How to Master EUDR

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Transcript

Saif Hameed [00:00:00]:

If you look at UDR and CSRD and CS Triple D and all the rest of it, there's a general trend towards capturing more metadata related to the stuff that you're buying. Metadata in simple terms, just being descriptive qualities, characteristics associated with the stuff that you're purchasing. And so if companies want to be future proof for this legislation, other legislation is to some extent no regret move, which is start setting up your data for flexibility in the future and flexibility will be higher. If you are capturing stuff like weights, locations, this sort of information is just going to be relevant and helpful. I would say there's obviously different levels you could go to as well, like the geotagging and you kind of have some dynamic way to share data across your supply chain as well. The kind of stuff that we're doing with the businesses that we work with at altruistic. But at its simplest level, just assume that the burden of requirement on your supply chain data is going to get higher one way or another. Right.

Saif Hameed [00:00:59]:

Whether it happens this year, next year, year after.

Isobel Wild  [00:01:16]:

Today, we're coming to terms with EUDR and what it means for businesses. We're getting to grips with compliance requirements and how to maximise value from the data that you're actually collecting. This conversation takes place against a backdrop of evolving and in some cases retreating climate policies. Recent developments, including SEC's climate disclosures, rules being put on hold, as well as the Net Zero Banking alliance walking away point from the 1.5 degree limit, among many others. But before we delve into the specifics of eudr, let's examine some of these recent climate policy developments, provide a bit of context for the discussion. Saif, first off, how are you?

Saif Hameed [00:01:57]:

I'm good, thanks. Izzy, how are you doing?

Isobel Wild  [00:01:59]:

I'm very well. Should we jump straight into our first newsworthy headline, which is Net Zero Banking alliance and how it's walking away from the 1.55 degree limits and the fact that Aviva's investors are ditching their watch list pledge. So what. What is actually going on in emissions financing?

Saif Hameed [00:02:18]:

So I think really understand what's going on in emissions financing. Let's go back several years so when banks first started looking at serious emissions related targets. And as far as I can remember, this is around 2019 or so I remember. I was actually at McKinsey and I was an. I was sort of internal expert on some of these topics. And so I was wheeled out to a couple of banks to help with their emissions target setting. And the way that we would do it is we would say, let's look at every sector that you are lending in. So if you're a bank, you're lending to, let's say super high emissions sectors like coal, you're lending to oil and gas, you're lending to industrials, you're lending to retail, you're lending to technology, you have a few other sectors, however you cut it and within each of those let's look at how much you're lending, how much money you're making, like how much profit you're making and what the emissions intensity is per dollar that you're lending for that sector.

Saif Hameed [00:03:19]:

So like if you're lending to coal based facilities or oil and gas based organisations, then the emissions per dollar that you're lending is much higher versus let's say if you're lending to, you know, making Ology Co. Maybe the emissions intensity per dollar that you're lending is, is much lower. And we would then say okay, great, if you were to have a bullish target or a super bullish target or a moderate target, which sectors would you try and deleverage from or lend less to? And there was usually also a component of which sectors would you try and lend more to because you're also trying to reduce the emissions intensity of the book. So ideally you want to not just lend less money to heavily emitting sectors, you also want to lend more money to low emissions intensity sectors. And for most banks, they were actually looking to try to ramp up renewable energy lending for example, at the time. And so as a whole sustainability strategy, they were thinking of this as a potentially fairly attractive strategy depending on the bank. So there were a few banks where they were actually not very heavily exposed to coal based companies, somewhat exposed to oil and gas, but not very heavily. And yet they saw a big opportunity to lend more towards energy transition positive companies like renewable energy developers for example.

Saif Hameed [00:04:33]:

And so in that climate, no pun intended, in that sort of environment, around 2019, 2020, it actually looked like a not crazy bet for a retail bank to try and appease its consumers, capitalise on opportunities to lend to the energy transition and deleverage from heavy emitters as well. And so that's where a lot of these initial targets came out of. And then you kind of get the net zero banking alliance with a whole group of banks coming together and saying look, let's actually together pledge to deleverage from heavily emitting sectors like oil and gas and coal. And that's where this, this alliance has its origins. Now a few things have changed since then. Some have been somewhat moderate or slow and some have been quite radical. One of the shifts has been that actually renewable energy boom times have declined and that was starting out because of interest rates rising where actually these are capex heavy projects, they require a lot of debt financing and now that's no longer as cheap as it was a few years ago. And so generally speaking there are fewer opportunities to lend aggressively into renewable energy.

