EUDR: Can’t See the Forest for the Trees
Navigating through EUDR Implementation
The EU Deforestation Regulation (EUDR) has been in the spotlight for most of 2024. Some call it a bureaucratic monster, others a champion of strong environmental regulation. Regardless of such contrasting viewpoints, one thing is clear - EUDR will impact thousands of companies and compliance preparation cannot be delayed. This is true, even if the EUDR implementation gets delayed for 12 months, as was recently proposed by the European Commission. While we await the decision of the EU legislators regarding the extension of EUDR’s timeline, we would like to share insights on the current challenges of EUDR implementation and how businesses should use this time to prepare.
In short, what is the EUDR?
The EU Deforestation Regulation aims to ensure that the products EU citizens consume do not contribute to deforestation or forest degradation worldwide. It is part of the EU’s larger efforts to reduce environmental degradation, confirmed by the European Green Deal, the EU Biodiversity Strategy for 2030, and the Farm to Fork Strategy.
EUDR targets seven commodities: cattle, wood, cocoa, soy, palm oil, coffee, rubber, and some of their derived products, including leather or furniture. According to the EU Commission, regulating these commodities could help to reduce at least 32 million metric tonnes of CO2 emissions a year and address deforestation driven by agricultural expansion to produce the relevant commodities, as well as forest degradation[1].
How does the EUDR impact businesses?
Companies importing, exporting, trading, or placing on the EU Market covered products will fall under the scope of the EUDR. In most cases, apparel companies will not be directly affected by EUDR unless they import, sell, or trade raw hides, prepared leather, and some other articles derived from rubber or wood. However, brands selling homeware and furniture will fall under the scope. The impacts of EUDR will also be felt in the supply chains. The leather and cellulosic fiber industries will be under scrutiny, which may impact the supply of relevant materials for textiles. Also, the scope of EUDR could expand in the future, including cotton, which is currently included in the EUDR commodity review - to be published by July 2025. Stay close to 2B Policy for more updates on EUDR developments.
Companies falling under the scope of EUDR will be subjected to stringent requirements to place their products on the EU market or export them from the EU. They will have to:
Prove that their products are deforestation-free[2]. This will require an in-depth due diligence process tracing the products to their primary plot of land;
Prove that their products have been produced in accordance with the relevant legislation of the country of production;
Submit a due diligence statement with the relevant information to the platform set especially for this purpose - the EU Information System.
In addition to these, companies will have to set up an internal due diligence system storing the relevant supply chain and product-related data. This information must be kept for five years and should be made available upon request from the competent authorities in case of investigation. The companies will also need to annually report about anti-deforestation efforts on their websites or in their reporting as part of the Corporate Sustainability Reporting Directive (CSRD).
Challenges ahead
While anti-deforestation rules are much needed, the EUDR comes across as a complex piece of legislation, especially for supply chains that involve hundreds of farms and multiple intermediaries whose data can be difficult to obtain. One of the major challenges for companies will be tracing their products up to the plot of land where the tree was harvested or where the cattle were raised. This will require stringent traceability efforts and an active engagement with suppliers. There are also several challenges related to the (un)readiness of EUDR implementation tools:
The country risk benchmark has not been released yet
A benchmarking system will classify countries into three categories based on deforestation risk: high risk; standard risk and low risk. For commodities from low-risk countries a simplified due diligence can be used, i.e., companies do not have to go through risk assessment and risk mitigation (unless substantiated concern is received). This significantly eases the compliance process. However, the country classification will only be published by July 2025. In the meantime, all countries are given ‘’standard risk’’ and companies must follow an entire due diligence procedure, regardless of where their products come from.
The Information System is not ready
An EU digital platform TRACES will host ‘Information system’ that will be used to upload the relevant compliance documents, known as due diligence statements. The system will generate a reference code, which can be shared with relevant authorities and referenced by downstream suppliers. Without submitting a due diligence statement, companies will not be allowed to sell, export, or trade their products. Up until this day, the Information System has not yet been available. We expect the system to be launched in early December 2024. Stay close to 2B Policy to get informed.
The delay of EUDR implementation measures combined with a rigid due diligence process makes EUDR compliance extremely difficult.
What should impacted companies do?
The time is ticking and compliance preparation for impacted businesses is critical. Impacted businesses at this moment should be mapping the supply chain of the covered products and gathering the relevant data: country of origin, quantity, geolocation data, existing DDS reference number (if applicable), and other product and supplier-related information. They should also start the risk assessment and prepare for EUDR reporting. These are just a few examples of the totality of actions that companies must undertake in their journey of EUDR compliance.
Do you need assistance navigating the complexities of EUDR? Contact our team at 2B Policy, where we will help you comprehend and integrate EUDR into your business strategy and operations.
1. Regulation on Deforestation-free products - European Commission (europa.eu)
2. Deforestation is the conversion of natural forest to tree plantation, degraded land or agricultural land - if it occurs after the cut off date of 31 December 2020.
AUTHOR
Gintare Petreikyte
Gintare is a sustainability and policy manager at 2B Policy, specialising in due diligence, forced labour, and deforestation policies. She combines her legal expertise with that of public affairs to provide clear and simple answers to complex issues. Before joining the 2B Policy team, Gintare worked at the Policy Hub, assisting the apparel and footwear companies in their transition to become sustainable.