Back in 2019, responding to a wave of climate action activism arising from Europe, the European Green Deal was created with a vision to transform the European Union’s (EU) 27 member states into climate neutral and resource-efficient economies by 2050.
More significantly, in 2018 the Intergovernmental Panel on Climate Change (IPCC) released a special report detailing that a rise in global temperatures exceeding 1.5°C would lead to significantly worsening impacts from climate change.
The report further stated that in order to limit warming at 1.5°C, global carbon dioxide emissions would need to reach net-zero by 2050. Accordingly, the European Green Deal is set to reach its full completion in 2050.
The EU Deforestation Regulation (EUDR) policy, of which the first drafted proposal was presented in October 2021, is directly linked to the European Green Deal as a core component in ensuring that businesses that deal with Europe support its sustainability goal.
The law requires companies to show proof that products placed in the EU market or exported from it are deforestation-free, legally-produced in the country of origin, and are traceable to the specific plot of land where they were produced. It applies to commodities like cattle, soy, palm oil, coffee, cocoa, rubber, and wood, and became fully effective in December 2024, replacing the EU Timber Regulation.
By 30 December, the EUDR is to take effect for large and medium-sized companies dealing with and within Europe. Of the commodities that require compliance, Sri Lanka’s biggest export to the EU, rubber, earned the island nation $ 337.79 million in 2024.
The total exports included products such as pneumatic tyres, gloves, articles made of vulcanised rubber, and a significant portion of exports that were value-added items rather than raw natural rubber.
Crucially, value-added item manufacturers in Sri Lanka source their rubber mainly from smallholder rubber farmers. Around 65–70% of rubber as a raw material is sourced from smallholder farmers.
With the EUDR coming in, Asian exporters of commodities like palm oil, rubber, and wood will face new, stringent due diligence and traceability requirements to access the EU market. The region anticipates consequences that include market disruption, economic pressures, and systemic changes for smallholder farmers. It is further projected to significantly reduce European imports of wood products from countries like Indonesia and Malaysia, which have histories of high deforestation.
Further, the risk rating system of the EU will categorise countries based on their deforestation rates under categories such as Standard, High Risk, and Low Risk.
Challenges of smallholders
According to Institute of Policy Studies (IPS) Research Fellow Asanka Wijesinghe, although Sri Lanka is classified as Low Risk, circumventing the need for risk assessments, the country’s exporters are required to submit detailed geolocation data and proof of land ownership of the farms in which the commodities are produced in order to continue accessing such markets.
Speaking to The Sunday Morning Business, Wijesinghe said that it was crucial that due diligence was established and that proof was shown that lands from which commodities were sourced were non-deforested.
“Under the EUDR, due diligence should be established. Mainly, there should be proof to show that products are not from deforested lands after 31 December 2020. In addition, it should be established that cultivation happened under existing laws without violations. It is essential to pass plot-level geolocation data along the supply chain so that the operators can easily ensure due diligence,” he said.
Further, based on the findings that will be published in the forthcoming edition of ‘Sri Lanka: State of the Economy 2025’ by IPS, smallholder farmers, who manage 68.14% of the country’s total 98,393 hectares of rubber cultivation, will face challenges in obtaining technological support with digitisation and in supplying land ownership information in the required digital format.
As Sri Lanka struggles with a lack of reliable internet access, access to smartphone technology, and technical skills required for using mapping tools, a concern is that many may not be able to produce digitised land titles or permit documentation, according to IPS findings.
“Smallholders need to pass information on geolocation, such as land coordinates and proof of legality. Lack of awareness about the EUDR and illiteracy in the necessary technology for collecting geolocation data can be significant obstacles for smallholders,” Wijesinghe noted.
According to Agalawatte Plantations Director Manoj Udugampola, 90% of Regional Plantation Companies (RPCs) are ready with the requirements for mapping. “Foreign buyers frequently visit us and we have been dealing directly with their requirements over the years, so this is not something entirely new for the large companies. The concern is about smallholder producers,” he said.
Wijesinghe also noted that large firms had the capacity and knowledge to manage these tasks. “Ideally, there should be a system where operators can download geolocation data of rubber plots, tracing the products to plots. Additionally, this system should provide proof of legality and risk assessment information.
“If a farmer has an identification number and the required data is entered into a system using this identification number, operators can easily access the information. However, implementing this is far beyond the capacity of smallholders. The Government has a larger role,” he added.
Issues with documentation
According to the Rubber Development Department (RDD) of the Ministry of Plantation and Community Infrastructure, the project has been handed to the Survey Department, with a Cabinet-approved sum of Rs. 75 million.
