestry that heals the world, that makes it a better world with every cup. And I think that's really cool. That's something we should be aiming towards.

Senthil (07:59)
Let's get into coffee. Did you say 80 % of biodiversity loss is caused by agriculture? I work in agriculture. I know the emissions piece but deforestation percentage. 80 % of biodiversity loss is due to ag.

Etelle Higonnet (08:09)
Yeah.

Give or take, that's what people say in the scientific community. There's been studies that make it a little bit lower, a little bit higher. But yes, absolutely, 80 % of biodiversity loss appears to be from agriculture. And it makes sense, right? Because think about it. You know when you get into a plane, it takes off, bada bada bada, ploom, and you go up. You see the city that you were flying out of, And then as you sort of soar into the sky,

you see this patchwork quilt, right? And you get higher and higher and you realize, my God, like all that stuff that's not green, that's agriculture. You know, when you look at a satellite map or when you fly up in a plane,

It just, you intuitively feel the truth of this, Intuitively. And it's not just that we've chopped down forests and ecosystems like mangroves or wetlands or peatlands or grasslands or whatever to put in agriculture. And grasslands can have a huge amount of carbon and biodiversity, right? So I guess deforestation, we should say deforestation and forest degradation and destroying ecosystems that, you know, like the Cerrado and the Chaco.

There are these sort of dry forests in Latin America that are all, I mean, they're so beautiful. We only talk about the Amazon. It's as if we only had, you know, one child and we sort of told our second and third kids, shut off the bridge. But all our kids are beautiful, right? All those forests are beautiful. So it's not just that intuitively we know agriculture is changing our planet and deforesting. Think about all the pesticides, insecticides and fungicides that we spray like gangbusters.

The whole point of them is to destroy insects. But insects are at the bottom of the trophic chain. We are in something that has been baptized by a lot of scientists and by the New York Times and other media outlets like Mongabay et cetera, as the insect apocalypse. We are losing insects like crazy. And that means everything that relies on insects, birds, all this small taxa.

they're collapsing as a result of the insect apocalypse. And so this ripples are going up the traffic chain. That's pretty bad news for apex predators like us. So basically, know, agriculture drives that more than anything else. For every little lawn that you spray with glyphosate or every golf course, there's so much agriculture that's soaked in chemicals.

Senthil (10:57)
Well, you lead a unique organization called Coffee Watch, which takes coffee as a commodity and you see how that can be a force for good. ⁓ For someone who knows nothing about coffee, break it up in simple terms. Who grows coffee? What's the nature of coffee farming?

Etelle Higonnet (11:18)
yeah. So coffee is the number six driver of deforestation in the world. Almost all coffee farmers and farm workers are not learning, earning a living income price. Many of them are in poverty. Many of them are actually in something that would be called extreme poverty, but defined by the World Bank as under $2.15 a day. Because of that poverty,

So many things flow from that like child labor, bonded labor, slave labor, human trafficking that are very widespread and systematic problems in the coffee industry. Many coffee farm workers report working things like 12 hour days, seven days a week, three months straight, no breaks, no medical assistance, no PPE. We were just talking about pesticides, right? Sprayers often have inadequate or no protections and very

very

little medical care. Most coffee workers are pushed into these sort of opaque systems where they're sort of ghost employees, you know, where they don't really exist properly on paper, which means they're barred from things like social security and pensions and ⁓ it's not good. And how many people are we talking about? Let's sort of drill down into that because of course, you know,

I'm telling you this bad news about slavery and forced labor and child labor and extreme poverty and people not earning a living income, which is by the way, exactly what it sounds like. A living income means you can live on it. Usually people refer to the anchor methodology, which is this ⁓ widely accepted, you know, top of the line methodology to calculate a living income price and living income means you have enough food to live on, basic medical care, like education, basic clothes.

This is not a dignity income or a wealth income or like, I'm going to become a Elon Musk income. This is just, I can live on it. So most coffee farmers do not earn that. But so we've sort of established some of this bad news, right? I mean, how bad is it? Well, it turns out it's a lot of souls. We think that there's about 12 and a half million coffee farms with about 25 million smallholder farmers, give or take in the world.

and about 100 million farm workers. Those farm workers could be sprayers, they could be harvesters, they could do one harvest or two harvests a year, so they could be working anywhere from three months to six months, a more, a bit less. economist Jeffrey Sachs calculated that, he's very interested in poverty, and he specifically looked at poverty in coffee. He estimated that the 25 million coffee farmers have about 60,

we're talking about 65 million people when you include their dependents. Yeah. So if you think that the farm workers also have dependents, then when we think about coffee poverty, it's probably affecting around 265 million souls. That is a lot of people. That makes us in essence a development problem.

which in turn makes it a migration problem. know, when coffee farmers are in extreme poverty in places like Mexico and climate chaos wreaks havoc on their crops, they're already on the brink. It just pushes them into bankruptcy and crop failure leads to financial failure, which leads to moving across the border, maybe illegally with coyotes into the U.S. I think, yeah, this is a big problem. It's a real thing.

