The European Union (EU) Deforestation Regulation (EUDR) is an important initiative to tackle deforestation and forest degradation, which are primary drivers of the global climate and biodiversity crises. As forests help regulate the global climate, deforestation has several adverse effects on the environment, such as soil erosion, flooding, reduced carbon storage, and habitat loss. The EUDR, which entered into force in June of 2023 and repealed the EU Timber Regulation, is a significant first step towards reducing deforestation caused by European consumption and protecting the world's forests for future generations. Continue reading to learn more about the EUDR, including its goals, scope, and due diligence process.
What are the goals of the EU Deforestation Regulation?
The EU Deforestation Regulation seeks to ensure that products placed on the EU market are deforestation-free and compliant with relevant domestic legislation (from human rights to environmental impact). It also promotes transparency and traceability in supply chains, making it easier for consumers to make informed choices about the products they purchase.
As outlined by the European Commission, the EU Deforestation Regulation has three primary objectives:
- Ensure products that contribute to global deforestation and forest degradation are unavailable on the EU market
- Retain forests that store CO2 and shrink the EU’s carbon footprint by reducing carbon emissions generated from the production and consumption of certain commodities
- Address deforestation and forest degradation caused by agricultural expansion to produce certain commodities
What is the scope of the EU Deforestation Regulation?
The EUDR applies to operators and traders, excluding Small and Medium-sized Enterprises (SMEs), that import products into the EU market. The regulation has expanded commodity criteria beyond the scope of the original EU Timber Regulation, focusing on additional commodities known to contribute the most to global deforestation and forest degradation due to their demand for space and required agricultural expansion. Currently, the EUDR has seven commodities within its scope:
- Timber
- Beef
- Palm oil
- Soy
- Coffee
- Cocoa
- Rubber
Certain derivatives of the in-scope commodities, such as leather, chocolate, and furniture, also fall under the regulation’s scope. With strict criteria and requirements for these commodities and their derivatives, the regulation ensures that products bought, used, and consumed in the EU are sourced without contributing to the destruction of the environment.
How does the EU Deforestation Regulation due diligence process work?
Under the EU Deforestation Regulation, operators and traders who are not SMEs are required to implement a due diligence system to prevent products linked to deforestation from being placed on the EU market. As outlined by the European Commission, companies must follow this three-step process:
Step 1: Collect the information outlined in Article 9 of the regulation, which includes a description of the commodity or product, the country of production, and the geographical coordinates of where the commodities were grown. All of this information is included in the due diligence statement. If any of the required information cannot be collected for a commodity or product, it is not allowed to be placed on or exported from the EU market.
Step 2: Conduct a risk assessment using the information gathered from the first step. Verify and evaluate the risk of non-compliant products entering the supply chain using the criteria outlined in Article 10 of the regulation. Describe how the information in step 1 was gathered, compared against the risk assessment criteria, and determined risk. This process is also included in the due diligence statement.
Step 3: Carry out sufficient risk mitigation efforts for any significant risk of non-compliance discovered in step 2 while considering the criteria outlined in Article 11 of the regulation. Risk mitigation efforts must be documented for the due diligence statement.
After fulfilling these due diligence, risk assessment, and risk mitigation obligations, companies must submit a statement to an Information System confirming that they have successfully conducted due diligence and that the products they place on the market comply with the regulation’s rules.
How is the EU Deforestation Regulation enforced?
Companies that fall within the scope of the regulation will be monitored by enforcing authorities and held accountable for noncompliance. As part of the regulation’s due diligence process, companies must submit a statement containing essential information for monitoring compliance, including the geographical coordinates of where the commodities were grown. This strict traceability enables enforcement authorities to verify the validity of sustainable sourcing.
Although the EUDR is in force, operators and traders have until December 30th of 2024 to implement the new rules and due diligence process. Micro and small enterprises have a longer grace period and are not required to comply until June 30th of 2025.
Streamline the EU Deforestation Regulation due diligence process
Complying with a new regulation and due diligence process creates additional burdens for already over-burdened compliance teams. From establishing a deforestation-focused due diligence process to tracing commodities to their source and assessing risk, companies face many new challenges over the regulation’s implementation period. Furthermore, as the negative impacts of deforestation continue to escalate, more commodities could be added within the EUDR’s scope—meaning companies will have to utilize even more resources to achieve compliance.
Partnering with a supply chain compliance partner, such as Source Intelligence, allows your team to streamline the due diligence process and refocus internal resources on other parts of your business. Our comprehensive deforestation program facilitates product tracing, risk assessments, and document collection and management through powerful compliance software. Connect with us to have confidence that the products you place on the EU market are deforestation-free.
