What Is the EUDR Regulation?

The EU Deforestation Regulation aims to prevent products associated with deforestation or forest degradation from entering the European market. This legislation covers a range of high-risk commodities, such as palm oil, soy, coffee, cocoa, and timber, and derived products like leather, furniture, and chocolate.

The key to EUDR compliance is a rigorous due diligence system that businesses must implement, ensuring that their products are sourced from deforestation-free supply chains. Companies will have to map out the origin of their raw materials, including geolocation data to prove that the land used for production has not been deforested after December 31, 2020.

Why Is EUDR Important?

The regulation on deforestation-free products is a critical part of the EU’s overall strategy to address two of the most pressing environmental challenges of our time: climate change and biodiversity loss. According to the Food and Agriculture Organization (FAO), approximately 420 million hectares of forest were lost between 1990 and 2020 due to deforestation. This area is larger than the entire European Union itself. The EUDR is designed to end this alarming trend by ensuring that the products consumed in Europe are not contributing to forest degradation or loss in other parts of the world.

What are the Key EUDR Reporting Requirements

Compliance with the EUDR requirements stipulates that businesses must provide comprehensive documentation tracing the entire supply chain of their products, with geolocation data being a critical component.

Key EUDR compliance requirements include:

  • Due Diligence: Businesses must prove that their commodities are sourced from deforestation-free land after the cutoff date.
  • Traceability: Companies must provide the exact origin of their goods, supported by geolocation data, to ensure they meet the EUDR standards.
  • Certification: Although not mandated, acquiring EUDR certification through third-party verification will help companies demonstrate compliance.

Moreover, the regulation distinguishes between low-risk and high-risk countries to streamline the compliance process. A benchmarking system will classify countries based on their deforestation rates, allowing companies sourcing from low-risk countries to fulfill their due

EUDR Reporting Timeline: Preparing for Implementation

Originally set for 2024, the EUDR timeline has been extended by 12 months, following feedback from global partners who expressed concerns over their readiness. This extension means that large companies must comply with the regulation by December 30, 2025, while smaller enterprises have until June 30, 2026.

This extended timeline is a crucial opportunity for businesses to start preparing for the extensive changes required under the EUDR. Companies should not delay in beginning their due diligence processes, as the complexity of the requirements could present challenges, especially for those with multiple suppliers across different regions.

Key Standards:

Regulatory Timeline key Standards.jpg

Recent EUDR Development and International Cooperation

The European Commission recently introduced additional guidance documents and a stronger international cooperation framework to support stakeholders in preparing for the regulation’s implementation.

These guidelines address critical areas such as:

  • Definitions of key terms like ‘forest degradation’ and ‘operator’.
  • Details on penalties for non-compliance.
  • Clarifications on traceability obligations.

The Information System for registering due diligence statements is set to go live in December 2024, allowing companies to register their compliance well ahead of the enforcement deadline. This system includes machine-to-machine connections for seamless data input and multilingual instructions for global users.

What is EUDR Certification

Although not mandatory, EUDR certification is an excellent way for businesses to demonstrate their commitment to sustainability and compliance. Certification involves independent third-party verification that a company’s supply chain is free from deforestation. Achieving certification will not only ensure compliance but also boost the company’s reputation as a responsible player in global trade. As the regulation sets a new standard for sustainability, companies that proactively achieve EUDR certification are likely to gain a sustainability edge. Certified products will be in high demand among environmentally-conscious consumers and businesses, leading to increased trust and market share.

Retroactive Evidence:

Despite enforcement in 2025, companies must proactively provide evidence of the deforestation-free status of their raw materials back to December 31, 2020.

To ensure compliance with the EUDR, clear sanctions are outlined for violations:

  • Profit Confiscation: Violators may face the confiscation of profits associated with the trade of commodities linked to deforestation.
  • Fines: Businesses found in violation may incur fines, with penalties reaching up to 4% of their annual turnover.
  • Temporary Exclusion from Public Procurement: Sanctions may extend to temporary exclusion from public procurement processes.

Challenges in Implementing the EUDR Regulation

The implementation of the EUDR presents several challenges for businesses involved in the trade of commodities linked to deforestation:

  1. Managing Complex Supply Chains Tracking where raw materials come from and ensuring they meet deforestation-free standards is difficult. This can involve changing suppliers, which often increases costs and adds complexity to the process.

  2. Dealing with Unclear Costs from Suppliers Suppliers may raise prices due to the extra work needed to meet deforestation-free requirements. Compliance engineers need to make sure these costs are clear and justified, which can be hard when working with global suppliers.

  3. Developing Adaptive Due Diligence Plans The EUDR requires regular checks on suppliers to make sure they follow the rules. Compliance engineers need to build flexible systems that can adapt when new risks or requirements come up.

  4. Conducting Supplier Audits Regular supplier audits are needed to check compliance. However, these can be expensive and time-consuming, especially with suppliers in different parts of the world, making it important to focus on high-risk areas first.

In conclusion, the EU Deforestation-Free Regulation sets a bold precedent for sustainable business practices. While challenges may arise, the regulation aligns with global efforts to combat deforestation and promote environmental responsibility across supply chains. Companies must proactively embrace these changes to contribute to a greener and more sustainable future. Reach out to our compliance experts to proactively tackle EUDR

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