Senthil (15:03)
Well that's a lot of issues to unpack. Now on top of all this, now this EU deforestation regulation, let's see how that impacts smallholders. Help us understand what is EUDR?

Etelle Higonnet (15:19)
Okay, that's a great question. It's one of the most important things happening in the EU and maybe in the world. And in a way, it's really beautiful and should give people a lot of hope. So let's talk about the EU deforestation regulation. It entered into force on 29 June 2023.

It was supposed to become the law of the land and implemented at the beginning of this year, but due to a lot of lobbying, mostly by industry, which I believe many of those industry players that were doing the harmful lobbying to derail or delay the EUDR think a lot of the companies that are involved in that lobbying probably have a great deal of deforestation as well as, know, burning forests and...

destroying peatlands and slavery and child labor and other abuses in their supply chain. So one can maybe understand why some of these companies would have been lobbying to kill the EUDR but it failed. It failed. Those efforts to destroy the law failed. And we are told that the law is going to become the law of the land, what you must comply with starting January, 2026, January 1st next year. Yeah.

Senthil (16:42)
four months from now. Okay.

Etelle Higonnet (16:44)
four months

from now, so very soon. And then smaller companies will have a little bit longer to comply. So what it means is that if you are in the business of one of these seven high-risk commodities that I talked about, cattle, soy, palm oil, pulp and paper, cocoa, coffee, rubber, the seven deadly sins of deforestation, you will not be able to bring them in

to Europe if they are tainted by deforestation and actually if they're tainted by illegality. So we think that means slavery, rape, child labor.

So if I'm a big company and I'm sourcing coffee from place X and I pay people rubbish and they have to use their kids basically because it's starve or use your kids. So they pull their kids out of school and their kids are working and the women farmers also are very vulnerable to sexual exploitation. ⁓

and sometimes human traffickers bring forced labor in for harvest season, things like that, you know, these people end up in debt bondage. My coffee cannot come to the EU. Like it can't. And that's true for the other high-risk commodities too. It's gonna be a game changer. And keep in mind the EU consumes like a quarter of global coffee, but it consumes a lot more cocoa.

The EU is not only a place that consumes chocolate, but it also sells chocolate on to like UK, US. People love Belgian chocolate and stuff like that. So actually 50 % of global coffee goes to the EU. And we think that well north of 11 % of global palm oil goes to the EU. So basically these high risk commodities, this is going to transform them. This law will transform them. And if we're very lucky,

the EU becoming a real thing will trigger the UK to do its thing too. There's a law in the UK that's called the Environment Bill Schedule 17, often referred to as UKDR, UK Deforestation Regulation. It's passed. House of Commons, House of Lords, Royal Assent. Boom, boom, boom, that's all done. We're just waiting for implementing regulation from DEFRA, that's the agency in the UK. They put forth draft.

implementing regulation, which has some problems and didn't include coffee, so it made me a little grumpy, but it's better than nothing. When are they going to get off their butts and do this for real in the UK? Probably only after the EU shows up, because I think they're slightly peasilatimous and just waiting for someone else to be a first mover. And across the pond in the US, there is a Forest Act, which has bipartisan support in the House and the Senate.

it's kind of like a cousin of the EUDR. So there's like a little sister of the EUDR in the UK and a cousin in the US. And there's other legislation afoot in the world as well that's been proposed in different jurisdictions. So I think the EUDR could even create a beautiful model for way beyond the EU. That's kind of the frosting on the cake.

Senthil (19:55)
Mm-hmm.

Seems you're very hopeful about EUDR I can see that.

Etelle Higonnet (20:28)
Look, I think that there's problems with all laws and bills that are proposed and, you know, the perfect is the enemy of the good. I am sometimes worried. It does keep me up at night about whether women smallholder farmers and Indigenous smallholder farmers who typically have a lot less access to land tenure because they face so much discrimination, you know, around the world. ⁓

Women, sometimes legal discrimination is just cultural. Indigenous people often it's illegal, but it's culturally entrenched discrimination. We certainly found immense discrimination against indigenous people in coffee in Yunnan in China, which is where almost all Chinese coffee comes from, in Mexico and beyond. So, okay, I do worry about, will the EUDR kind of be an extra hurdle for these people?