Speaking to The Sunday Morning Business, RDD Director General Rohana Hapugaswatte said: “We had signed a Memorandum of Understanding (MOU) with the Survey Department, which will start the planning and finalise it by the end of December,” he said.
On the digital aspect of the project, Hapugaswatte stated that the geolocational data and permit details would be stored in QR codes. “We issued the geolocational coordinates and permit details via QR codes, so they can use them when selling their rubber.”
“However, it will be a challenge to digitise this information, which we hope to solve with the implementation of the project,” Hapugaswatte added.
Further, the RDD is also in the process of developing a Rubber Information Management System, which will register farmers, providing proof of land legality.
However, according to Wijesinghe, these should be in digital formats to be seamlessly transmitted to the operators. “Building such an integrated system that allows operators to download data using a registration number or ID number assigned to a farmer should be the priority,” he said.
Given the obscurity associated with legal land ownership in Sri Lanka, particularly with regard to title deeds as proof of land ownership, using alternative documentation, such as rates receipts, cultivation permits, and grama niladhari certificates, is yet to be officially considered as acceptable proof of land ownership.
Wijesinghe conceded: “There should be a systematic evaluation to define what constitutes legal production of documentation. If there are multiple requirements except land legality, this evidence should be brought together and passed on to operators.”
Staff shortages and connectivity issues
Addressing the challenges in Geographic Information System (GIS) mapping on the technology front, Wijesinghe highlighted staff shortages and connectivity issues as some of the main hurdles faced in the process, as discovered during interviews conducted by the IPS.
“Staff shortages were pointed out by a key informant in one of the interviews we conducted. Connectivity can be an issue for passing on data. Assume that farmers get a QR code with data on geolocation and proof of legality; this information should either be fed to a central database or passed on to dealers or operators. Access to the internet is required for this. GIS mapping can be done offline.”
Addressing how a smallholder farmer who only has a basic phone might interact with this system, Wijesinghe said: “We recommend substantial Government support and institutional engagement. Basically, farmers will have to pass geolocation data. The Government and private sector firms should bear the burden of more technologically sophisticated tasks.
“The only way is to provide the required technological support and undertake the necessary interventions, such as a central database with proof of being deforestation-free and legality, which can be easily passed on to operators. This will ensure that smallholder rubber farmers will not lose EU market access.”
Wijesinghe further noted that the use of digital ID and offline apps in Peru was a pertinent example that Sri Lanka could follow in its bid for realistic and compliant digitisation.
“They use offline apps, existing village-level government agents, and a central farmer database. There may be other successful stories worldwide. Recently, the EU delegation in Sri Lanka on EUDR referenced the measures implemented by the Rubber Authority of Thailand as well,” he added.
According to Wijesinghe, owing to the potential disruptions to the market that could be caused by non-compliance, job losses are expected in the manufacturing of rubber products.
“We have not been able to trace the losses to the level of rubber farmers. There is an analytical hurdle because rubber cultivation is part of a large group of crops, making it difficult to isolate effects at the farmer level. The economy-wide unemployment effect, if we assume workers are not absorbed by the other sectors, can be larger,” he noted.
The road ahead
Pushing back against the RDD’s stance regarding the completion of surveying by the end of December, a Chief Executive Officer (CEO) of an RPC who wished to remain anonymous stated that it was highly unlikely that the process would conclude by December and enable a smooth transition of exports.
“On Monday (15), RPCs met with the Export Development Board (EDB) and other rubber exporters and manufacturers. What we gathered from speaking with the RDD is that they will not be able to conclude [the survey] by December. Compliance should have started by October, so that by the time the products reach Europe, they will be compliant by the December deadline.”
Initially, the EUDR was set to be implemented in December 2024, but the European Council postponed it to December this year.
The CEO noted: “They had been given an extension last year, but this year it is unlikely that the EU will waver on compliance.”
Wijesinghe noted that increasing demand from EU-based companies and developing countries producing rubber, cocoa, and coffee likely contributed to this delay. “Micro and small enterprises are granted time until 30 June 2026. The EUDR has been an EU law since 19 April 2023, so this was a phased implementation. Exporting countries and multilateral trade facilitators have been preparing for this since 2023.”
Furthermore, Wijesinghe stated that leveraging the influence of cooperatives could also play a significant role in raising awareness. “Awareness is a key step in EUDR due diligence. Cooperatives have been proven to increase awareness among the members. Additionally, members can pool their resources.”