While we're waiting, I might as well say I'm Mike Tyrrell, I'm the editor of SRI Connect. I'm gonna be chairing today's session, and before we get started formally, I, for those of you who are on, I think I'm absolutely delighted to see this. This is exactly the sort of session that we know investors are interested in seeing, and it's great to see Barry Callebaut take these steps on this important issue, so I think we're in for a good call today, and the participants appear to have joined, or the rate of joining seems to have slowed slightly, so with that, I think we'll make a formal start. Hello, everyone. Thanks for joining today's briefing by Barry Callebaut on the EU Deforestation Regulation. I'm Mike Tyrrell of SRI Connect, and I'm gonna be chairing today's session. As such, I have a few points of admin to run you through. Firstly, I need to tell you that today's call is being recorded, and secondly, I need to let you know how to ask questions. Please post them at any stage in the presentation, in the chat window, and then when we come to the question session, which we've left plenty of time for, I will group them, hopefully, into topics of similar relevance. I will attribute you, so, you know, do let me know if it's not immediately clear who's asking the question, and then we should get a good amount of time for the company to answer them. And do that through the presentation, so don't sort of wait to deliver a rush of them at the end. And with that, nothing more from me. I'm going to hand over to Sophie Lang, Head of Investor Relations at Barry Callebaut. Let her introduce the team. Over to you, Sophie. Thanks, Mike, and good afternoon or good morning to everyone. As Mike said, I'm Sophie Lang, Head of Investor Relations at Barry Callebaut, and it's my pleasure to welcome you today to our investor webinar on the EUDR regulation. We wanted to host the session today to share more detail on the regulation and our approach at BC. As we know, it's an important topic for all of you. We believe we're well positioned at BC, given we're fully vertically integrated, and we cover every step in the value chain, from our strong footprint in the cocoa origin countries, right through to the production of chocolate. Our session today will be hosted by Nicolas Mounard, our VP of ESG, Sustainability and Traceability, as well as Juliette Cailliez, our Head of Forest and Climate team. Myself and Taryn Ridley, our Head of ESG, are also present here to support the Q&A session as required, which as Mike said, will be moderated by himself. So with that, I'll hand over to Nicolas. Thanks, Sophie. Look, I will hand it over quite quickly to Juliette, who has been creative and has been the brain behind the EUDR approach. Just wanted to introduce with three points. I think the first one is to kind of address the elephant in the room around the potential delay of the regulation. You will have seen in the news some declarations from the German Chancellor last week, in particular. Just to let you know that on our side, we keep working on the assumption of thirtieth of December 2024. Probably two reasons for that. The first one is, I think the closer we get to the date of implementation, the more difficult it will be to reopen the political discussion. If the commission was willing to extend the transition period, that would be basically a change in the regulation that would require a wider debate. So we think that the timing is relatively stretched to implement the delay. And the second reason is, we've been welcoming for a long time a level playing field. And I don't think there's a better level playing field than EUDR. So, pretty keen to see it implemented on thirtieth of December 2024. The second point I wanted to make an introduction is how transformational that regulation is. I don't think I've seen anything as transformational in the industry for the last years. Obviously, today we'll focus a lot on the consequences in terms of sourcing, sourcing policy, and deforestation monitoring. But keep in mind that the work that has been going on in the company covers a huge scope. Obviously, the regulation means physical traceability, so we'll talk a lot about physical traceability, but you can imagine that this has a lot of consequences in the way we shape factories, in the way we define flows, in the way we design systems. So a lot of system question. So yeah, basically for me, it's a huge transformation of the company. It's a huge transformation of the industry, both in terms of traceability, in terms of deforestation monitoring. If I just give you one example, in terms of sourcing, I think it's quite widely known that probably 20%-30% of the Ivory Coast crop comes from a protected area. Obviously, that volume will not be available for the EU market, which still represents the biggest market for the chocolate industry, so the consequences are huge in terms of how the industry is structured. The last point for me is to talk about maybe our uniqueness. Obviously, Juliette will dive into it. I don't have a sense about how other company are approaching EUDR, or at least not in detail, but I'm super confident about the way we are approaching it. I think we are ready. I think we are very robust in our approach. And for me, if I had to summarize our uniqueness or USP, I would say three things. The first one is the way sustainability and deforestation monitoring is embedded into our sourcing decision. I think we're reaching a huge level of integration in the way we are working together and the way decisions are taken. The second thing is the depth and breadth of our due diligence toolbox. Juliette will also go through that, but we've developed seven tools. I think they are quite comprehensive, and it goes from maps to yield control to deforestation monitoring and key partnership with people like Starling. And then last but not least, which I think will make us very unique, is the fact that we are systematizing and mainstreaming forest protection as an element of compliance for the regulation. You will know, probably, that there are three key articles in the regulation, Article nine, 10, and 11. Article 11 is about the way we mitigate the risk, and for us, there's no better way to mitigate the risk of deforestation than to invest significantly and massively in forest protection. I don't think that will be the case for everybody in the industry, but for us, it's what makes us unique. And on a personal note, it's what makes me very proud of what we've done. Over to you, Juliette. Juliette, we can't hear you. Nico, I think you're still on mute. Yeah, sorry, go ahead. I thought it was... We're set. I was sharing that it was my pleasure to walk everyone on the call over our strategy to reach EUDR compliance, and I will start by sharing a reminder