Because if they already don't have a lot of good access to land tenure, you kind of need that. need to have the right to your land in order to be able to prove that it's legal and then access the EU market. so, know, there's, yeah, what are we going to do for women, smallholders and Indigenous people?

who have been traditionally sidelined and already abused and impoverished and exploited and maybe even historically victims of genocide, you know, like in Guatemala. ⁓ So yeah, that keeps me up at night. But I think a lot of these problems are fixable problems. yeah, I'm a really glass half full person or maybe you could say mug half full person, cause it's coffee.

Senthil (22:09)
I want to deep dive into the smallholder bit.

for the reasons you laid out. Most of the coffee in the world is grown by smallholders. I'll tell you a small story talking about land tenure. I was doing a project in in the highlands of Papua New Guinea. One of the, question we wanted to ask our farmers was what's your farm size? And majority of them don't know the size by hectare or acre or whatever. So we came out with this innovative way. Most of the highlanders watch rugby. So we said,

Could you think of a rugby field? Obviously they see in television, it's very poor proxy. We tell them, what do you think is the size of your farm compared to a rugby field? And say half of it, we took the size. The point I'm trying to make is farmers are not very informed.

Etelle Higonnet (22:42)
I love that! It's amazing! It's so good!

That's so cool! That's so

smart and innovative and creative!

Senthil (23:00)
This came from

⁓ a field worker. Obviously, they know the communities well. is, if farmers don't even know their farm size, it seems one of the demands from EUDR is the legal things and you need to know the farm boundaries. What is your work show? How are farmers coping with these kind of challenges?

Etelle Higonnet (23:20)
Yeah, you know, there's a wonderful NGO, which is called Fern, F-E-R-N. They're very present in Brussels. They've worked a lot on the EUDR. And ⁓ they just did, ⁓ they just sent a ⁓ note around actually about ⁓ research from an NGO that they know very well, which is called the Vietnamese Center for Sustainable Rural Development.

And they looked at how ready Vietnamese coffee smell holders are for the EUDR. And they did talk about problems of like literacy and knowledge and access to technology and how

important it is to overcome these barriers to help the farmers comply with the law. Really it's the companies that have to comply with the law. Most coffee companies are millionaire and millionaire companies, so they can well afford to pay for this. Unfortunately, most coffee companies also tend to screw over their farmers and their farm workers like all the time. So, you know, that's why we end up in a situation where your cup of latte, like the coffee farmer gets 0.4 percent.

of the value of your cup of latte. It's not because they're not working extremely hard doing backbreaking, excruciatingly difficult labor, it's because the coffee industry has decided to try to exploit them as hard as they can. So if we assume that the industry is not going to go in and like really try from a place of love and compassion and development focused ⁓ ideology.

to help smallholders, and I think it really falls on governments and civil society to help smallholder farmers. And this great Vietnamese study that the Foreign Center ran with research by SRD indicated that most Vietnamese farmers have smartphones.

which means that if we give user-friendly guidance tools to apply geolocation technologies,

those tools would enable the vast majority of smallholders who do have access to smartphones to figure out their polygons and to get into compliance. even people who don't have smartphones have like a family member, a neighbor, a community worker with a smartphone that can help them.

⁓ But this does require that like the EU and the Vietnamese government would basically increase support and capacity building for smallholders, especially in these remote areas, especially with ethnic minority communities and women. And there has to be more land use transparency and a traceability system that governments set up to help smallholders on a pathway to compliance.

And you know, sometimes governments don't want to do that. Sometimes there are people in government who benefit from opacity and criminality in agricultural supply chains. That happens. That's like a reality.

Senthil (26:41)
So we acknowledge that it's a problem, right? Smallholders, education levels, use of technology, stuff.

Etelle Higonnet (26:47)
Yeah, literacy.

But I think, you know, just like your colleagues came up with this incredibly ingenious creative idea of the rugby field, which I totally love. I heard that idea. So too, I think that, know, with the EUDR, we can think of really creative solutions that tap into the power of small holders access to smartphones and other things like that, do provide the ability to

Senthil (27:00)
Hahaha

Etelle Higonnet (27:14)
comply basically, right? And keep in mind also, even for a small company that's on the ropes because of Trump's tariffs, right? Because President Trump has just rolled out these insane tariffs that really are hammering coffee producing countries. Brazil got hit with 50 % tariffs. That's the top coffee producing country in the world. But a lot of other ⁓ countries that are very dependent on coffee for GDP and...

revenue and jobs and whatnot like Mexico and Nicaragua, they're very hard hit too. yeah, those governments, they do need to get their act together, but they also need assistance maybe from the EU ⁓ so that they can get into compliance and ensure that their coffee is marketable to the EU given that the US has kind of jumped off a cliff of tariff insanity. And the Secretary of Commerce.

