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Forests are disappearing rapidly worldwide. The main threats to these important ecosystems are deforestation and forest degradation. In the last 3 decades, about 10% of the world's forests, an area bigger than the European Union, have been destroyed due to deforestation.
Over the past decade, governments around the world have committed to halting deforestation and restoring forest land. Yet, despite these commitments, 2023 data shows that the equivalent of 10 football fields of tropical primary forest is lost every single minute.
This level of destruction has significant social, economic, and environmental consequences locally and globally. Deforestation contributes significantly to climate change and the loss of biodiversity.
The European Union’s regulation on deforestation-free products (EUDR) aims to promote the use of products that do not contribute to deforestation within the EU. This regulation is specific to certain products and will prevent companies from selling these products in the EU.
Specifically, the regulation focuses on commodities such as cattle, cocoa, coffee, oil palm, rubber, soy, and wood, (some of the products that cause 90% of the world's deforestation) along with products derived from these commodities.
The regulation will come into effect on December 30, 2024 (or June 30, 2025, for micro or small businesses) and is part of the EU's broader commitment to protecting the environment and addressing climate change. The goal is to transition to supply chains that are free from deforestation.
Relevant commodities and relevant products shall not be placed or made available on the market or exported, unless all the 3 following conditions are fulfilled:
For more detailed information, please refer to the official European Commission's resources on the EUDR.
The European Union's Deforestation Regulation (EUDR) represents a significant stride in addressing the environmental and societal impacts of deforestation and forest degradation. The Regulation is part of a broader plan of actions to tackle deforestation and forest degradation first outlined in the 2019 Commission Communication on Stepping up EU Action to Protect and Restore the World’s Forests. This commitment was later confirmed by the European Green Deal, the EU Biodiversity Strategy for 2030 and the Farm to Fork Strategy.
The regulation, which officially came into force on June 29, 2023, traces its inception back to long-standing concerns over the detrimental environmental effects of deforestation. Key events within the broad EU Deforestation Legislation's timeline include:
The EUDR, along with other regulations like the CSDDD, also known as CS3D (Fostering sustainable and responsible corporate behaviour for a just transition towards a sustainable economy), and the CSRD (EU rules require large companies and listed companies to publish regular reports on the social and environmental risks they face and on how their activities impact people and the environment), will have a significant impact on global supply chains and their sustainability. However, because the EUDR is product-based legislation, it prohibits companies from placing certain commodities or derived products on the market without compliance. That is the main difference between the other regulations we have seen so far, which are more business than product-based.
The new regulation supersedes the EU Timber Regulation that came into force back in 2013. The EUDR will apply to all products harvested from June 29th, 2023, and imported to or exported from the EU market after December 30th, 2024.
Any wood harvested after June 29th, 2023, but imported to the EU before December 30, 2024, must adhere to the superseded EU Timber Regulation (EUTR).
Since the EUDR has a broader scope as well as stricter due diligence requirements, the following table summarizes some of the key differences.
To prepare your supply chain for compliance with the European Union's Deforestation Regulation (EUDR), it is crucial to first identify which commodities and products fall under the scope of the regulation. The EUDR applies to seven key commodities: cattle, cocoa, coffee, oil palm, rubber, soy, and wood, as well as a wide array of products derived from these commodities, such as meat, leather, chocolate, glycerol, pneumatic tires, soybean oil, wood furniture, newspapers, and books.
Operators and traders must ensure that from 30 December 2024, these commodities and their derivatives, whether produced within the EU or imported, do not contribute to deforestation or forest degradation post-31 December 2020. This requirement is crucial for businesses aiming to access the EU market, making it essential to carefully check the product's tariff classification under the Combined Nomenclature to verify its coverage under the EUDR.
Once the relevant commodities and products have been identified, the next step involves gathering the necessary documentation to comply with the EUDR's due diligence requirements. Operators and traders are required to compile comprehensive documentation that proves the deforestation-free status of the commodities and their adherence to the relevant legislation of the country of production. This includes a due diligence statement, which must be filed prior to placing or making the products available on the EU market or exporting them from the EU.
The documentation process involves several key actions:
By adhering to these steps and ensuring all required documentation is in place, businesses can effectively prepare their supply chains for the upcoming implementation of the EUDR, thereby minimizing risks and enhancing their sustainability practices.
To comply with the EU Deforestation Regulation (EUDR), companies must implement a robust due diligence process, starting with comprehensive risk assessments. These assessments are crucial for determining the potential risks associated with deforestation and forest degradation in the supply chain. The primary focus is to ensure that no products linked to deforestation are placed on or exported from the EU market. This involves collecting detailed geolocation coordinates and conducting a deforestation analysis for plots where in-scope commodities—such as cocoa, coffee, soy, palm oil, cattle, wood, and rubber—are harvested.