of EUDR scope and key principles. To introduce this presentation, there are three figures I would like to share with you. First is that 90% of deforestation has been associated with the expansion of agricultural land. The second is that at least 50% of cocoa expansion since the sixties has been at the expense of forest, and the last number I wanted to share is that EU imports 58% of cocoa produced globally. To address this, and in efforts to support broader climate commitments, the EU will be enforcing from January twenty-five, a regulation seeking to prevent imports from certain commodities to be associated with deforestation or illegal farming practices. The commodities in scope are cattle, cocoa, coffee, palm, soy, wood, and rubber. Companies placing these products on the market will be subject to that regulation. What does being subject to EUDR mean? It means to be able to demonstrate that cocoa imported in the EU is traceable, is deforestation-free, meaning that it is not associated with conversion from forest to cocoa since twenty-twenty, and that it has been produced legally, meaning that production is compliant with local regulation, and local regulation specifically around farming on that land. So what needs to be demonstrated is those three things, by providing to the regulation two big bodies of documentation. First, what is referred to as due diligence statements, comprising declaration and connection to all the plots that are associated with the import from the EU market. And second, risk assessment and risk mitigation declaration. So an assessment of whether there is any risk that imports in the EU are associated with non-traceable, non-deforestation-free or illegal practices. So this is what we have to comply by. We have to comply with, moving forward. At BC, we have worked on designing an approach that enables us to both address EUDR as well as our broader commitments, that are connected to our deforestation-free supply chain. And so we refer to this approach as our forest positive strategy. I'll give you a brief introduction to the key considerations that have enabled us to build that approach, as well as share the three elements upon which our approach rests. Approach is structured around risk, and it is structured around three elements. The first being knowledge of deforestation dynamics in cocoa-producing landscapes. Secondly, robust due diligence approach, and third, Forest Positive as a key risk mitigation element. The first consideration to share with you is our Forever Chocolate ambition. Our ambition is to be Forest Positive by 2025, and what this implies is sourcing EUDR-compliant beans and deforestation-free products by 2025. Our second big commitment is being aligned with the one point five climate trajectory, and therefore having science-based targets and net zero commitments, by then. The second key consideration that we use to structure our approach towards EUDR compliance is the fact that we have in mind, and we know that we source from countries that, in principle and in the majority, have been ranked as either having the highest deforestation rates in 2022, in terms of surface deforested, or relatively in terms of forest surface on the territory. The exception that is being made is with Ivory Coast, historically, which has been one of the countries that has seen the relatively highest deforestation rates in a country level in the last 50 years. In EUDR, what this means is that we are structurally sourcing from areas that are considered to be at high risk of future deforestation. The third consideration for us, in terms of how our Forest Positive strategy is structured, is really focusing on EUDR itself and on its implications for us. We are required to share significant amounts of data, relative to our supply chain with the regulators that will enforce EUDR. The more risky the data or the later we identify the risk in our sourcing process, the more risk is borne by the business. And so any risk associated to non-compliance is twofold for us. First, it's obviously financial, because failed EU checks would result in the recall of products, but it's also operational, because if products are suspected or deemed non-compliant after being cleaning stage, for instance, volumes corresponding to all products mixed with non-compliant beans would have to be discarded. The risks for us are significant in terms of non-compliance, and this was structural in how we had decided to formulate our strategy towards compliance. The fourth consideration that I would like to share is around forest protection. We did significant literature review to identify what means were available to us to mitigate risks of deforestation in cocoa-producing landscapes. Because in the end, this is what we need to do. Obviously, we need to ensure that products entering our supply chain are compliant, but we also need, in a way, to address and understand structurally how those risks are coming to emerge and what mitigation options are available to us. And so looking at multiple studies and specifically one meta study that was performed and released last year, what we can see is that literature review really identifies that forest protection is key and by far the most positive factor in reducing deforestation. So using all those considerations, what we have decided to do is structure, first of all, our approach around risk mitigation and really structure it around three pillars. First, sourcing knowledge. So ensuring that we know where to source beans from areas where risk of deforestation is low and where Forest Positive targets are reachable. The second piece is our due diligence approach, so implementing a toolbox that is robust and that supports us in managing risk and really enforcing best industry practices and best advice. The third piece is supporting efforts to reduce deforestation in high-risk areas, and really foresee this as being the most efficient risk mitigation strategy that is at hand and also the most differentiating. So I will start by sharing our approach around sourcing knowledge. So as I said, initially, 90% of deforestation has been driven by the expansion of agricultural land that extended forest. What we did first is really ensure that we build a good knowledge internally of what a forest is, what conversion from forest to agricultural land means, and to ensure that we have then the right approach to monitor this and to make sourcing decisions that are based on this understanding. Obviously, we also link that to a strong knowledge being built internally around how specifically that dynamic takes place in the cocoa producing landscapes, and how that has evolved over time, how this is likely to evolve. What we have performed is a global risk assessment. What we have done is taking over the