Howard Lutnick, Trump's secretary of commerce said on TV that coffee would be exempt as would other tropical commodities, because there's no point in tariffing them. So you can't grow them in the US, it's not a country unless you want to like mow down Hawaii and Puerto Rico. Like bulldoze all of Guam. But yeah, that hasn't transpired yet. So although he said on TV they would exempt tropical commodities, it hasn't happened. I think there is an onus on the EU to step up and help.

producer countries of the regulated commodities to better comply and to help their own small interests comply. And that could include like the EU changing its tariffs to be more friendly to the producer countries.

Senthil (28:59)
To what extent policymakers in Brussels are aware of these challenges? I know you fight this battle at the front line. Do you have any perspectives on that?

Etelle Higonnet (29:09)
You know, I think for people who sit on their bums in beautiful comfy offices in Brussels, it's hard to feel super up close and personal concerned by the slavery, the child labor, the deforestation, the forest degradation, the pesticides of monoculture, the extreme poverty. ⁓

that characterize this coffee, but that actually also, you know, I just said the word coffee, you could like insert cocoa here. I mean, there's a lot of agricultural commodities that are very exploitative of people and planet, of farmers and forests. think some people in Brussels are amazing and awesome and truly care. And then there's others who just don't give a hoot. You know, we had these weird, fascinating debates.

around the EUDR and also around the CSDDD, which is like the human rights litigation that was proposed. Sort of if you could think of like the two wings of the butterfly that the EU's been talking about, one is this EUDR, that's like the deforestation wing of the butterfly, a little bit legality as well, but then the other wing of the butterfly was the human rights wing, CSDDD. You know.

You hear people just say this crazy insane stuff in Brussels. Some MEPs, I some MEPs are amazing, but some MEPs literally do not give a damn about deforestation. And I just, I don't understand. Do they not breathe? Do they not want their kids to breathe? Like, do they just plan on like moving to Mars? What is their plan?

Do they not think scientists are smart people? Do they think there's a giant conspiracy of almost every scientist in the world who's lying to them? I don't really know. yeah, Germany is about to kill the Lieferkettengesetz, they say, the supply chain law, which is to Germany what the EUDR is to the EU. The Lieferkettengesetz is maybe on the chopping block.

We'll hear what the Bundestag decides pretty soon, but you know, that wasn't even a very stringent law. Like, that was considered to be too much. No slavery, no child labor, like too much. Okay. It seemed to me like a pretty low bar, but I mean, I guess we have these people who are on like team slavery. Yeah.

Where are these people from? don't know.

Senthil (31:52)
⁓ This may not be surprising for you. Coffee traceability is such a hard endeavor, right? I mean, most of the coffee in the world is not traceable to the farm. What are some of the systems that are working in the sector ⁓ that makes these companies comply with the EUDR? If a coffee company cannot trace down to a specific farm, how can they tell

European Union officials that my coffee is compliant to EUDR

Etelle Higonnet (32:24)
So I think that used to be the way coffee operated, right? Where it was extremely opaque and it went through so many hands and it was untraceable. But actually, probably largely because of the EU DR, maybe also because of that UK DR that I talked about, that sister across the channel and the sort of anticipation that the US Forest Act might pass, that cousin across the pond.

and some other laws like the l'effet qu'a des gazettes, which we just mentioned, and the devoirs de vigilance in France. Actually, a lot of companies in coffee, and other commodities too, I should say, have pretty much traced

their supply chain. And that's nuts because it used to be that people would say, ⁓ it's totally impossible. Don't ask me to do that. It's so hard. Som Som the dog ate my homework. you know, now we heard some big names and copyrights. Don't take it from me. tree hugging NGO person, Dahlmeyer. Dahlmeyer said they fully support

the global goal of halting deforestation and is in the midst of implementing compliance with the EUDR in a timely manner. Nestle said, at Nestle, strongly support the objective of the European Commission to protect the world's forests and restore forests in a sustainable way. I'm literally quoting Nestle. They said we consistently advocated for a ⁓ mix of complementary measures at the EU level, and we've never called for any delay of the EUDR and oppose any calls to reopen the substance of the EUDR.