Saif Hameed [00:05:40]:

Another thing that's shifted is that you now have a very different political climate, particularly in the US and also now in fact frankly, increasingly in Europe as well. And as a result the opportunities in the energy transition look a little less attractive maybe to some banks than they looked a few years ago. At the same time, you are at significant risk if you don't lend to heavy emitting sectors because there's a lot of legal action now coming out, particularly in the US as well, against institutions that seem to be penalising heavy emitters or traditional energy companies. So a lot of that has kind of come together. There's maybe a sense that also the consumer sentiment is a little less on the front foot than it was a year or two ago. And so a lot of these banks are feeling now like actually the cost and even the imperative to take a small step back is very different to where it was a few years ago. That's placed pressure on the alliance, which has meant that the alliance has had to adapt its requirements in order to keep most banks on board. Long answer, Izzy, but I thought the history would be relevant there.

Isobel Wild  [00:06:46]:

No, I actually really enjoyed that little, little history lesson. And what about Aviva investors ditching their watch list pledge?

Saif Hameed [00:06:54]:

Really the same thing. I think that there's two aspects to this. One is about how banks interact and the other is how asset managers interact. And on both fronts what, what is interesting to see now is a lot of potential legal jeopardy for financial institutions that seem to be penalising heavy emitters. In the US particularly, there has been a sort of wave of state level action, legal action, which is basically saying that these institutions should not discriminate against heavy emitters by restricting access to capital. And so all this is sort of part and parcel of the same thing. We should talk a little bit about the SEC as well. But another, another trend is that investors and asset managers are getting pressured to avoid raising sustainability as a conversation topic in their discussions with the assets in which they've invested because it is again seen as sort of penalising stake during the conversation and somewhat against the political and legal zeitgeist of the moment.

Isobel Wild  [00:08:03]:

How are like policymakers, consumers, businesses responding to this change is There any backlash or is this slightly just heading under the table?

Saif Hameed [00:08:14]:

Yeah. So in most of these organisations they have, most large organisations have a pattern for how they respond in situations like this and the pattern is typically lean on the internal legal and comms teams who are the teams that you rely on to help you navigate difficult situations. There are very few large or large companies or organisations that have not at some point had to grapple with this sort of topic. Whether it's like product recall companies in the news, there's like a big lawsuit. This sort of thing is not unprecedented in business. There are some elements of it which is, which are unprecedented. Like arguably the US government is taking a much more active stance with respect to company policy and corporate policy than previous US governments have done. Whatever your political leaning, it seems to me at least that the US government is being much more active in engaging on these topics.

Saif Hameed [00:09:18]:

So that is a little unprecedented. But at the same time companies have trodden this sort of path before. And so what I am noticing is a sort of short term and a medium term impact. The short term impact is that most companies are kind of clamming up a little. They are saying let's just talk about stuff less while we figure out what we are going to do and what the policy is and what the approach is. And I see that line coming from legal and comms within the organisations, like let's just hold on guys, let's just wait a bit and just figure things out on our side before we say anything externally. And then medium term. I do expect that organisations will talk less about what they are or aren't doing.

Saif Hameed [00:10:02]:

But at the same time I think that the baseline that we were looking at in the sustainability space was artificially high. What I mean by that is that companies were talking about sustainability quite a lot actually over the last few years and arguably more than made sense given how much work was actually being done, given how core it may or may not have been to the company's agenda. Like many companies that actually didn't have a lot at stake with sustainability, were setting targets, talking extensively about it. So I actually think that we're kind of going through this process of re baselining where, where everyone is trying to figure out the new normal or how much should they talk about what they're doing, the actual content of what they're doing. I have not seen change very significantly in the companies that I'm exposed to.

Isobel Wild  [00:10:55]:

Okay, so to clarify, it's actually not a strategic shift in efforts or ambition, it's just perhaps more of A communications tactic to avoid scrutiny.

