The European Union Deforestation Regulation (EUDR) is a landmark initiative aimed at curbing deforestation and forest degradation driven by the production and trade of specific commodities. As businesses prepare to comply, it's crucial to understand the regulation and implement effective strategies to meet its stringent requirements. This blog will explore the key aspects of the EUDR, its objectives, and practical steps for successful implementation.

Scope of EUDR

• Product commodity under scope: cattle, cocoa, coffee, oil palm, soya, rubber, and wood. All relevant commodities can be found in Annex I of the Regulation document
• Applies to both imported and EU-produced goods, regardless of quantity.
• Effective for larger organizations from 30 December 2024 and for small and micro-organizations from 30th June 2025
• Requires companies to ensure that products do not come from deforested land, effective as of 2020

Key Components of EUDR Implementation

1. Due Diligence Requirements : The EUDR distinguishes between the initial entry point into the EU market (referred to as "operators") and subsequent resellers (referred to as "traders"). Both operators and traders have specific due diligence requirements to fulfill.

a. Data Gathering: Collection of data on the supply chain of products, like product trade name, description, quantity, and country of production including information about the geographical location, and evidence of legal harvesting.

b. Risk Assessment:
i. Assess the data to determine the risk of products being linked to deforestation, forest degradation, illegality, and human rights violations. This is to establish whether there's a risk that the products intended for the market or export are compliant.
ii. The assessment must be conducted annually and be available to the competent authorities upon request.
iii. Operators must not place the relevant products on the market or export them unless the risk assessment indicates little to no risk.
iv. The Commission is also developing a benchmarking system, which classifies each country based on a level of risk (High, Standard, Low). The data will be published by the end of December 2024.

c. Risk Mitigation: Adopt risk mitigation procedures and measures that are sufficient to achieve minimal or insignificant risk by requiring additional data or documentation and carrying out independent surveys and audits.

d. A declaration of due diligence must be submitted to the competent authorities through the online information system before the product is placed on the market or exported. No import or export is permitted without this declaration. The EU has designed a specialized tool that is used to simplify the creation of due diligence statements for supply chains and ensures that products do not contribute to deforestation. The online registry will be made available from the end of December 2024.

• It enables operators, traders, and their representatives to create electronic Due Diligence Statements.
• Users can submit these statements to relevant authorities to demonstrate compliance with the Deforestation Regulation.

e. Operators must annually publish a comprehensive report, including on the Internet, detailing their due diligence system and the measures taken to fulfill their obligations.

2. Traceability: To ensure compliance, the regulation emphasizes traceability across the entire supply chain. This means companies must know not only where their products are coming from but also the specific geographical location where the commodities were produced.

a. EUDR mandates the collection of geographic coordinates of the land where commodities are produced. This is essential for verifying the absence of deforestation and is required in due diligence statements.
b. Remotely sensed data or other information can verify if declared commodities and products are linked to deforestation.
c. Geolocation can also be obtained through GNSS (Global Navigation Satellite System) and GIS (Geographic Information System)
d. Each batch of goods imported into the EU or placed on the EU market must be traceable back to their production location.

Penalties for Non-Compliance

• Fines can reach a minimum of 4% of the company’s total annual turnover from the previous financial year, with the possibility for member states to impose higher penalties. The severity of the fine will consider the environmental impact and the value of the affected goods.
• Confiscation of products and the revenue they generate.
• A ban on participating in public procurement and accessing public funding for up to 12 months. In cases of serious violations, the goods and products in question may be banned from entering European markets.
• Repeated or serious breaches will result in the loss of eligibility to apply simplified due diligence procedures.

EUDR and Businesses: What Needs to Change?

The EUDR represents a significant shift for companies with complex supply chains, particularly those dealing with raw materials in sectors like agriculture, manufacturing, and food processing. Here’s what businesses need to do to prepare for the EUDR implementation:

1. Supplier Engagement: Companies need to work closely with suppliers to ensure compliance at every stage of the supply chain. This involves training, realigning priorities, and investing in technologies to track and monitor sourcing activities.
2. Investment in Technology: Technologies such as satellite monitoring, blockchain, and geolocation services will be critical tools for verifying deforestation-free supply chains. By investing in these systems, businesses can ensure real-time tracking of deforestation risks.
3. Data Collection and Transparency: The EUDR demands a higher level of data transparency than most previous regulations. Companies must collect precise information about where and how their commodities are grown, harvested, and processed. This data will also be essential for passing audits or inspections by EU authorities.
4. Third-Party Certifications: Many companies may choose to obtain third-party certifications such as FSC (Forest Stewardship Council) or RSPO (Roundtable on Sustainable Palm Oil) to demonstrate their compliance with deforestation-free standards. Although certification isn’t mandatory under the EUDR, it can help to simplify the verification process.
5. Adaptation to New Trade Relationships: The EUDR may lead to changes in trade relationships, as companies shift their sourcing from high-risk deforestation regions to more sustainable areas. Some companies may even look into developing new markets that focus on sustainably produced commodities.

The successful implementation of the EUDR will depend on proactive planning, enhanced supply chain transparency, and technological investment. Those businesses that embrace this regulatory shift are likely to find themselves in a stronger position in a world that increasingly prioritizes sustainability. As the world moves towards greener practices, the EUDR stands as a symbol of accountability, urging businesses to play their part in preserving our planet’s forests.

If you would like to learn more about this regulation or need assistance with EUDR compliance, please reach out to us.