criteria that are included in the regulation, as well as criteria linked to our own supply chain. We have assessed all the main countries that we source from in terms of risk, to identify where structurally or even linked to our own supply chain practices, the risk of non-compliance with EUDR is the highest. This has guided our thinking around sourcing strategies and orientation of sourcing flows. And this is what is feeding constant discussions at the sourcing level and within that part of the business at the moment. The second piece of our strategy is really built on due diligence. So using that knowledge, how do we then implement due diligence approach that enables us to address and mitigate that risk in our sourcing practices? And so what we have done is we have formalized our approach around, first of all, risk policy and sourcing guidelines that really support our sourcing team to make the sourcing decisions that enable us to source EUDR compliance beans and on, I would say, regular ongoing basis, dynamically assess and mitigate risk throughout the sourcing season. I want to share a bit more detail around our due diligence approach and how it is structured. There are three pillars to this approach. First, what we do is at country level, we assess risk, in a way that, is aligned with the regulation itself. And really the ambition there is to identify at country level, sub-national level, where we structurally see a risk of the crop being non-compliant with the EUDR. Where the risk structurally of cocoa expansion, at the expense of forest, or where legal practices are high, or where traceability is structurally a challenge, there we invest in forest protection as the main risk mitigation measure that we have at hand. We also have sourcing decisions being made based on that assessment, and specifically where we see that very high risk has been identified, the sourcing committee at the highest level of the organization is gathered to make an informed decision as to whether or not it is possible for us to continue sourcing goods or products from this region and import them in the EU. The second step of our due diligence is at supplier level. So there, what we assess is whether suppliers are also structurally in capacity of delivering products to us that comply with EUDR and its requirements. So in terms of risk mitigation, we request the client to take time-bound action in case they haven't still fulfilled all the requirements that we have placed forward to them. We also perform audits and have a grievance mechanism and training support that we provide to them. There again, sourcing decision is made on a supplier-by-supplier basis, based on both the risk assessment and the risk mitigation, elements that we have put forward. The third step is at farm level, whereby we assess all farms, that are associated with cocoa entering our supply chain and being imported in the EU. This is where we assess polygons, GPS points, and assess whether there is a risk, that these are located either in protected areas or associated with deforestation that has happened in 2020. There again, there is a pattern whereby we make a sourcing decision based on that assessment and decide whether or not we can continue sourcing from those farms or whether we have to discard them from our database and our supply chain. To perform those assessments and perform this risk mitigation at sourcing level, we rely on seven tools that we have formalized and rolled out progressively over the last year. We have formalized a country risk assessment methodology to perform the first step of our risk assessment. We are currently in the process of finalizing the country risk assessments for each of the countries in our supply chain. The assessment is done both at national and sub-national level. We have similarly formalized supply risk assessments, that we are currently conducting for all suppliers, for direct and indirect flows, as I said, to assess whether structurally they're in capacity of providing us with EUDR components. The last assessment that we have formalized is on-farm risk assessment. So there we're really defining in much detail and very clearly what constitutes a risk, and how do we assess it, throughout our supply chain. We have formalized a deforestation monitoring approach, so we rely on a tool that I will describe in a bit more detail, in a minute. But essentially, we assess our polygons and farms that have been mapped in our supply chain against land use maps, but also using remote sensing technology to be able to assess whether or not farms have been installed prior to 2020, if conversion has happened since 2020, if there is a risk of deforestation happening around those farms. So we rely on a tool for this, and we have embedded this in our own sourcing systems. In terms of risk mitigation, we rely on three tools: yield control, and this is really important. It's a key element of our approach towards traceability. So traceability is one of the three requirements of the regulation, and traceability means that we have mapped land where the cocoa we buy is produced. We are in capacity of registering well any transaction linked to that cocoa, changing hands, entering the supply chain. But also, we are in capacity of controlling that structurally cocoa that we buy can be produced on lands that we declare as being in our supply chain. So throughout the transactions in our supply chain, we apply thresholds to ensure that, we document how much production can promote of, a hectare in a given place, and that we mirror that in the traceability processes. The two last tool that we have in our risk mitigation strategy is a grievance mechanism. So we have a tool that is currently live, whereby stakeholders can reach out to us to inform us of risks, in our supply chain, and inform us of potential breaches of our own policies or our EUDR. The final tool to mitigate risk is stakeholder engagement. We are training suppliers, sharing our requirements towards them, ensuring that our approach is understood. We are also supporting them, specifically on traceability, providing guidelines, providing technical support, sometimes also providing support in the field to ensure that they are able to reach EUDR requirements. The tool that I wanted to focus on for today is our deforestation monitoring provider. We have decided to partner with Starling for cocoa. We are currently launching that partnership and ensuring that we analyze all plots that have been mapped in our supply chain with them. We are building on many years of experience on their end on land use assessments. We're also really leveraging very high technology to be able to decipher what land use is. In the context of cocoa, it's not always easy. From the sky, cocoa and agroforestry often looks