Saif Hameed [00:11:06]:

Well, the way you phrase that question, Izzy, is a little harder for me to agree with because I think it is a strategic shift in that I think that three years ago, if you asked a CEO in any large, let's say, consumer business, which are the ones that I know best, whether sustainability was important to them, they would probably say, yes, it's a top three topic for us. And they would say, you know, we're thinking about, like, AI, we're thinking about sustainability, we're thinking about, you know, something else, right? Big, big pick your flavour of initiative. And whether or not that was completely honest or accurate, like whether or not it was a top three topic or a top five topic, there was still quite a lot of internal momentum driven by the fact that the CEO wanted to be able to say that. I think that the strategic shift that we are seeing play out is that sustainability is transitioning more towards business as usual. And I think that that shift has been catalysed by a couple of things. One is that companies are understanding what they want to do better than they did a few years ago. And so that's like just a positive. You know, we talk a little bit about this sort of maturity curve of sustainability that's just a positive, that's like companies getting a hang of it better.

Saif Hameed [00:12:25]:

And the other is that companies are now figuring, well, actually, like, there's a different set of maybe top three priorities. Maybe sustainability isn't top three or top five, it's probably still top ten. But we are going to focus on a few big bets in sustainability and make those very operational and make those very, you know, very much aligned with our business as usual. And we are going to do less on the kind of crazy frontier. Like you had a lot of these projects happening at the crazy frontier. Like, we're going to map every, every aspect of our supply chain for sustainability and kind of run 20 or 30 different pilot programmes at huge expense. Like that sort of thing is just not happening anymore. So I would say it is a strategic shift.It is just you kind of have this clamming up in the public space and a lot of stuff still happening under the surface that we're seeing.

Isobel Wild  [00:13:16]:

Well in replacement, because as you said, being able to communicate them was quite a good lever for getting more funding or getting buy in, in as not having that as a lever. What other levers would you rely on more so from a sustainability professional perspective to fill the void?

Saif Hameed [00:13:36]:

Yeah. So you see when you're talking about getting more funding, you're Talking specifically about the sustainability team, I would say that the best bet, the best thing for any sustainability professional to lean on is business value. This was actually true last year and the year before as well. It's even more true this year. You need to think about why this makes sense for business. Like why, why does this help us reduce cost, increase revenue, increase stickiness of our value proposition, improve brand. And the same way that you would think about any other initiative, you have a prioritisation within that. So most companies will tend to prioritise immediate cost reductions or near term cost reductions over medium to long term revenue gain, for example.

Saif Hameed [00:14:22]:

And the reason is that the cash value is just higher, the time value of money is just higher. If I can take cost out of my business now because of energy efficiency, packaging reduction, something in that vein, that is just more valuable than the potential promise of more revenue next year. At the same time, more revenue next year is more valuable than the abstract brand protection advantage that I might be able to get by being seen as a more sustainable business. So there's a defined hierarchy that is not new, is not specific to sustainability, but it just applies to sustainability more this year and going forward than it did previously. Sustainability was in a somewhat protected zone for a bit of time and I don't think that's true.

Isobel Wild  [00:15:04]:

I'm going to take us on to our second headline which is about the SEC climate disclosure. So the SEC's climate disclosure was approved in March 2024 after a monumental effort. I think they had about 24,000 different stakeholders giving feedback on this. But now as of February 2025 the SEC has announced it will no longer defend the rule in court, signalling a withdrawal. Seph, could you share a bit more detail about what's happening here?

Saif Hameed [00:15:34]:

Yes, I will, but let me go on a tangent before I do, which is these sorts of multi stakeholder consultation processes are always very tortuous but there's something quite interesting about them which is that where you land is where the stakeholders lowest common denominator was already typical. And so, you know, let me kind of give an example. I was working with a big industry consortium at one point helping them figure out what their circularity goals should be. And this consortium had over 100 members in the like working group basically of figuring out what this sort of what the strategy and plan should be. And those members competed with each other. They all had slightly different angles within their different packaging businesses which made that meant that they were all kind of a little dissimilar as well. And ultimately where you sort of land is what works for everyone. It is very difficult in these organisations for you to take a bold stance.