Lavazza said, the objective of the EUDR is noble and for Lavazza, forest protection and reforestation are central themes. Lavazza also opposed the EUDR ⁓ a different form, but not because they were saying we should have deforestation and coffee. NKG said it has always welcomed and supported the EU regulation on deforestation-free procurement.

You know, Olam said, we recognize the EUDR as a necessary and positive step. It could go on. Ili Cafe, JDE, LDC, Malita, Chibo. These are not little hippie to be corner stores. These are gigantic coffee companies. I do, not just coffee. IKEA. IKEA is like, it's, I mean, who has not heard of IKEA? If you don't know IKEA, you've been living under a rock in outer Tajikistan in a coma.

They came out for the EUDR. know, lots of companies, the biggest rubber company in the world, Halcyon, I think it's 12 % of global rubber came out to support the EUDR. I think this indicates to me that there are so many companies that say they support the law, they can comply, they're getting into compliance, they may already be ready for compliance. I think it means we're in this beautiful new world Senthil

where traceability that used to be an impossible pipe dream has suddenly, it's around the corner. It's about to be our new reality. I mean, like, let's pop some champagne. That's kind of cool. You know?

Senthil (35:48)
Yeah, so EUDR is also pushing traceability.

Etelle Higonnet (35:52)
Yeah, yeah. But you know, the the Lieferkettengesetz that I mentioned, that German, it's called this like supply chain law. ⁓ The Fuller Project, which is this cool investigative group, checked out to see what was the impact of the Lieferkettengesetz on Pakistan's garment workers. And it turned out it had had a really big positive effect on people being allowed to join unions safely, on unions being

not just allowed to advocate for worker rights, but actually like really getting a seat at the table and getting big positive changes for people to come out of the shadows and get contracts, to get benefits, to get better pay, to get better conditions. So that was kind of fascinating to see that there had been such...

a big positive improvement in pay and conditions as a result of the Lieferkettengesetz with all these German companies sourcing garments from Pakistan. We don't have that many other data points that are similar to the EUDR because there are not that many great laws out there, but yeah, although many bills and proposed legislation. But so yeah, I think there's great hope that this will lift a lot of people's lives and protect a lot of forests.

Senthil (37:11)
Great to know. Etelle we talked about smallholders' ⁓ ease of using technology and the challenges that comes with it. The broader criticism is it puts a lot of compliance burden on smallholders. ⁓ What are some of the things you're observing in the communities?

Etelle Higonnet (37:31)
Yeah, I think there was at first a kind of shock and surprise and lack of knowledge. And it took a while for information to really reach lots and lots of smallholders about what is this and how do you comply. And so for many people, I think there was a moment of panic of like, ⁓ what is this going to do? How do I comply? But then actually, we saw there were some beautiful statements of support from

enormous smallholder groups in palm oil and cocoa. Yeah, so actually, which are these regulated, those big seven deadly sins that palm oil and cocoa have a lot of smallholders amongst those seven commodities. Coffee is probably the most smallholder heavy, but cocoa and

is also very smallholder dominated and about a third of global palm oils made by smallholders. actually, I think with time and knowledge came these increasingly positive responses to the EUDR But overwhelmingly, people say they want technical assistance, they want financial support, they need to have ⁓

whole process to get access to land tenure, especially for women and Indigenous people and marginalized groups. And you know, getting land tenure, that's like nothing to sneeze at. That's a really complicated thing. And also I will add, you know, there's a bunch of countries where because of war, genocide, ⁓ or unrest, land tenure just has like many problems. Like think about Cambodia.

Khmer Rouge just burned everything, right? They literally outlawed money and they outlawed property and all records of property were destroyed under the Khmer Rouge. They also killed like a very large percentage of their people. was horrible. But that's not the only time when we've had a genocide and a war where...

you know, end result for smaller farmers is that they don't have the paperwork and they don't have a functioning system to safely go get papers to prove their land. So I think, the land tenure thing comes up a lot. And trust and understanding about what's at stake, that comes up a lot. ⁓

Senthil (39:48)
Mm.

Etelle Higonnet (39:56)
And I think also, you know, there is something that I hear that I think is completely fair. Most smallholder farmers and farm workers want a living income. And the EUDR does not give that.

doesn't regulate that. The only thing it does is it maybe says slavery and child labor are illegal, so in order for companies to be sure that they don't have child labor, they might have to pay a living income so that the parents can survive without having the kids be pulled out of school to help. So it may be that the final result of the EUDR will be a living income, just so that companies can kind of stop.

embracing a business model that is built on child labor because it is built on poverty, but that remains to be seen, you know.