like a forest, so I'm very grateful for the technology that they have put on the market for us to be able to understand through that tool what is land use before or after twenty-twenty. I'll move to the last part of the presentation. The key risk mitigation strategy that we are using is forest protection. We know that investing in forest protection is really complementary to a supply chain approach where risk is mitigated, and that we know that to continue sourcing in certain areas and to continue sourcing EUDR compliant beans, this is a key element of our strategy. So we're currently partnering with various institutions to tie meaningful partnerships and ensure that this is, launched in the field. I think this is also something... It's a field where private and public sector can partner for innovation, and so we also seek to push differentiation there, and specifically through those, partnerships and collaborations. And to guide our decision-making, we have built as well, tools, methodology to support us to identify how and where and who to partner with on those forest protection initiatives. So the focus is, at the moment, to identify initiatives, projects or partnerships that are robust, that are relevant to the forest protection agenda, that are effective in deploying the right tools, methodology, means, to reach forest protection goals, and that ensure permanent benefits over time. Ongoing commitments, and partnerships are mostly being tried in Cameroon, Côte d'Ivoire, and Ghana. In Cameroon, we have partnered with the government institution that is in charge of forest protection, called OIPR. And we are specifically investing in the areas where risks of deforestation associated with cocoa are, have structurally been high for the last years and are continuously being under scrutiny in Cameroon and Côte d'Ivoire. We're currently investigating opportunities in Cameroon and planning partnerships in Baham, Djerem, Debergie, and in the east. We're also discussing partnerships in Ghana, in the Ashanti of Lamadti. In terms of concluding remarks, at this time, we're preparing for, as Nicolas said, full implementation. We're really in the process of rolling out all the tools, launching the partnerships with forest protection. It's, I think, quite transformational indeed, for the business. We're reaching a point where we're seeing all those tools being used by the sourcing teams and by the various teams that are engaged in EUDR. So very much very satisfactory in that sense for us, and still plenty, I think, of things to learn as we go into EUDR. Thank you very much, Juliette. A very comprehensive presentation, very concisely delivered. Thank you very much for that. And I'm pleased to say that it's stimulated a good number of questions coming in, so I'll be trying to group those and direct them to you. I wonder just. I had one on the way through. Could you just take us back to slide 16? 'Cause I just wondered if other people would have found the context that I would have found helpful, while we're lining up the other questions. Am I right to read that as a red? Is this a high risk? Because obviously, red against Cameroon, cocoa is a minor driver for deforestation. That doesn't seem like it's therefore a low risk. Can you just explain how to read that table? Yes, so this table should indeed be read as red, representing high risk, medium in yellow, and low in green. Cocoa has been a driver for deforestation in Cameroon, albeit not in the same dimensions as in Côte d'Ivoire or Ghana, but currently, we see it as being a major driver for deforestation, and we see that risk increasing in the coming months and coming years, with prices of cocoa being extremely high and presence of forest being important on the territory as well. If I may add a quick fact also on that issue. If you compare Cameroon to Ivory Coast, obviously in Ivory Coast, 90% of the territory is under forest, mainly linked to what Juliette has explained, like huge level of deforestation over the last fifty, sixty years. In Cameroon at the moment, the forest cover is around 55% of the territory, so obviously you have a lot of forest. On our polygons, we detect a presence of forest on a very large amount of polygons. So actually, ironically, the large presence of forest also makes Cameroon more risky, because if you combine the presence of forest with the high level of price in the market at the moment, obviously it's a big risk for us as an industry. Okay, thank you. Right, I'm gonna try and group questions a little bit, and I may end up therefore not attributing them in the way that I might. But there are a couple of questions here about monitoring and enforcement. One, if you could share some expectations of how the EU will actually monitor and enforce compliance, and secondly, what resources will be available to the authorities to monitor and enforce this compliance? I think those are questions that we ourselves are seeking clarity over, if I'm being fully transparent. What we expect is that, at least in the first year implementation, first of all, there will be a dialogue with operators importing, products on the markets. We expect that this dialogue will trigger the types of checks that are being performed, but initially, my assumption is that they will check, the administrative, requirements being fulfilled, and that there will be sample checks, for instance, on polygons that have been shared against in these maps. As well as a general check, most likely on the processes that companies are putting together to comply with the regulation. But in the detail, how those checks will be performed and how checks will be performed in one country versus another, this is something still that we will need clarity from the EU institutionally. Can you maybe remind the audience about the percentage of tests that will be done, performed, depending on the level of risk? I think everybody starts with an average risk. Mm. Yes. But because that's probably a key information for the audience, I think you have three level of risk, depending on the country. Our understanding is that everybody will start on the same baseline for the implementation, but the level of checks will depend on the level of risk between kind of low, medium, and high. I think it goes up to 9% check, I think, on the highest level of risk. Meaning that for imports in the EU market, where the level of risk is perceived as the highest, 9% of the transaction are supposed to be checked, with obviously the caveat that Juliette mentioned, where we expect year one to be relatively lenient. Thank you. I think this is probably another relevant contextual question: How much of the global cocoa supply do you think is not compliant with EUDR today? I'll give that to you first. It's honestly, it's really hard