Saif Hameed [00:16:35]:

You end up being quite consensus driven. And with the sec, where the SEC actually landed was actually a very consensus driven landing zone. And so if you remember, like there was this whole Scope three debate that was happening when the rules were coming in and last minute there was a big sort of pullout. And so like actually where the SEC landed was a fairly uncontroversial place as far as I could tell. Which means that if the SEC is announcing that it's no longer going to defend the rule in court, which is effectively the SEC saying, look, we're not going to pull out, we're not going to officially repeal this or retract this just yet because it would be pretty embarrassing, but we're basically going to just signal to everyone that it no longer matters. From a business perspective, it's hard to say how significant this is because most of the, what, 7,000 companies that were impacted, we're already heading in that direction, otherwise the SEC wouldn't have landed there in its rules last year. That's kind of my opinion, I guess. Now I'm sure that there will be a bunch of those companies that think, wait, great, now it's like, holidays are early, we don't need to disclose a bunch of this stuff.

Saif Hameed [00:17:48]:

But for most of where the SEC landed, the writing was on the wall. The direction of travel was pretty clear from just business practise. Let's not forget that a lot of these sustainability regulations that we talk about, CSRD included, are following on the tails of what was already reasonably established business practise for a reasonably large share of companies, and that business practise informed consultations that then informed the actual legislation.

Isobel Wild  [00:18:17]:

So essentially you don't think that this will cause many aftershocks and actually people or companies who are going in that direction anyway will still disclose or will still have the kind of level of ambition behind them.

Saif Hameed [00:18:31]:

I think it will. I think that the impact of this will probably be similar to the impact of omnibus adjustments on CSRD should they sort of pass and be incorporated, which is, I think that you will find that, that a part of the constituent base will no longer report at all. And that's going to be true for this for the SEC and it's going to be true for the CSRD as well. And a part of the base will basically see it as a reprieve where they don't need to report until later and a part will continue to report as normal or continue to disclose as normal. So I think you're going to kind of get some split across these three. So I'm not saying that there's no waves, no impact. There will be for sure. And every sort of step back in terms of momentum definitely impacts what the adoption curve would look like in a parallel universe where you have no omnibus, you have the FCC holding strong, and you probably have a lot of new legislation coming in as well.

Saif Hameed [00:19:42]:

Obviously momentum in that scenario would be far higher than in the scenario that we're living through. But I don't see these individual decisions necessarily as hugely consequential yet. And maybe that changes and at some point, actually it just reaches critical mass and we start to see some very significant shifts. But in the sort of large corporate community, I don't see huge changes in what's happening.

Isobel Wild  [00:20:11]:

I think bottom line is it's just adding to this whole landscape of uncertainty, which whilst maybe the compliance burdens are slightly less, the uncertainty that you have to wade through of what you're supposed to be doing, what u turns you need to be making, is that helpful at the end of the day?

Saif Hameed [00:20:30]:

No. I think what every business wants when it comes to regulation is above all consistency. Because regulation is like reporting is one thing, but then all the hoops you have to jump through to kind of make sure that you will be compliant once you report it is another. And I don't think any business enjoys this sort of change. This sort of change doesn't kind of serve anyone in terms of disruption. And so I think there is certainly that. I think the other piece is that there's no certainty behind the shifts that we're seeing right now either. And there's two avenues to that.

Saif Hameed [00:21:07]:

One is, what's the next US government going to do? Like a few years down, what does that look like? Actually, frankly, two years down after the midterms in the us, what happens there actually? Do we see another shift? What does this mean? And then also you have all this sort of state level legislation in the US as well. You know, who knows where that's going to land in this kind of patchwork of compliance requirements. So it's kind of just, it is feeling a little like, like a lot of chaos. And I don't think any business enjoys that.

Isobel Wild  [00:21:47]:

Yeah, and I think unfortunately is a good segue onto EUDR because that is another slightly chaotic compliance area. But I'm going to give a quick, quick explainer about eedr, although I know a lot of our listeners will be very well acquainted with it. But EUDR is European Deforestation Regulation, which is essentially designed to stop deforestation. It affects all companies that sell any of the affected commodities or any derived products of them. So these commodities include palm oil, soy, wood, cocoa, coffee, rubber, cattle, and each product entering the market needs to have a due diligence statement submitted to confirm that the products have not been sourced from land which was deforested or degraded after 31 December 2020. This is supposed to come into effect on 30 December 2025 for large operators and the June 30, 2026 for, for SMEs. But watch the space, because as a lot of us know that this got pushed back from 2024 and there's some signals suggesting that perhaps it might be pushed back again when you don't comply. Any product that doesn't essentially pass this risk assessment can't be sold in the eu.