The risk assessment process should address both legality and deforestation risks for each shipment. Companies need to evaluate various factors, including the presence of forests, land rights conflicts, and the overall transparency and governance of the supply chain. This comprehensive analysis, which must be updated annually, serves as a foundation for confirming that all commodities are sourced from areas free of deforestation post-December 31, 2020.
Once risks are identified through assessments, companies must develop and implement effective risk mitigation strategies. If the initial risk assessment indicates a high risk of non-compliance, additional evidence and more rigorous checks are necessary to mitigate these risks. This may involve enhancing the traceability of the supply chain, conducting independent audits, or collaborating closely with suppliers to ensure all sourced commodities comply with EUDR requirements.
Operators are encouraged to adopt a flexible approach to legality, collecting a broad spectrum of documents and information to substantiate compliance. This includes verifying land use rights, environmental protection measures, and adherence to local and international human rights laws. Regular audits and independent verifications play a critical role in ensuring ongoing compliance and addressing any potential issues proactively.
To further solidify the due diligence process, companies can leverage technology such as satellite monitoring to verify the absence of deforestation in specific locations. Automating parts of the due diligence process can improve consistency and efficiency, reducing the reliance on manual efforts and speeding up the overall compliance timeline.
In summary, implementing due diligence measures under the EUDR requires a multi-faceted approach that includes thorough risk assessments and proactive risk mitigation strategies. By adhering to these guidelines, companies can not only comply with regulatory requirements but also contribute to global efforts against deforestation and forest degradation.
The European Union Deforestation Regulation (EUDR) requires that statements of due diligence be submitted electronically to a deforestation registry created by the European Commission. These statements will be checked in the registry by both the European Commission and the authorities of the Member States.
The information system is an online tool designed to assist in creating due diligence statements for supply chains. Its purpose is to simplify the process of submitting and processing these statements for relevant operators, traders, competent authorities, and customs. The goal is to ensure a smooth transition when the rules of the EUDR become effective at the end of 2024.
However, it's important to note that this system is currently in the pilot testing phase. In the summer of 2024, the European Commission, in coordination with member states authorities, will provide a training environment and sessions to train interested companies. This will allow stakeholders to become familiar with the system before the Regulation becomes effective. Additionally, the Commission will provide user manuals and other self-learning materials, such as video tutorials.
Blockchain technology has become indispensable for ensuring traceability and transparency within supply chains, particularly under the European Union Deforestation-free Regulation (EUDR). Finboot's MARCO Track & Trace, a no-code/low-code digital suite that leverages blockchain, enhances the security and immutability of data, ensuring that all recorded information is authentic and unaltered. This capability is vital for maintaining a chain of custody that can withstand rigorous audits.
Key Features and Benefits:
By leveraging blockchain technology, companies can ensure robust traceability and transparency, thereby meeting EUDR compliance and fostering sustainable business practices.
Annual Reporting Requirements
Under the European Union's Deforestation Regulation (EUDR), companies are mandated to publicly report on their due diligence systems annually. This requirement is crucial as it ensures transparency and accountability in monitoring deforestation risks within supply chains. The reports must detail the steps taken to comply with the regulation, including risk assessments and the measures implemented to mitigate those risks. Additionally, companies must retain all documentation related to their due diligence for at least five years, making these records available to authorities upon request. This rigorous documentation and reporting process is designed to facilitate ongoing compliance and enable timely adaptations to regulatory changes.
Adapting to Regulatory Changes
The dynamic nature of environmental regulations necessitates that companies remain agile and responsive to new developments. The EUDR is no exception, and it is expected that the regulation will evolve to encompass more stringent measures and possibly extend to other threatened ecosystems in the coming years. Companies must therefore conduct documented annual reviews of their compliance policies and procedures to ensure they align with the current regulatory requirements. This proactive approach not only aids in maintaining compliance but also positions companies to swiftly adapt to any regulatory changes, thereby safeguarding their market access and operational continuity.
The EUDR mandates that the products within the EU must not contribute to deforestation or forest degradation, be produced in compliance with the relevant legislation of the country of production, and be accompanied by a due diligence statement.
The regulation is based on the principle of due diligence, requiring companies to perform thorough assessments to identify, analyze, and mitigate risks related to deforestation within their supply chains.
This approach not only promotes transparency and traceability but also ensures that the origins of products are verifiable and not sourced from lands experiencing deforestation or degradation.
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