to tell. Then we, I think more than it's quantitative assessments, what is important to keep in mind is the fact that the biggest gap towards compliance is around traceability. At the moment, there are significant portions of the cocoa supply chain that are not traceable. And this is linked to multiple factors. I think the industry has done a lot of effort in the last years towards traceability, but not to the level that a majority of the supply chain is currently traceable. I think also it's fair to recognize that in a smallholder farming context, traceability can be challenging, especially when it's required at scale. My hope is that traceability systems being enforced by exporting countries, like Côte d'Ivoire or Ghana, will also gradually support the request and requirement to have traceability of covering a vast portion of the supply chain. But yes, I would say in general, more than a quantitative assessment, I think it's important for everybody to keep in mind the fact that it is traceability still that is the biggest gap towards broad compliance in the supply chain. To give an order of magnitude, I will just revert back to my point of introduction. Obviously, Ivory Coast still represents 40% of the global crop. I think all the literature sources are pretty clear that, particularly on the topic of protected area, we're talking about a significant portion of the crop, probably somewhere between 15%-25%, 20%-30%. You have different assumptions, but the significance of it is not in doubt. And then perhaps a follow-on to that, Rob Beale of Capital Group asks, "What are the expectations for volumes that are considered ineligible? Will these be shipped to markets that don't have regulation? Well, can I quickly take this one? That's, I think, both for Juliette and I, an argument that we're, that we are fighting. I think we heard a lot of that internally 12-18 months ago, saying, "Okay, well, it's not compliant. We'll just go in other market." I think there is a limitation to that. First of all, if you take the two biggest alternative market for us, North America and Asia. In North America, most of our, most of our customer already have requirements in terms of traceability and transparency. So we actually think that for most of our big U.S. customers, the level of demand will be pretty similar versus Europe. Okay, APAC still remain a relatively marginal market in terms of consumption of chocolate. I think there is no expectation that, you know, APAC will welcome all the non-compliant beans. What I would also add is a genuine concern on our side from an industry perspective, about the potential two-tier market, where indeed, depending where the destination of the beans will be, you might have a competition between people like us, who will mainly source compliant beans, and more regional players that typically might be dedicated to the Asian region, and be less demanding, and therefore have to pay a lower differential. But those are key questions that we're also addressing through professional associations, particularly ECA, European Cocoa Association, in order to be clear that we are all playing according to the same rules. But again, back to what Juliette was saying, for us, the emergence of a national traceability system in Ghana and Ivory Coast, which basically represents 65% of the global crop, that's the main guarantee that we will all play according to the same rules. And then one more question on context, and we'll come onto your response next. So is there any country that's at risk of being excluded altogether from EU imports? My answer on this would be no. I think. So there are several things. First, the EU will work on country benchmarks, whereby it will assess, structurally, whether commodities from a given country are associated with risk of deforestation, with illegal practices, with human rights challenges. But those benchmarks have not yet been made public. I think there is a diplomacy topic there, that is being discussed by EU and countries that are exporting commodities in scope. I don't see a ban applying to an entire country. I don't think that is realistic, because obviously commercial exchanges are not limited to products that are in scope for EUDR. That being said, it is possible that if structurally a given commodity from a given place is associated with very high levels of deforestation, that obviously there would be fines multiplied towards that flow, and that would have significant consequences on trade exchanges and relationships between a given country and the EU. Maybe one point also, to make it specific, I think what also makes us quite innovative, and I'm not sure I've seen that a lot in the industry, is the way we've also rethought our flows. I think it's much easier for us to try to concentrate on a smaller number of exporting country, on which we put a huge amount of effort in being compliant. So a lot of work has also been going on in terms of, you know, reshaping the recipe, and making sure that most of our EU volumes will be served by five countries, so Ivory Coast, Ghana, Ecuador, Nigeria, and Cameroon, which for me was also a very smart approach. So there's a question which asks you to extend on that, really. It's: How does your approach compare to that of your peers, perhaps more broadly than just this, on this specific point? I can quickly take this one. I think for the moment, we don't necessarily have a huge amount of detail about how our competitors are approaching it. I would say two things. First of all, as an industry, we've worked on a harmonized protocol at the ECA level, so European Cocoa Association. So at least on the main articles, which are Article nine on data collection, article ten on risk assessment, and Article eleven on risk mitigation, we came to a broad common understanding. Although, if you compare the ECA protocol with what we've developed in terms of sourcing guidelines, obviously we're not talking about the same level of detail. So the ECA protocol are a good common understanding of the three main articles of of EUDR, and guaranteeing some form of harmonized understanding around EUDR. But as a company, we had to go a lot deeper. Maybe I can also add one point on something that has kept us quite busy over the last weeks. The regulation makes a difference between plots that are under four hectares and plots that are above four hectares, requiring polygons, so basically the whole boundary of the plot to be captured for plots above four hectares, and only a GPS point for plots under four hectares. If you look at our approach, we've made the decision to go 100% polygon, so probably a bit beyond what the regulation was asking, the reason being mainly around risk. If you take the logic of GPS point, I think there are two things that were problematic