The European Union's (EU) new regulation for deforestation is sending ripples through the global coffee industry, impacting coffee exporters in Ethiopia and other developing countries.

The sweeping regulation, which aims to combat global deforestation, demands stringent due diligence from companies importing agricultural commodities, including coffee, into the European market to ensure these products are not linked to deforestation or forest degradation post-December 2020. While set to be effective from December 2024, the rule is already influencing supply chains, with European businesses reducing orders from countries struggling to meet these stringent standards.

The regulation requires due diligence statements to include information attesting that products supplied have complied with countries’ land-use, labour and human rights laws, including indigenous communities’ rights. Noncompliance entails up to four percent of annual turnover as punishment, confiscation of goods and a temporary ban from participating in procurement or tenders of the 27-strong Union.

The regulation poses a particular challenge for coffee exporters in countries like Ethiopia. Coffee, renowned for its quality and originality, is a crucial part of the country's economy and cultural heritage. However, the new regulation casts a shadow of uncertainty over this critical sector.

Heavily dependent on coffee as a major export commodity, exporters sold nearly 40pc of their beans last year to buyers in Europe, a market that accounted for nearly half of the global coffee consumption. Exports of over 300,000tns of coffee contributed around a third of Ethiopia's nearly four billion dollars in earnings.

Gizat Worku, manager at the Ethiopian Coffee Exporter Association, echoes the concerns of many in the industry. He noted the immediate impact on current cultivation and future orders, with companies indicating a shift towards alternative sources for their coffee supply.

"We're very concerned," he told Fortune, "So is anyone who cares about the crop."

Gizat stated the need for a transition period to meet the new standards, a sentiment shared by many in the sector. The transition is not merely a procedural change but requires significant investment, particularly challenging for smallholder farms that dominate Ethiopia's coffee production landscape.

Ethiopian Coffee & Tea Authority officials actively seek a grace period for compliance, engaging in discussions with the EU delegation and various embassies based in Addis Abeba. The latest discussion was held last week with the Norwegian delegation. Despite the diplomatic efforts, these officials remain sceptical about any immediate response or a reversal of the EU's decision.

Adugna Debela (PhD), director-general of the Authority, talked about the logistical constraints in mapping smallholder farms. Although developing digital mapping and certification capabilities to meet the EU's requirements remains a concern, he sees a potential upside in these difficulties, viewing them as an opportunity to advance digitalisation in the sector, albeit acknowledging the need for a substantial time frame for the transition.

International coffee prices, which saw a 32pc decline last year, add another layer of complexity.

Adugna suggested that focusing on speciality coffee instead of commercial varieties could offer long-term benefits, aligning with global trends towards premium and sustainably sourced products.

Cooperative Unions, significantly affected by the regulation, stress the urgent need for an extension period. The Sidama Coffee Farmers' Cooperative Union, enlisting 68 associations with 70,000 farmers who collect 5,000tns annually, has requested an extension of the period through the EU delegation in Ethiopia.

Tsegaye Anebo, its general manager, noted ongoing digitisation efforts but disclosed the need for a more extended period for detailed mapping, which is crucial for compliance.

The nature of its coffee cultivation further complicates Ethiopia's situation. Unlike major coffee-producing countries like Brazil, where coffee is grown on large commercial farms, its coffee is primarily produced on small, fragmented land holdings. A coffee farmer's average land size is around half a hectare, accounting for 85pc of coffee plantations. This structural difference poses additional problems in meeting the EU's stringent standards.

"The most important thing is time," Tsegaye said. "We need at least three years."

Tsegaye is not concerned about the conditions of deforestation, as coffee grows in most places. His apprehension comes with the details of the forest cover data that can be provided through a three-year-old satellite map. He fears Ethiopia's labour market is short of professionals who can conduct the mapping and certifications.

"We hope efforts by the Authority bear fruit," said the manager.