Senthil (40:44)
I think you use this term, or I can see your concern ⁓ for women, indigenous people, ⁓ the impact of this regulation, I mean. So let's suppose they are unable to comply to this regulation, by January, they are basically gonna be out of the supply chains, is that correct?

Etelle Higonnet (41:05)
This is not totally clear, right? Because small companies have a longer time to comply. And also when we look at the EU TR, the European timber regulation, which is maybe the closest thing we have to a precursor to the EU DR, the European deforestation regulation, you know, there was a lot of on ramping. So that is

potentially would happen. I think that's what everybody wants there to happen in NGO circles, in activist circles. I kind of think that's probably what everybody wants also in like farm worker and farm union and smallholder farmer circles. Although I will add, it's very hard to talk to legitimately elected and representative farmer union leaders in coffee in particular.

because the number two coffee producing country in the world, Vietnam, does not allow unions. China, I think is number 13 of coffee production. They've almost all their coffee concentrated in this province called Yunnan. Also, you cannot have a union.

Brazil is the number one coffee producing country and under Temer and Bolsonaro, these are hollowed out the unions including for coffee. They have not bounced back yet. They have not really been able to build back from that decimation. And in Colombia, like technically, theoretically, you could have a farmer union, you know, to advocate for land tenure and living income and other EU support and have a

farmer union to demand more technical assistance and help roll it out with their members, except that in Columbia, I believe it is literally the most dangerous country in the world to be a union organizer. it is hard because of that. Those things that I just mentioned, it's really hard to be able to like have proper dialogues with farmer leaders that are representative.

Senthil (43:14)
Mm.

Etelle Higonnet (43:25)
of a big, broad millions of smallholder farmers and farm workers. It's hard.

Senthil (43:35)
So who do you see representing them now?

Etelle Higonnet (43:38)
Yeah, look, there's always some incredibly heroic and dedicated people that you can turn to. Like in Brazil, you have this union called Adere. Adere represents a lot of ⁓ workers in Minas Gerais who are in coffee and regularly helps free these slaves. ⁓ With the, you know, basically helps the Brazilian Fiscalização, the labor inspectors to find slaves and free them.

Yeah, Adere is very strong and you also have NGOs that are quite fearless like Repórter Brasil in Brazil, just, you their leader just won the Goldman Award last year, Marcel Gomes. You know, I think it's fair to say they put their life on the line for most of their reporting. in Colombia, we have incredible group like Voces por el Trabajo. In Mexico, we have this incredible group ProDESC know, everywhere.

In the world, are some farmers and farmer leaders and NGO groups that are trying, that do try. And because they're doing this against all odds, I think it's even more important that everyone try to listen to them really hard and go find them and talk to them.

Senthil (44:49)
Hmm.

Well, I was speaking at one of the conference last year and after completing my session, I got a question from one of the audience. So he asked me, okay, because the EUDR is coming into force now, ⁓ I'm sure there'll be farmers that cannot meet the requirements of EUDR. So those coffee supplies will get diverted into markets like Australia and New Zealand or some other parts of the world.

And when I was doing a quick research for this episode, that's one of the predominant concerns raised by many stakeholders. EUDR are incentivizes farmers to re-channelize their product to less regulated markets like China, which is obviously such a massive market. India could be one. What is your take on this trend? Or do you see this trend happening or are you concerned about this?

Etelle Higonnet (45:41)
It's possible and it really depends on the commodity, right? Because the EU, about 50 % of global cocoa goes to the EU. So it'd be very hard to bifurcate a cocoa supply chain between clean and dirty. ⁓

You kind of have to clean up your whole cocoa supply chain because the EU is such a big player. That's less true for something like palm oil, where my understanding is about 11 % of global palm oil goes to the EU. for example, to bifurcate your palm oil supply chain into clean and dirty ⁓ and end up with this unintended negative consequence of creating

sort of high speed pipeline between palm oil that's got peatland draining and deforestation and fires and rape and forced labor and child labor and other kinds of exploitation and consumers that don't look at any of that stuff like, you know, the domestic biofuel market in Indonesia, for example, or as you said, China.

or Saudi Arabia, it's not particularly known for regulating human rights and environmental issues in its supply chains You know coffee is an interesting one because we think like 24 percent, maybe 26 percent of global coffee goes to the EU. So that makes it a very valuable key player.

hard to give up on that market and it's all the more attractive for a producing country and for co-ops and regions, coffee producing regions, to remain competitive for the EU because it tends to pay better. And when you

Senthil (47:42)
Mm.