to us. First, the assumption that a GPS point would be collected in the center of a plot. Don't know how much of you guys have been on a cocoa plot, but finding the center of a plot is not the most obvious things to find. And second thing, if you only have a GPS point, then you should define a catchment area. And that catchment area, according to what we see in the industry, is roughly four hectares. And for us, if we rely on GPS points, because you don't know the exact boundary of the farm. There is two risk, one risk of picking up false positive, so deforestation alert that would occur within the catchment area, but outside of the plot, but also to miss some deforestation alert that would actually happen within the boundary of the plot. So for us, on a question like that, with all the in-depth work that has been going on in the team, and particularly under the leadership of Juliette, we've decided to, from a risk management point of view, to go for hunts and polygons. Thank you. And I just want to pick up and extend a question, and so you may have answered this, but Chris Armstrong from Berenberg asks it. So I'll read his question out, 'cause you may want to expand a little bit. So should we read page sixteen as it makes it more likely you will source from lower risk countries like Ecuador or Indonesia, and less from established countries? And do these countries have the ability to supply in volumes and to comply? So you did mention focusing on five countries, but is there gonna be a significant shift, and can you get the volumes from the countries you're shifting to? Maybe I can say a word of introduction on that. I think the idea according to which we would shift significantly away from West Africa at least for the coming 20 years is probably wishful thinking, so the short answer is no. Obviously, Ecuador is an exception. We are growing really fast in Ecuador, and the plan for us is to source, yeah, probably between 80 and 100 thousand tons of beans from Ecuador, to make it probably the second biggest origin for us in terms of sourcing in the coming 2 or 3 years. Other than that, I don't think you should read that as, basically, we're gonna stop sourcing from Ghana and Ivory Coast. That's not gonna be the case. I think you need to take that as, obviously, in order to keep sourcing from Ghana, Cameroon, and Ivory Coast, we need to understand the landscape very well, and being very clear on where in this region, and from who, we can keep sourcing. But, there is no intention for us of declining volumes from Ivory Coast, Ghana, or Cameroon. Sorry, there's one more related question, then I'm going to move it on. We may need to come back to this topic area. But Stefan Frischnecht asks, "Does he understand correctly, that you're not sourcing from Brazil and Indonesia, and is this because of the high risk in terms of first mile traceability? I can take Brazil rapidly, and maybe I'll leave you Indonesia. Brazil is quite obvious. Brazil is a deficit market, so basically, all the crops of Brazil is used on the domestic market for the Brazilian market. Just for you to know, Brazil imports, depending on the year, but between 20 and 30 thousand tons of beans from elsewhere, particularly Ghana. So there's no export out of Brazil, because Brazil is just not self-sufficient. So Brazil is not an EUDR topic for us, because everything we buy in Brazil is consumed in Brazil. Speaking about Indonesia, no, we haven't decided not to import beans from Indonesia. I think there. We are prioritizing other flows in our direct supply chain. But we do see that Indonesia, as other countries, with vast portions of the supply chain, where huge efforts have been made by suppliers to the other countries. So no, there are challenges, for sure, linked to first mile traceability in Indonesia, but this is not a decision that we have made. We haven't made a decision to stop sourcing beans from Indonesia then. Okay, thank you. Now, I'm going to move the questions on to cover the questions of competitive advantage, and then also one question, or a sort of multi-part question, on pricing and costs. The questions on competitive advantage: what have been the biggest opportunity you've been able to realize by changing your processes to align with EUDR? And the second one... No, handle that one first. So what are the advantages, and how do you see this playing through the competitive value chain? And then I'll come on to the questions of costs and pass-through. May I start with that, Juliette? Mm-hmm. Maybe sharing a bit of, I think of our experience. I think if you look back twelve or eighteen months ago, I think where we've been good is understanding quite early on the magnitude of what EUDR would generate. And I don't think it's been the case in general in the industry, and with our customer. I think it took a lot of time for them to understand what EUDR would mean. And I think that created a key competitive advantage for us, because it took them some time to wake up to the magnitude of the regulation. Now, over the last two or three months, we've seen a radical change in the nature of the dialogue, where everybody over the summer, and probably a little bit before that, said, "Okay, I mean, this is absolutely huge." And we said, "Okay, yes, we know, and we've been working on that full on for the last 18 months." And we saw, I think, a big shift over the last month, with a clear thirst from our customer for robust implementation. Obviously, what makes EUDR quite unique is like the burden of proof is on us, and the burden of proof is passed along the supply chain, so the burden of proof is also passed to our customer. We are basically guilty until being proven innocent, and that statement is also true for our customers. So basically, if we're not able to prove that the risk is normal or negligible, then we will have to withdraw the product, and the financial risk, as mentioned in Juliette's presentation, is very high. So the robustness of our approach for me is the key competitive advantage, and obviously, our model of the vertical integration with a strong presence on the sourcing side, where a very significant proportion of our volumes is sourced directly by us, across a very large presence on all these different geography, is also a critical advantage. You wanna add something? Thank you. Now, we knew that we were gonna be some questions on, cost and pass-through ability- Really? And I said we'd take one, and so what I'm gonna do is I'm gonna read you the three that we've received, and you're gonna tell us what you can tell us, and then we'll appreciate that. That probably is what you've got at this stage. So the questions that we've got so far is: Do you think you can pass on costs of the EUDR to your customers? Then very much the same one, how