Isobel Wild  [00:23:09]:

And any sold food found linked to deforestation will be withdrawn and revenues will be confiscated. And this will be punished for. Like I'm really heading in with the punishments here, but with a fine of up to 4% of the EU annual revenue administered and a 12 month ban from selling other products. So the T's and C's and your warnings have been given to you now and we're going to go on to the questions. But Sev, first off, what data do you actually need to collect for eedr?

Saif Hameed [00:23:40]:

So a lot of the data is similar to the types of data that you're going to need for CSRD requirements. So for the affected products, you're going to need commodity quantities, origin, country, you're going to need some additional aspects like geotagged location data, so you know the exact production area and production time frame and that basically should be what you require to start meeting basic compliance needs here.

Isobel Wild  [00:24:07]:

Maybe just to backtrack, will EUDR be impacted by omnibus? Do we need to highlight that here?

Saif Hameed [00:24:15]:

No, omnibus is. Well, omnibus is specifically targeting CSRD and csdd. UDR is seen as a sort of separate piece of legislation that is not going to be impacted directly by omnibus. I think there might be something around just the, the types of companies that will be caught. So omnibus is excluding SMEs, for example, from its scope. I think it's very likely that there'll be something similar, similar for EUDR as well. That said, there's of course also challenges to EUDR, as you indicated, and so it may well be that EUDR gets watered down in its own right. I think that there are a few areas that I would expect more challenges to be discussed around whether that leads to watering down or not.

Saif Hameed [00:25:03]:

I don't know. One is the types of companies in scope. So again, can we, would it be limited to even fewer companies? A second might be the time frame of impact and either that could be when does it take impact, when does it come into effect? Or it could be like when is the effective date for the product that you're kind of looking at, which you reference. And then I think the other piece that is interesting is do you get some countries that are exempt from EUDR requirements? And there are two types of challenge coming to country level inclusion. One is should you have no risk countries? Like, should you have countries where actually there is considered to be no, no forestation relevant or like there's no deforestation risk at a country level and therefore the country's exporters should just not have to fill out all the reporting requirements to comply. And then the other is that there are some countries that have a very high dependency on export of products that are linked to forestry and they are arguing that this is a punitive kind of anti trade measure that the EU is taking. And so there's quite a lot of challenge coming from those countries as well. So I think it's, it's going to be a very hot topic.

Saif Hameed [00:26:21]:

The other area that I would expect to get challenge on is the, is the punitive measures. 4% of revenue is quite a lot and if you imagine in some cases that is a reasonable chunk of margin and in some cases maybe even more than margin, I would expect so it's going to be interesting to see where that lands to.

Isobel Wild  [00:26:43]:

I want to get into this data collection area and the current challenges around it. I think I've particularly heard around the trials and tribulations of collecting geocoordinates from your production areas, especially from certain industries like coffee, where the majority of your suppliers or farmers will be small holder farmers. So actually getting the geolocation data from each of those thousands and thousands of suppliers is a huge, huge ask. What's your take on this?

Saif Hameed [00:27:13]:

Seph I think that there's also a lot of room for interesting technology innovation here. And so you have significant advances in satellite imagery quality that should help here. You have significant smartphone penetration that should help here. One of the questions that I find interesting is around like someone described this to me, but if you think about like the actual density of the forest and you then think about like deforestation impact, that might actually not be visible because of the density of the forest, might actually not be visible from the imagery. But you can kind of tell it at a, at a more local level within the forest environment. From a business perspective, even if there is emerging technology that can help solve the data problem, that is an expense. So I would not be surprised that most businesses will push hard against it. That said, in a competitive market, raising the barriers to entry is generally a good thing for the incumbent or for the business that manages to excel in that environment.

Saif Hameed [00:28:14]:

And so just to give you a parallel, in the shipping industry, some of the biggest proponents for regulatory like for higher regulatory barriers are the largest shipping companies like the Maersk and the Hapag Lloyds and others because they actually want to keep the bar high, which ends up favouring them versus a lot of the smaller shipping companies, the sort of challengers against them. And I think the same will be true in this space as well. The companies that manage to really master getting, getting through UDR requirements will have a big advantage versus a lot of the other players that are struggling, struggling to, to, to sort of master the technology and the data requirements to compete here.

