If you are an operator or trader that places or exports certain commodities (or derivatives of those commodities) on or from the European Union market, you must be ready for the approaching European Union Deforestation Regulation (EUDR) deadlines. To help you prepare for the new regulation, which repealed the EU Timber Regulation (EUTR), our experts created a comprehensive four-step guide to EUDR compliance. We also offer recommendations to guide you through each step of this complex process.
The EUDR compliance deadline: December 2024
The EUDR goes into effect for most companies (operators and traders) on Dec 30th, 2024. However, micro and small enterprises have until June 30th, 2025, to comply with the new regulation. With these deadlines quickly approaching, it is crucial for companies to start preparing as early as possible. EUDR compliance requires extensive preparation, as many steps are involved in data collection and tracking materials throughout the supply chain.
For more information about the regulation, check out our blog covering the EUDR’s scope and due diligence process.
EUDR compliance in 4 steps
Non-compliance with the EUDR presents many business risks, making preparation important. These four steps break down the compliance process to help businesses understand what is expected of them.
Step 1: Launch an EUDR Program
When creating your EUDR compliance program, it’s crucial to assess how the EUDR affects your business. These are important questions to consider:
- What materials, supplies, or parts must be tracked?
- Do you have an internal compliance solution, or will an external solution be necessary?
- What additional tools does your business require for compliance success?
- How will you onboard suppliers to your compliance program?
Here are our recommendations:
Prepare the risk assessment – Plan ahead to set up your EUDR risk assessment, as this process may be complex and lengthy.
Leverage existing data – Create effective data flows from your existing systems to your EUDR program (especially for your risk assessments and due diligence statements).
Get a head start on training – Train the internal teams involved with the EUDR, such as buyers and procurement teams.
Set clear expectations with suppliers – Educate suppliers on upcoming regulations, allowing them to prepare and begin to gather their data.
Keep scalability in mind – Consider how to scale your program as your business grows or expands to other commodities.
Step 2: Collect the data
Organization is crucial in the data collection process. It should be workable for both suppliers and internal teams. Efficient software, or tooling, makes a significant impact. Relying on effective supply chain compliance software can ease the burden on companies and suppliers. Through this process, it’s important to consider certain questions.
- How should suppliers be reminded to submit the data (and how often)?
- How are you going to handle non-responsive suppliers?
- When collecting data, who will perform face-value checks?
- Will the person performing these checks be efficiently trained to recognize quality responses from poor responses?
Here are our recommendations:
Start collecting data early – Aid your process by collecting data early to handle any obstacles that may arise. Shipments will require due diligence statements immediately after the EUDR deadline.
Collect risk-based data – Certain regions, such as Brazil and Indonesia, pose a higher sourcing risk than others. Suppliers must provide additional information to prove legal and deforestation-free production in these areas.
Reduce supplier fatigue – Find a way to collect data all at once to reduce the need for multiple interactions with suppliers. Give clear explanations of why you are requesting specific information.
Step 3: Conduct risk assessments
Companies will need to conduct a risk assessment for each shipment. These risk assessments address legality and deforestation risk.
Here are our recommendations:
Automate the process – Improve consistency and speed by reducing the need for manual effort with automation.
Start as early as possible – Plan ahead for high-risk shipments to ease the stress of the approaching EUDR deadlines.
Leverage certifications - Leverage certifications and utilize sustainability initiatives already in place.
Make smart use of satellite monitoring – Assess the presence of deforestation at a given plot.
Step 4: Mitigate risk and organize due diligence statements
When importing a commodity, it is necessary to have sufficient proof there is negligible risk of deforestation or illegal harvesting. If it can’t be initially proven, the risk must be mitigated, and more documents must be collected to find proof. The key is to find a balance between thoroughness and effectiveness.
Subsequently, companies must post due diligence statements to the EUDR Information System. Automation reduces tedious work during this process, especially for those working with large numbers.
Here are our recommendations:
Use a third party – Add an extra level of assurance by confirming your EUDR processes with a third party.
Collaborate with suppliers – Work closely with suppliers to foster healthy relationships. This practice improves outcome clarity for suppliers, which simplifies the data collection process.
Reserve time to make changes in your supply chain – Prepare for instances where you cannot prove negligible risk. You may need to encourage suppliers to improve their sourcing or find an alternative source.
Include spot checks of the low-risk supply chain – Ensure your system correctly classifies certain supply chains as low-risk by performing spot checks.
Automate where possible – Accelerate and scale your efforts with automation and software support to benefit from added efficiency, speed, certainty, and consistency.
Implementation timeline for EUDR compliance
Our experts recommend following this implementation timeline when creating your EUDR program. It’s crucial to act now to mitigate supply chain risk, ensure your commodities are deforestation-free, and successfully achieve EUDR compliance.
The risks of EUDR non-compliance
The business risks and complexities associated with EUDR non-compliance are compelling reasons to act sooner rather than later. From a literal perspective, products may be withdrawn from the market, and shipments may be stopped. Additionally, companies may suffer from fines and damage to their reputation. The fines for non-compliance with the EUDR can range from up to 4% of annual revenues.
Prepare for EUDR compliance with Source Intelligence
Source Intelligence’s EUDR technology aids companies in achieving a deforestation-free supply chain by streamlining elements of the compliance process—including product tracing, automated supplier outreach, and document collection. Our turn-key solution allows you to keep pace with the rapidly moving timeline toward full EUDR compliance. Plus, we offer the highest degree of automated risk assessment and mitigation to enable efficient due diligence processes.
Whether you need software or fully outsourced managed services to streamline your EUDR compliance efforts, our EUDR program will seamlessly guide you through your EUDR compliance journey.