would you assess your worldwide customers' willingness to pay for more sustainable cocoa? And then a differentiated one, what are the expectations for what EUDR compliance will mean for cocoa prices? So if you could share what you can with us on costs and on prices, then that would be appreciated. We understand- I will- Much to be determined, still. I will not plead the Fifth on the whole spectrum of questions, so I'll give you a bit of element of answer. I think, first, it's quite important to understand that, without getting into the detail of the cost, there are two cost driver. There's the cost of due diligence, but there's the cost of sourcing traceable beans. Obviously, those are two different cost driver, and in terms of order of magnitude, we think that the fight for traceable beans is probably gonna be a key factor in the coming years. On our ability to pass cost to customer, I think we have absolutely no concern about that. I think the guidance from our CFO has been pretty clear, that any cost will have to be passed obviously, because the main crop is starting in a few weeks. We've had this discussion with most customer, and again, for the moment, we don't foresee any inability to pass cost, and that has been basically set in stone in our pricing system from first of September. So, it's not a negotiation. We pass it, it's set in stone, it's set in our system, and it will be charged. Then I think the question of sustainable cost versus compliance cost, that's probably a different question. Do we see an appetite for passing all sustainable costs in the future? I think that I would probably give you a more nuanced answer on this one. Obviously, the, what has happened market-wise over the last six months, with price between $7,000-$10,000, makes most of our customers quite price sensitive, and we see some tension in some of the discussion on sustainability program in general. But okay, that's a key question for us in the future, because, yeah, in order to get impact, I think the price of sustainability will have to increase significantly in the next decade. But yes, no concern on our side on passing the cost of compliance, and that will also be the case. I'll talk briefly about it in my conclusion, but that's gonna be also the case on CSG body, on human rights due diligence. For us, it's just a, a license to operate, and that's how our customer are understanding. Thank you very much. I should just say, Effie Yang, sorry, I apologize, you did ask a question as well. I think it's... I didn't read it out verbatim, but I think it's probably been covered there as well. A slightly different related one. AAK have said they will build in Europe an inventory of palm oil ahead of year-end regulations, the regulations start, to buy them time. Do you plan to do that? So you see there's always five, ten seconds of delay in the hope that my colleague will take the question from on my behalf, but so I'll give a technical answer to that. So obviously, the regulation was voted and live in 2023. We are, at the moment, in the transition period, and the transition period will extend until thirtieth of December 2024, and during that transition period, any product that hits the EU market, as long as we can prove that the import was prior to thirtieth of December 2024, doesn't have to go through the whole process of assessment of non-negligible risk. So are we using stock? Basically, yes, but to a limited extent, because you would also know that we have quite strict stock targets, and also we are looked at quite carefully in terms of our balance sheet and working capital. So I don't think it's a strategy for us to use inventory as a way of compliance. Yes, of course, on some specific cases we do, but it has not been at front and center of our strategy. Basically, we'll be ready for thirtieth of December 2024, irrespective of level of inventory. Thank you. I'm gonna flag to people, we are gonna finish on the hour, so I'm gonna spend the next minute looking for any questions I may have missed, but while I do that, we've got two great questions from Peter Forslund. One is, "Would reforestation efforts be able to be packaged as a way to sell carbon credits, while at the same time harvest cocoa sustainably? Is this an option that has been explored?" And his other question is, "You mentioned that Theobroma cacao, cacao trees, are part of the natural flora in the regions mentioned... Have you considered reforestation of patches of land where cocoa trees are planted as part of the reforestation?" So I'll leave those with you to answer the technical, while I find any other questions. Anybody else who has a question to ask, this is your time to put it in the chat, and we'll try to get through as many as we can by half past. Back to you, Nicolas. Yeah. Go ahead, Leslie. That question? Okay. So on the first part of the question, cocoa trees being part of natural fauna and flora. So we really distinguish the difference between forest and agricultural land. So land that is agricultural, meaning that it is mostly exploited to harvest a given crop, cannot be considered ever as a forest. Okay. And so that is also something that is mirrored very clearly in EUDR, meaning that it's not the amount of trees on a portion of land that make it or not a forest. It's whether or not those trees have been planted and are harvested for a specific agricultural reason, that make that distinction between forest and agricultural land. So in our case, cocoa trees do never constitute, like a cocoa plot doesn't ever constitute a forest. However, the practice that we really support and encourage is agroforestry. Naturally, cocoa trees do grow under the canopy. Cocoa has been grown under a certain amount of shade traditionally. In the last years, this shading practice has disappeared from, mostly Côte d'Ivoire and Ghana, and with that, we have seen soil fertility decrease, rainfall being also, I think, imbalanced. We are supporting putting shade back into cocoa plots, and that is mostly towards preserving the resilience of the crop and preserving soil fertility, supporting rainfall in cocoa-producing landscapes. It's never a case of whether or not we are. It, it's not going to ever be seen as a risk mitigation strategy in the face of EUDR, nor can it be seen as, for instance, a way to remediate deforestation that has occurred. The regulation is extremely clear on the fact that what matters is the conversion from forest to agriculture, and whether that conversion has happened before or after 2020. Any conversion after 2020 really prevents material grown on a given land from being imported into EU, and there is no remediation part that can actually revert that, so once a forest is gone, nothing that has been planted among it and mostly on that portion of land, can