Isobel Wild  [00:28:57]:

So EEDR define a forest as 10% coverage of a hectare, which is actually a really small amount if you think about what is a meaningful forest that is operating on all biodiversity carbon cylinders. I think it like I read a paper that it had to be 30% and above. So I think there's opportunities to look for in that data coverage to say, oh, okay, having got that geolocation data, you can see that this only has a very small percentage of forests in there. Maybe this isn't a good area to be looking at for reduction initiatives because it's pretty sparse as it is. But I think onto this point around industry variation and how this changes between different sectors like cocoa and coffee, are you seeing any variations there?

Saif Hameed [00:29:47]:

I think that the challenges in some of these sectors are similar at a high level, but very, very different at a local level. Like if you kind of look at livestock for example, there's a whole different category of data capture on methane which is just totally different to whatever you'd have in the forestry space. So I think we're going to start to see, I think what's going to be interesting is companies that are exposed, the hardest hit companies are going to be those that are exposed to all of the above. Like the intermediaries who are dealing in all these different materials I think are going to find themselves to be hardest foot. I think it is comparatively easier. If for example, you're a palm oil specialised business operating in Southeast Asia, you can Kind of figure out your part of the act and you can raise the barriers for others. I think you could probably do the same if you're heavily invested in protein and that's your main sector. But there are some companies that are kind of straddling multiple areas which are going to be faced with the biggest part of the challenge.

Isobel Wild  [00:30:51]:

And many of the supply chains that we're talking about involve smallholder farmers. How can companies ensure that the compliance burden of these don't necessarily fall on them?

Saif Hameed [00:31:05]:

I think that you have to assume that companies want the burden not to fall on the smallholder, which is not necessarily the case. And so most of these organisations, not all, but most, have already. If you think about the agricultural value chain, it is already structured such that the smallholder farmer receives very little of the margin. Basically, I think there's a separate question which is does smallholder farming make sense at all for anyone? And I realise that's probably like a digression here. I have some strong views on smallholder farming which are probably unpopular, but maybe worth actually just going into that for a moment. Yeah, you piqued my interest that I think it's important. This sort of concept of like smallholder farms being important is something that I've noticed has come out of the Western development community and I think that it, it has found a counterpart in the global south because it plays into a political narrative around employment. And so typically it's like, hey, we need to like X percentage of global agriculture is coming from a small hold of farms.

Saif Hameed [00:32:17]:

This is an important source of employment. We need to help these smallholders be productive, make an income, feed their families, etc. However, coming from Pakistan, which is a heavily smallholder farming dependent country where something like 30 to 40% of the economy is agricultural and less than 1% of the agricultural land is farmed at 100 acres or more. So it is primarily smallholder farming. Smallholder farming I think has ruined Pakistan's agricultural economy and I think this is true for a couple of reasons. One is that I have yet to find any smallholder farmer who wants their kids to become smallholder farmers. As far as I'm aware, from any smallholder farmer I've ever interacted with, and I've interacted with quite a few. They all want their kids to go and work in a bank as a bank clerk or do anything frankly, other than be a smallholder farm, go and get a city job, make a decent income, get on a career ladder and never come back and pick the potatoes out of the ground with Your bare hands again.

Saif Hameed [00:33:14]:

And I think that makes complete sense and frankly is borne out by all the data that we're seeing in western agricultural economies as well, which is as a general talent drain away from the farm. The other thing is that smallholder farming is inherently uneconomically competitive versus large scale commercial farming. And what I've noticed is that in countries like Pakistan, which are heavily dependent on smallholder farming, you either have to have massive subsidies to make that economically viable or you have huge levels of imports in Pakistan, rapeseed, chickpeas, lentils, all these things are imported in vast quantities because it is just cheaper to grow them in Canada and in Australia. If you look at the cost per acre of a decent agricultural acre in a country like Pakistan, it costs about $25,000 to buy a decent, connected, decently irrigated agricultural acre in Pakistan, which is very similar. And that's not purchasing power parity, that's like dollar cost. That's very similar to what it would cost you in the Netherlands. And that's because you have such high fragmentation of agricultural land in countries like Pakistan, which is, which is where you get this sort of smallholder farming playing in. So I actually kind of think that there's, you know, sorry, this is like an emotional topic for me because I feel like there's just a misinterpretation here that needs to be corrected.

