Deforestation has become a critical environmental issue, with its impact on climate change becoming more evident each year. The global loss of 25.8 million hectares of forest in 2020, double the amount lost in 2001, highlights the urgency of the situation. In 2022 alone, 4.1 million hectares of tropical primary forests were destroyed. This widespread deforestation is responsible for about 20% of global greenhouse gas emissions and leads to significant habitat destruction, further exacerbating the decline in global biodiversity. According to the Living Planet Report 2022, wildlife populations have decreased by an average of 69% over the past 50 years. The IPCC warns that to avoid the most severe and irreversible effects of climate change, the world must limit temperature increases to 1.5-2 degrees Celsius. Addressing deforestation is crucial to achieving this goal and ensuring the health of both people and ecosystems.

EUDR: Regulation designed to combat deforestation

The European Union, known for leading efforts to address climate change, has implemented the European Union Deforestation Regulation (EUDR). This regulation is aimed at promoting the use of products that are not linked to deforestation, with the goal of reducing deforestation and forest degradation. It is an integral part of the EU Green Deal.

What is EUDR ?

The European Union Deforestation Regulation (EUDR) has replaced the EU Timber Regulation (EUTR). While the EUTR focused on preventing illegal logging by verifying the legal sourcing of timber and timber products entering the EU, the EUDR takes a more comprehensive approach by addressing the broader issue of deforestation.

The European Union Deforestation Regulation (EUDR) has been effective since June 29th, 2023. It aims to ensure that products sold in the EU do not contribute to global deforestation and forest degradation. The EUDR extends its scope to cover a wider range of commodities and products, including palm oil, soy, coffee, cocoa, beef, wood, and rubber.

What is the Scope of EUDR?

Under the EU Deforestation Regulation (EUDR), companies will need to conduct due diligence to ensure that their supply chains are free from deforestation and forest degradation. This involves tracing the origin of the products, evaluating the risk of deforestation, and taking appropriate actions to reduce that risk. Operators and traders must comply with the regulation by the end of December 2024, while micro and small enterprises will have an extended timeframe to comply, along with other specific provisions.

Starting December 30, 2024, companies placing relevant products on the EU market must submit a due diligence statement to their national authority via the European Commission's Deforestation Due Diligence Registry (Links and Videos will be shortly released by EU). This statement confirms the company's responsibility for ensuring EUDR compliance. The due diligence requirement also extends to companies exporting these products from the EU. Non-EU companies may increasingly need to provide information to help their customers meet EUDR obligations.

What are the Goals of the EUDR?

1. Preventing Deforestation Through Consumer Choices: The EUDR aims to ensure that the products purchased, used, and consumed by Europeans do not contribute to deforestation or forest degradation, whether within the EU or globally. By addressing the supply chains of commodities linked to deforestation, the regulation seeks to make European consumption more sustainable.
2. Cutting Carbon Emissions: The regulation targets a significant reduction in carbon emissions associated with the EU’s consumption and production of these commodities. Specifically, the EUDR aims to cut emissions by at least 32 million metric tonnes annually, contributing to global efforts to combat climate change.
3. Addressing Agricultural Expansion and Forest Degradation: The EUDR also focuses on the broader issue of deforestation driven by agricultural expansion. It seeks to address not only deforestation but also forest degradation resulting from the production of commodities covered by the regulation, aiming to foster more sustainable agricultural practices.

What are the Key Provisions of the EUDR?

1. Due Diligence Obligations: Businesses that place relevant commodities or products on the EU market must carry out due diligence to ensure they are deforestation-free. This involves a rigorous assessment of the supply chain, including the traceability of products to their source and an evaluation of deforestation risks.
2. Traceability and Transparency: Companies are also required to provide evidence that the products they import into the EU do not come from deforested land. This includes obtaining geo-location coordinates for the land where the commodities were produced and ensuring that the land was not subject to deforestation after a specific cut-off date.
3. Third-Party Certification: While third-party certification schemes can support the due diligence process, they are not a substitute for it. Companies are required to assess and address any risks that might not be covered by these schemes.
4. Penalties for Non-Compliance: The EUDR enforces stringent penalties for non-compliance, such as fines, product seizures, and the suspension of the right to sell products in the EU. Companies that fail to comply may face fines of up to 4% of their turnover within the EU, temporary exclusion from public procurement and access to public funding, and even confiscation of goods. These harsh penalties highlight the EU's strong commitment to upholding this regulation.
5. Stakeholder Engagement: The EUDR encourages businesses to engage with stakeholders across their supply chains, including producers, local communities, and civil society organizations. This collaborative approach is vital for ensuring the effective implementation of deforestation-free practices.

How does it Impact the Businesses?

The EUDR represents a significant shift for businesses operating within the EU or exporting to the EU. Companies will need to invest in robust traceability systems, enhance their supply chain transparency, and adopt more sustainable sourcing practices. This may involve working closely with suppliers to ensure compliance, developing new partnerships, and leveraging technology to monitor and verify supply chain data.

For small and medium-sized enterprises (SMEs), the EUDR may present particular challenges due to limited resources. However, the regulation also opens up opportunities for businesses that can demonstrate their commitment to sustainability, potentially providing a competitive advantage in a market where consumers are increasingly concerned about environmental impact.

What are the Global Implications?

The impact of the EUDR will reach far beyond the borders of the EU, influencing global supply chains and potentially creating a model for other regions to follow. Countries exporting goods covered by the EUDR may need to adjust their agricultural practices and land-use policies to align with the EU's deforestation-free requirements. This shift could encourage more sustainable land management practices and contribute to reduced deforestation rates worldwide.

Furthermore, the EUDR is anticipated to stimulate innovation in supply chain management, prompting companies to invest in technologies such as blockchain, satellite monitoring, and AI-driven analytics to improve traceability and ensure compliance.

Conclusion

The European Union Deforestation Regulation (EUDR) reflects the EU's strong commitment to addressing global deforestation. While it presents challenges for businesses, it also offers the potential for those who can adapt and lead in sustainable sourcing practices. In a world dealing with environmental crises, pivotal regulations like the EUDR play a crucial role in driving the necessary changes to protect our planet's forests for the benefit of future generations.

As this legislation takes effect, it is vital for businesses to stay well-informed, proactive, and collaborative in order to effectively navigate the changing landscape and actively contribute to a more sustainable future. Embracing and proactively engaging with the regulation is not just a regulatory need, but a critical step in fostering a collective commitment to safeguarding our planet's invaluable forests for the well-being of generations to come.

Reference:https://environment.ec.europa.eu/topics/forests/deforestation/regulation-deforestation-free-products_en

Deforestation Stats from

• Global Forest Watch (GFW),
• The Living Planet Report 2022,
• The Intergovernmental Panel on Climate Change (IPCC)