Etelle Higonnet (47:44)
bifurcate your supply to clean and dirty and say, okay, we're just going to send this stuff with deforestation and slaves and kids and rape to like ..

you know, then you're just like hostage to the vicissitudes of a smaller market with a smaller customer base and less wiggle room and less bargaining power. You know, if someone consulted both of us, that's better for them than if they can only sell to me because I'm dirty and you're clean, right? Because then I can lowball them basically.

So it's a really good question. I think it depends on how market dominant the EU is for each commodity. And it depends on the political and other realities in the producer country. here's a great example. Brazil just got hammered with a 50 % tariff by Donald Trump. Apparently, they were going to exempt tropical commodities. Secretary of Commerce Howard Lutnick has been on TV and said coffee is exempt.

But then it hasn't been exempted. Is that going to happen or not? Who knows? But for Brazil, the EU just became a more attractive market as a result of those 50 % tariffs on the US, right? So it's very volatile, and it's really hard to predict how it will all shake out.

and your question is a great one and I don't have the answer.

Senthil (49:16)
Etelle, one last question before we move to the last section. Tell us a little bit about data sovereignty or security, however you call it. was reading a statement from a minister from Indonesia, said if Europe is so protective about their citizens or their farmers' data why should a developed nation's farmers give their farm details and polygons to Europe? Seems like a fair question.

What are your thoughts on that?

Etelle Higonnet (49:43)
Yeah,

that's a fair question. But keep in mind, we all live on this planet and we all kind of need to breathe and have a habitable planet. And so if a country is not on top of their deforestation, then I think it's fair to ask for a system that ensures that. Right. And also, you know, if Indonesia doesn't want to sell to the EU, they don't have to.

But the EU is free to decide what it's going to buy, right? It's like, let's say I want to go buy a pair of jeans. I mean, what jeans I buy, it's up to me. Right? And I could buy...

a pair of waterless jeans that use like 99 % less water. think that's the Levi's like their little micro niche that's environmental, you know. I could buy jeans that were, you know, fair trade cotton with a living income for the cotton workers instead of some horribly abused Uzbek, know, quasi slaves. It's really my choice what jeans I'm going to buy. And that's true for

Countries too, countries choose what they're going to do. if Indonesia doesn't want to sell to the EU, they don't have to. But I think if Indonesia didn't have a deforestation crisis, we'd be having a very different conversation, wouldn't we?

And it's not just a deforestation crisis. Like I remember because I was research director at Greenpeace Southeast Asia for a while, the deforestation that for so long characterized Indonesian palm oil, which has been getting so much better. So let me just say I'm hugely happy about that and in great admiration for all the campaigns that made it happen and the government and industry folks who have now.

wrapped their hands around the deforestation crisis and Indonesian palm oil and shrunk it down to an ever diminishing problem. ⁓ you know, this is also a human rights problem for Indonesians more than anything else. Like, it's not just that people cut down forests for palm oil, they burned forests to put palm oil in its place, right? These huge raging forest fires were lit.

like on purpose, and about half was for the pulp and paper industry and half was for palm oil, more or less, give or take. ⁓ you know, those fires, they were, especially in peatlands, they're like mortar fires. You can't put them out. They go meters underground. They travel meters to the side. They smoke and smolder. These embers go on forever. And it's not just that. It kills people. Like the mortality and the morbidity from the smoke is insane.

Did you know that in a bad year, like 2017, a dry year, it is thought that around 100,000 people died from PM2.5 inhalation from the smoke in Southeast Asia? And on a good year, the scientists tell us it's around 30,000 people.

who literally die from PM2.5. And that's not even counting the glyphosate and the paraquat in the air and all the carcinogens. And it's not even counting any of the other stuff. It's just the PM2.5 from the, and that's not even counting the.

morbidity, like the sickness as opposed to the mortality. Millions of people were hospitalized in Singapore, in Malaysia, in Indonesia. The fires were so bad that China complained about them. If China complains to you about air pollution, you're in trouble. You could see the smoke from outer space. It went to Guam. you know, the way Indonesia tolerated or even some people in Indonesian government tolerated and turned a blind eye to it.

blind eye to, maybe even incentivized, let's be honest, because that is possible too. Deforestation and forest destruction literally killed people and made them sick, but on a massive scale. And it was a carbon bomb, a giant carbon bomb. So, you know, my understanding is that the carbon ⁓ from these forest fires,

I believe that it wasn't just 100,000 premature deaths. It was an estimated financial loss of $16 billion. And that the carbon from Indonesian fires outpaced the emissions of the entire US economy for like 30 days out of a year on a bad year.