Saif Hameed [00:34:34]:

So I think this is like this initial thing which is just how long can smallholder farming as an industry hold out and be competitive? And there's this other piece around, well, what other actors in the value chain are actually trying to make smallholder farming viable? And if they were trying to make smallholder farming viable, the margin would be so small for smallholder farmers. So I actually think that most large corporations will probably try and push some element of this upstream to the farmer. I think there's only so much you can do because most of the farmers in most of the affected regions by EUDR and similar legislation are not going to be data centric, data savvy, in some cases not even literate. And so I think that there will be this element where maybe intermediaries try and push this onto buyers, commodity traders, potentially even fertiliser and pesticide input sales channels as well, which usually have some of the best connectivity to two farms. So I think there's going to be just an interesting set of chaos here that will find its own equilibrium.

Isobel Wild  [00:35:35]:

So given this backdrop that we've just spoken about, what, what steps should companies be taking right now to prepare for EUDR implementation that might happen in December of this year or might be pushed back.

Saif Hameed [00:35:48]:

If you look at EUDR and CSRD and CSDD and all the rest of it, right? Like there's a general trend towards capturing more metadata related to the stuff that you're buying. Metadata in simple terms, just being descriptive qualities, characteristics associated with the stuff that you're purchasing. And so if companies want to be sort of future proof for this legislation, other legislation, there's a sort of a, to some extent, no regret move, which is start setting up your data for flexibility in the future. And flexibility will be higher. If you are capturing stuff like weights, locations, this sort of information is just going to be relevant and helpful. I would say there's obviously different levels you could go to as well, like the geotagging. And you kind of have some dynamic way to share data across your supply chain as well. The kind of stuff that we're doing with the businesses that we work with that are altruistic.

Saif Hameed [00:36:49]:

But at its simplest level, just assume that the burden of requirement on your supply chain data is going to get higher one way or another. Right. Whether it happens this year, next year, year after, for this reason or any other, it's just rising.

Isobel Wild  [00:37:02]:

Yeah. And beyond compliance, how can businesses actually leverage this data? Because it's a huge undertaking, collecting this data. How can you make the juice worth the squeeze? And actually, are there different ways that you can cut or look at your data that will provide you broader sustainability improvements or insights?

Saif Hameed [00:37:23]:

And I think that if I was just thinking, what is the biggest commercial value proposition for me, if I were a business impacted by EUDR, I would say figure out how I can be really good at this. Figure out how I can actually sail through compliance requirements and figure out how I can develop maybe some unique, even proprietary capabilities that I can deploy within my value chain to capture all the data points necessary. And having done that, I would go around to all of my customers and start actively pitching EUDR as a competitive lever that I have versus others. And I would probably just talk about how this is necessary. This is a sustainability, sustainability imperative. This is regulation coming soon and how I can help them navigate it. And I would look to do that very heavily over the next several months. I would probably also, you know, as far as lobbying goes, I'd probably lobby to keep requirements high because I think that it is very seldom that businesses get thrown as much of a carrot as this, as this in terms of just raising the bar for all their competitors.

Isobel Wild  [00:38:35]:

Okay, Saif, thank you so much. Are there any last thoughts or words of advice that you want to give to our listeners before they embark on EUDR.

Saif Hameed [00:38:43]:

I think that this is going to be a year of very intense fluctuation across regulatory requirements and also what companies want to communicate externally. And so I would adopt the approach of just saying let's kind of build healthy internal systems to navigate change. And it is always a good investment to know more about what you're buying and know more about what you're doing and how you're using the stuff that you're buying. And so I would, I would actually think about the data side of this problem as the one that is least likely to be a regret that you might make whether or not the compliance or external disclosure requirements shift.

Isobel Wild  [00:39:22]:

Good final words, Saif, thank you so much. I know you've got a busy week with Socie and Chicago, so good luck for that one.

Saif Hameed [00:39:29]:

Thank you very much, Izzy.

Isobel Wild  [00:39:31]:

Awesome bye.

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