EU Regulation on Deforestation-Free Products (EUDR)

 

Introduction

As global efforts to combat deforestation intensify, businesses across the European Union (EU) and those exporting to the EU need to be prepared for the upcoming regulatory changes. One of the most significant steps in this direction is the EU Regulation on Deforestation-Free Products (EUDR), which will take effect from 30 December 2024. This regulation will introduce strict requirements regarding seven key commodities, ensuring they are deforestation-free.

Here’s everything you need to know about the EUDR and how it might impact your business.

 

The Scope of the EUDR

Effective from 30 December 2024, the EUDR aims to curb global deforestation by imposing stringent regulations on seven key commodities:

  • Palm Oil
  • Cattle
  • Soy
  • Coffee
  • Cocoa
  • Timber
  • Rubber

This regulation applies to all products produced within the EU, as well as imports from outside. All operators in the supply chain, whether large or small, must ensure due diligence to prove that their products are deforestation-free. While small and medium enterprises (SMEs) are exempt from certain documentation requirements, larger businesses and non-SME traders must submit due diligence statements and ensure full compliance.

The EUDR covers various aspects, including exports, packaging materials, and even recycled paper. It also considers deforestation that may result from natural disasters. Additionally, future reviews of the regulation may extend its scope to include other ecosystems and land types.

 

Timeline for Compliance

The EUDR entered into force on 29 June 2023, but its full applicability comes in stages:

  • 30 December 2024: Full applicability for large and medium-sized enterprises.
  • 30 June 2025: Micro- and small enterprises must comply.

During this transitional period, products placed on the market before these dates are exempt from the EUDR requirements. However, for commodities placed during the transitional period but sold after the deadline, businesses must prove compliance with the regulation. Specific rules for timber and timber products are also outlined under Article 37.2 of the regulation.

 

Due Diligence Requirements

One of the core pillars of the EUDR is the establishment of a Due Diligence System. Businesses must follow a three-step approach to ensure compliance:

  1. Information Collection: Gather comprehensive data about the product, including its geographic origin and evidence that it was legally harvested. This information must be submitted in a due diligence statement. If these details cannot be obtained, the product must not be placed or exported.

  2. Risk Assessment: Use the collected data to assess the risk of non-compliance with deforestation-free standards. You must document how risks were identified and mitigated.

  3. Mitigation Measures: If any risk is identified, appropriate mitigation measures must be taken and documented. While sourcing from low-risk areas simplifies obligations, businesses are still required to collect and retain necessary data.

Even re-imported products are subject to the same due diligence standards as newly placed commodities. Although certification schemes can assist with risk assessments, they cannot replace the due diligence process. Furthermore, operators must keep relevant documentation for five years, and due diligence must be conducted even on products perceived as having negligible risk.

 

Traceability Requirements

Ensuring traceability is crucial under the EUDR. Operators must collect geographic coordinates of the plots where commodities are produced to verify that no deforestation has occurred. These coordinates need to be included in the due diligence statement submitted to the Information System.

For larger plots of land (over 4 hectares), operators must use polygons to define the area, while for smaller plots, a single point can be sufficient. This traceability requirement applies to all batches of relevant commodities to prevent the mixing of deforestation-free products with those of unknown origin.

Even for bulk and composite products, businesses must ensure that deforestation-free goods are segregated throughout the supply chain. If the geolocation of the commodities cannot be verified, the product cannot be placed on the EU market or exported, even if sourced from low-risk countries.

 

Country Benchmarking

The European Commission will introduce a country benchmarking system to categorise countries or regions based on their risk of producing non-deforestation-free products. Countries will be classified as high, standard, or low risk, based on various criteria such as deforestation rates, forest degradation, and agricultural expansion.

The methodology for this classification is still being developed and will include stakeholder consultations. Countries are encouraged to contribute data and engage with the European Commission to improve their risk classification. This system aims to enhance transparency and support global efforts in fighting deforestation and forest degradation.

 

Preparing for Compliance

With the EUDR set to fully apply by the end of 2024, businesses should begin preparing now. Establishing robust due diligence and traceability systems will be key to ensuring compliance. Engaging with certification schemes, reviewing supply chains, and gathering the necessary documentation will help mitigate risks and avoid penalties.

As deforestation becomes a top concern on the global environmental agenda, the EUDR marks a significant step forward in ensuring sustainable trade practices. For businesses, this regulation presents both a challenge and an opportunity to demonstrate leadership in sustainable sourcing and environmental responsibility.

 

Conclusion

The EU Regulation on Deforestation-Free Products (EUDR) introduces significant changes to how businesses must operate regarding key commodities, emphasising the importance of sustainable, deforestation-free supply chains. With mandatory due diligence, traceability, and risk mitigation requirements, companies must begin preparing now to ensure compliance by the 2024 deadline. By understanding the regulation’s scope and implementing robust systems, businesses can not only meet legal obligations but also contribute to global efforts in combating deforestation and promoting environmental sustainability.

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