ever be imported. Thank you. We have three specific questions. I'm just trying to squeeze them in, on your processes. So one question is, how do we interpret traceability audit? And the slide in front of you is having no risk assessment. So that's the first one. And the second one: Among the risk assessment tools, how specifically are you implementing deforestation monitoring? And then the third one- The third one, just for clarification. As the cocoa is transported in bags, what level will the due diligence statement be prepared at, and will the offtaker, presumably the buyer, be able to use the same submitted due diligence statement? Just for the clarity, can you let me read me the third one? Sure. I'll answer the first two questions. So I'll start by answering actually the second question on deforestation monitoring and how specific are we. I can safely tell you, we are being very specific, in the sense that we are assessing each and every polygon, each and every farm that has been mapped in our supply chain. We have defined a protocol whereby we look at land use over time through time series that reflect basically what land use has been gradually and shows through satellite imagery when it was converted from forest to cocoa. So we are very specific in that we assess with a lot of granularity any deforestation events that have happened. The smallest we look at is 0.1 hectare of deforestation on a given plot, and that is one of the thresholds that we use to be critical, to assess whether a plot is compliant or not. We also rely on high-resolution imagery, the satellite imagery that we get from Starling goes up to fifty centimeter resolution. We are very granular in our capacity to assess land use change over time on a given plot. That's to answer the second question. On traceability, what does that look like in terms of audits? We have different levels at which this can be performed, and the levels of audits will also differ depending on the type of supplier that we're looking at. But say, if we look at a given cooperative in, for instance, Côte d'Ivoire, we will check that, for instance, through a sample base, mapped plots coincide with the farmer information that we have received. We would verify that those plots, that those plots have been mapped properly by going to the field, making a verification there. We would look at how transactions are being recorded within the cooperative, and we would also likely, if we were to take things a step further, look at, broadly speaking, the cooperative's entire business and business model. So take a look also at financials over time to see how stable the supply base is, but then how the mapping efforts have taken place to make sure that it all cross-checks towards and matches the information that has been shared with us. And maybe very- Nicolas, if I may just interrupt you there, 'cause we're going to finish very soon. Could I add one more question to you, and then I'll let you go answer the bags question, and then on into your summary? Sure. Just to say, Georgios, the extent to which EUDR affects investors, I think probably lies a little bit outside the scope of this, but I'll pass the question on to Sophie separately. A question from Cedric Norest is: As this regulation adds complexity, could this encourage more brands to outsource production? So if I could leave you with the question about the bags stat, and then your summary, that would be excellent. Thank you very much. I won't... I mean, I don't have any opinion about will it encourage brand to do more outsourcing deal. I don't know. Does it bring more complexity? For sure. Absolutely, 100%. I think we hope we have conveyed part of that complexity, but obviously it's complexity in terms of sourcing decision, complexity in terms of how dynamic the risk assessment is. Very complex in terms of how we organize the supply chain, how we segregate the volumes. Very complex, how we will deal with systems. So yeah, increasing complexity 100%. Are we well-positioned to manage that complexity? Yeah, 150%. So I'll let you reach the conclusion of that, but will it make things more complex? Yes, for sure. Very much so. And then very quickly on the rest, the reason why I wanted to take the last question is because that's an area where there's still different interpretation about the what we call the role of downstream operators. There's two school of thoughts on that. There's one school of thought that says that basically, once a DDS has been produced, anyone downstream only has to collect the DDS. We are not from that school of thought, mainly because what the regulation says is that you can rely on DDS, if and only if you've assessed the robustness of the due diligence of the people, of the company, of the operator you buy the product from. So on our side, we will not rely exclusively on the DDS, on the indirect supply chain, where we source the product, downstream. So we'll still have a robust approach on assessing the due diligence system of our suppliers, and we will not rely exclusively on their DDS. Maybe just before I, Sophie, I'll let you conclude. Two remarks on my side. One is to also let you know that we've done a similar exercise to this with NGOs. I think it's worth mentioning, because you will have seen in Juliette's presentation that the element of grievance mechanism will take a very big importance, and that basically means that us, as an industry, will be exposed to grievances, and we expect most of these grievances to come from NGOs. We already collaborate a lot with some of the main environmental NGO, and their understanding of the cocoa supply chain and the challenge and the landscape where we're operating is extremely detailed and extremely sophisticated. So we see the importance of maintaining that dialogue with stakeholders, including NGO, as a very critical part of the year ahead. And we're working very hard on this. The last thing I also wanted to say is, like, in that whole topic of level playing field, we see that level playing field as having two legs. EUDR is one leg, but yes... BBB is the second leg, and reaching the EU market and EUDR, as we described. Yeah, for us, the combination of both regulation makes a fabulous opportunity for the industry to develop that level playing field beyond sustainability. I think that brings us to the end of the session. So thank you very much to you all for dialing in and listening today. I hope you found it useful, and thanks also to Mike for moderating the session. If you have any more follow-up questions, please get in touch with me over email. And yeah, we look forward to seeing you next at the full year results on the sixth of November. So thanks very much for listening. Thank you very much. Thank you. Have a good day. Thank you. Bye-bye. Bye. Goodbye.