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Brazilian meatpackers are unlikely to comply with the requirements of new legislation, an analysis by think tank Chain Reaction Research shows

12/01/2022


Brazilian meatpackers JBS, Marfrig and Minerva are unlikely to meet the requirements of the law that the European Union is expected to pass next week to block imports of commodities linked to deforestation (legal and illegal) occurred after December 2020.

According to an analysis by the think tank Chain Reaction Research (CRR), the law will impact the operating profits of these companies, which also risk paying fines for environmental damages in their chains.

CRR drew estimates with data from alerts of deforestation from the Real Time Deforestation Detection System (DETER), of the National Institute for Space Research (INPE), and not the annual data from the Measurement of Deforestation by Remote Sensing (PRODES), which are typically used by NGOs and companies – INPE only released PRODES data for the Amazon rainforest for the last year.

It also used data from INCRA, and not from the Rural Environmental Registry (CAR), which is commonly used by NGOs and prosecutors.

CRR estimated that the suppliers of the three companies deforested 81,000 hectares after the cut-off date of the European law, including 72,600 hectares within the restriction of the rule. The difference would correspond to deforestation in Cerrado areas which, as the draft legislation stands today, would not be blocked.

In the case of JBS, CRR estimates that 50,000 hectares have been deforested between December 31, 2020 and July 2022 in the supplying farms. In Marfrig’s chain, deforestation is estimated at 18,000 hectares. In Minerva’s chain, it is estimated at 12,000 hectares.

CRR also estimated the damage to earnings reports, since the companies will not be able to export to the EU the meat from cattle from these areas. The impact on overall EBITDA would total 1.8% (JBS), 2.7% (Marfrig), and 5.3% (Minerva).

JBS would lose 0.6% of its EBITDA with these fines, while Marfrig would lose 0.7%, and Minerva, 2.4%. Fines may reach 4% of sales to the EU member state.

JBS criticized the CRR report and the EU law. The company said it is in talks with the EU to “discuss the best strategies” to “ensure the sustainability of the chain,” and that it believes that it could reach that “only with collaboration and technical and financial support to producers, instead of an exclusive focus on blocking.”

For JBS, the CRR “is based on a mistaken methodology” by not using the CAR, as recommended by Imaflora, and by using INCRA databases, which are “not adequate for the analysis in question.” It also said that the CRR “is not transparent” by not “specifying the offending farms, preventing the company from analyzing, clarifying, and acting accordingly.”

JBS said it already monitors direct suppliers and is implementing a tool to extend control to indirect suppliers until 2025.

For its part, Marfrig sent a 17-page letter to CRR in which it detailed the actions of the Marfrig Verde + program to monitor its entire chain until 2025 in the Amazon and until 2030 in the Cerrado. The deadlines are beyond the cut-off date of the EU law. So far, the company already monitors all direct suppliers in the Amazon and Cerrado, 71% of indirect suppliers in the Amazon and 70% in the Cerrado.

Marfrig said that it monitors fires in the Amazon and that when there is overlap with farms, an alert makes it reassess purchases until the situation is clarified.

The company also said that its chain in Mato Grosso, where most of its cattle come from, will be audited in 2023. But its risk map shows Pará as the focus of the greatest risks.

Minerva sent to Valor a four-page document saying that “it is able to meet the most demanding markets and clients” and that its “suppliers operate under the most diverse protocols of quality, health and sustainability from different countries.”

The company affirmed that its goal is to monitor its entire chain in South America until 2030 and that it already monitors all direct suppliers in Brazil and Paraguay. In Colombia, monitoring is at 80%, and in Argentina, at 90%. The company said it provides them with an application, Visipec, to monitor indirect suppliers. And stressed that it was one of the best evaluated in the sector in the last audit of direct suppliers in the state by prosecutors in Pará, referring to 2020.

Marfrig and Minerva declined to comment on the CRR report specifically. None of the three companies cited in CRR’s analysis commented on the impacts that the approval of the law in the EU will have on their businesses.

*By Camila Souza Ramos — São Paulo

Source: Valor International

https://valorinternational.globo.com/