The US economy is big. That's a lot of emissions. So, yeah, I mean, you know, you have a carbon bomb, you people dying, people getting sick. You're like jeopardizing the future of humanity. Don't get me wrong. Europe should not have cut its forests either. That's wrong. America should not have cut its forests. But...

Senthil (54:33)
Mm-hmm. It is. ⁓

Etelle Higonnet (54:56)
to say Europe doesn't have the right to pass the EUDR, I think that's cuckoo.

Senthil (55:04)
Okay, so you argue that every stakeholder can benefit. There are some initial pains, but I think the collective benefit to humanity is massive, it seems. ⁓

Etelle Higonnet (55:15)
The collective

benefits of humanity is massive. Talk to all those people who, that PM2.5 inhalation killing and making people sick, we don't even know the dose response for babies. So although babies are much more sensitive, we don't even calculate the death of babies. I'm a mother. If my child died because of pollution from raging forest fires, like I would kill myself. You know, the heartbreak of every death.

Senthil (55:24)
Hmm.

Etelle Higonnet (55:45)
Like, I don't know, that's just kind of incalculable.

Senthil (55:52)
Okay, Etelle well, I know we have.

Etelle Higonnet (55:53)
Sorry, that was a little bit grim. I think the

key thing that we should focus on is these laws are afoot. They're being passed, they're being proposed, they provide solutions. A lot of producer governments are also working on solutions. There's a lot of good companies getting ready for compliance and working on solutions. Yeah, sorry, I brought us to a dark place. Let's talk about hope, let's talk about hope.

Senthil (56:13)
I get the sentiments. It's

such an important issue, definitely. ⁓ Well, we have few minutes left. I asked three standard questions to all my guests. How do you handle differences of opinion? Someone disagrees with you. How do you usually approach that?

Etelle Higonnet (56:34)
I always want to talk to them. Dialogue. Why do they think so differently? Can I persuade them? Let's talk. I think, you know, half the problems in the world are from people not wanting to talk to each other.

Senthil (56:51)
very impressive. What is one book you go and read again and again?

Etelle Higonnet (57:01)
love Arundhati's God of Small Things. It's really, I think, the best book in the whole world. ⁓ I'm such a fan of hers. Is that too nerdy? She's my...

Senthil (57:15)
No, no, lovely.

I when I was in school, this is a book which often comes on. I'm from southern India. So ⁓ this book created such a controversy. I don't even know what is this book about. I was in a small town and now because you recommended this book, I'm going to read it in the next few months. thanks for reminding that.

Etelle Higonnet (57:22)
yeah?

Literally

the first time I read it, I couldn't put it down and I finished it at like three in the morning and then started it again.

Senthil (57:45)
Interesting. And what are one or two essential skills that leaders in the business sector must have today?

Etelle Higonnet (57:46)
It's a good one.

Courage and scientific knowledge. You know, you should not have to rely on activists like myself to get you to do good things. You should talk to scientists. Almost every single scientist will tell you, we're in a polycrisis. We are facing climate chaos. We are facing mass extinction.

the biodiversity crisis and the carbon crisis are potentially cataclysmic. And we have solutions for all of this. You you want little packaging styrofoam, you can make it out of mushrooms. You want sneakers, you can make them out of recycled plastic bottles. You want coffee, you can make it regenerative agroforestry coffee that's farmer-centric and deforestation-free. You want to have milk, you can make it plant-based milk in your...

Delightful coffee. You want cups? They can be compostable and recyclable. know, every part of our life, whether it's cars or solar panels or anything, or coffee, we can do it in a way that is so much better for people and planet. The solutions are there. The science is there. The scientists are begging you to do it better.

Why aren't you listening to them? If you are a business leader, you should put science in your heart. It should be at your core and not just science, but courage, courage, because we have got to change. If you're running a ferry company, we need electric ferries. If you're running an airline company, we need to split switch from planes to those high speed blimps that use 90 % less carbon for all the city hubs, you know, because it turns out half of you.

global fights, our city helps. There are solutions. Get off your butt. Be courageous. It's not about the quarterly earnings or whether your shareholders like you. This is about your kids. This is about your life. It's about all of us literally surviving on planet. Please, please be our leaders. know, this is

We're at an inflection point. This is a time when you need to stand up and be counted. Courage.

Senthil (1:00:26)
Okay, you leave me impressed and inspired, Etelle! It's such a pleasure talking to you today and thank you so much for the time.

Etelle Higonnet (1:00:32)
it was lovely. Thank you so much

for having me on your show. I was thrilled.

Senthil (1:00:37)
Lovely.