European Union's Deforestation Regulation (EUDR)
Navigating the new EU Deforestation Regulation
The European Union's Deforestation Regulation (EUDR) is a groundbreaking initiative aimed at curbing the importation and trade of products linked to deforestation and forest degradation. This regulation is part of the EU's broader strategy to combat climate change and biodiversity loss by ensuring that products sold in the EU do not contribute to deforestation globally.
Latest update on the EUDR
October 2024 Update:
The European Commission recently proposed a one-year delay in the implementation of the EUDR, with full enforcement now expected in 2026 instead of the previously announced 2025.
This extension aims to provide businesses additional time to adapt their supply chains to the new requirements and ensure comprehensive compliance.
While the timeline has shifted, the core regulatory framework remains unchanged, with strict due diligence, traceability, and sustainability standards still at the heart of the legislation.
This delay offers companies a critical opportunity to bolster their preparations. Whether through investing in better supply chain management tools, engaging suppliers more effectively, or enhancing due diligence processes, businesses should use this extra time to solidify their compliance strategies.
The European Commission recently proposed a one-year delay in the implementation of the EUDR, with full enforcement now expected in 2026 instead of the previously announced 2025.
This extension aims to provide businesses additional time to adapt their supply chains to the new requirements and ensure comprehensive compliance.
While the timeline has shifted, the core regulatory framework remains unchanged, with strict due diligence, traceability, and sustainability standards still at the heart of the legislation.
This delay offers companies a critical opportunity to bolster their preparations. Whether through investing in better supply chain management tools, engaging suppliers more effectively, or enhancing due diligence processes, businesses should use this extra time to solidify their compliance strategies.
What do you need to know
- Comprehensive Coverage: The EUDR targets a wide range of commodities, including soy, palm oil, beef, wood, cocoa, and coffee, as well as products derived from these, such as leather and chocolate.
- Mandatory Due Diligence: Companies will be required to conduct thorough due diligence to ensure that their products are not linked to deforestation or forest degradation.
- Strict Traceability Requirements: Businesses must trace the origins of their products back to the plot of land where the commodities were produced, ensuring full transparency in their supply chains.
- Penalties for Non-Compliance: Companies that fail to comply with the EUDR could face significant fines, market bans, and reputational damage.
Who is required to comply?
The EUDR applies to all companies involved in the importation and trade of the specified commodities within the EU market. This includes both EU-based and non-EU-based companies, making it crucial for businesses globally to understand and adhere to these new requirements.
Under the EUDR, companies must report on several critical aspects, including:
- Product Traceability: Detailed information on the supply chain, tracing the product back to its source.
- Deforestation Risk Assessments: Evaluation of the risk that products are linked to deforestation or forest degradation.
- Due Diligence Systems: Documentation of the due diligence procedures in place to ensure compliance with the EUDR.
Mandatory Due Diligence Requirements
The EUDR places a significant emphasis on ensuring that companies actively engage in thorough due diligence to prevent their supply chains from contributing to deforestation or forest degradation. This process involves several key steps:
- Risk Assessments: Companies must conduct detailed evaluations of their supply chains to identify any potential links to deforestation. This involves analyzing the origins of commodities, assessing the environmental impact of their production, and identifying high-risk suppliers.
- Supplier Engagement: Beyond assessment, businesses must actively engage with their suppliers to ensure compliance with the EUDR. This means setting clear expectations, providing guidance on sustainable practices, and ensuring that suppliers adhere to deforestation-free policies.
- Continuous Monitoring: Due diligence is not a one-time task. Companies are required to continuously monitor their supply chains, updating risk assessments regularly and taking corrective action when necessary. This ongoing process is crucial to maintaining compliance as supply chain dynamics evolve.
Penalties and Enforcement
Non-compliance with the EUDR carries significant risks, and the regulation includes stringent enforcement mechanisms to ensure adherence.
- Financial Penalties: Companies found to be in violation of the EUDR may face substantial fines. The severity of these penalties will be determined based on the nature of the non-compliance, the company’s turnover or revenue, and the duration of the violation.
- Market Bans: In addition to financial penalties, companies that fail to comply with the EUDR could be banned from accessing the EU market. This is a critical enforcement tool that underscores the importance of adhering to the regulation.
- Reputational Damage: Beyond legal and financial repercussions, companies that do not comply with the EUDR risk significant damage to their reputation. In an increasingly sustainability-conscious market, being associated with deforestation can lead to a loss of consumer trust and long-term brand damage.
How Food & Beverage Companies Can Prepare
The FLAG tool will determine a company’s reduction target for them based on the company’s base year, target year, and baseline emissions. The following key requirements are directed by SBTi FLAG.
- MAP YOUR SUPPLY CHAIN
Identify all suppliers and the origins of the commodities you trade. Ensure that you can trace these back to the specific land plots where they were produced. - IMPLEMENT ROBUST DUE DILIGENCE PROCEDURES
Develop and maintain systems that can effectively assess and mitigate the risk of deforestation within your supply chain. - ENGAGE YOUR SUPPLIERS
Work closely with your suppliers to ensure they understand the requirements of the EUDR and are taking necessary steps to comply. - INVEST IN TECHNOLOGY
Leverage technology solutions that can help you monitor, manage, and report on your supply chain data, ensuring transparency and compliance. - STAY INFORMED
The EUDR is part of a broader movement towards stricter environmental regulations. Stay updated on related regulations and trends to anticipate future requirements.
The EU Deforestation Regulation (EUDR) represents a significant step forward in the global effort to combat deforestation and protect the world's forests. Companies that proactively align with this regulation will not only contribute to a more sustainable future but also enhance their market standing and consumer trust.