A sad and destructive effect of our globalised food chains are deforestation and forest degradation worldwide. (Tropical) nature and forest have to give place to plantations and monoculture agriculture. The European commission is now working on a regulation to protect forests worldwide against this threat; this regulation is called the Regulation on Deforestation-free products (EUDR). Read more about this in our article, and find out how this new regulation might affect your business.
What is the EUDR
Globally, the main driver of deforestation is the expansion of agricultural land that is linked to the production of certain food products or raw materials. The Food and Agriculture Organization of the United Nations (FAO) estimates that 420 million hectares of forest — an area larger than the European Union — were lost to deforestation between 1990 and 2020.
The EUDR, Regulation (EU) 2023/1115 on deforestation-free products, therefore aims to promote the consumption of ‘deforestation-free’ products and to reduce the EU’s impact on global deforestation and forest degradation. Coherent, the regulation is also expected to bring down greenhouse gas emissions and biodiversity loss.
The specific objectives of the EUDR are:
- avoid that the listed products Europeans buy, use and consume contribute to deforestation and forest degradation in the EU and globally
- reduce carbon emissions caused by EU consumption and production of the relevant commodities by at least 32 million metric tonnes a year
- address all deforestation driven by agricultural expansion to produce the commodities in the scope of the regulation, as well as forest degradation
For this, any operator or trader who places certain commodities on the EU market, or exports from it, must be able to prove that the products do not originate from recently deforested land or have contributed to forest degradation.
The EUDR applies to the following 7 commodities:
- cattle
- wood
- cocoa
- soy
- palm oil
- coffee
- rubber
The EUDR also includes some of their derived products (leather, chocolate, tyres, or furniture).
The EUDR commitments are in line with the European Green Deal, the EU Biodiversity Strategy for 2030 and the Farm to Fork Strategy.
Read more on the official EU webpage: https://environment.ec.europa.eu/topics/forests/deforestation/regulation-deforestation-free-products_en
Who must comply with the EUDR?
The EU Deforestation Regulation (EUDR) applies to both products that are produced within the EU and potentially exported, as well as products that are imported into the EU. And the EUDR is applicable to all countries within the European Union. This means that these countries must adhere to deforestation legislation and ensure that produced, imported, and exported products are deforestation-free.
The EUDR affects both large and small enterprises, including sole proprietorships.
And the EUDR applies to all market operators and traders who intend to import, export, or produce relevant products or commodities within the EU for the purpose of placing them on the market.
A market operator has more responsibilities under the EUDR than a trader. This is because traders utilise products and commodities that have already been assessed for due diligence earlier in the supply chain.
- Market operators must establish their own due diligence systems.
- Traders can use due diligence declarations from their suppliers.
However, large traders are subject to the same requirements as market operators.
For the Dutch market, the Nederlandse Voedsel en Waren Autoriteit (NVWA) supplies the tool the EUDR Regulatory Assistance Tool, “Regelhulp EUDR”, where you can check if and how the EUDR applies to your situation.
When will the EUDR enters into force?
First aim was to let the EUDR enter into force at the end of 2024. But the Commission has proposed giving concerned parties additional time to prepare. The reason for this is that, according to the European Commission, companies both outside and within the EU will need time to prepare and adjust to the regulation.
If approved, this would make the law applicable on 30 December 2025 for large and medium companies and 30 June 2026 for micro- and small enterprises.
Due diligence declaration for each shipment
When the EUDR has entered into force, you will need to create a due diligence declaration for each shipment. By submitting the due diligence declaration, you indicate that you meet all the requirements of the EUDR. The declaration will include information about your company and the origin of the products and raw materials.
You will have to create this declaration in TRACES, Trade Control and Expert System, a web application of the EU that connects veterinary and phytosanitary authorities in all EU countries and countries outside the EU. TRACES is currently being developed and will be active when the EUDR takes effect.
How can I prepare for the EUDR?
Most important is to implement a Due Diligence System (DDS). Because you have to demonstrate that the origin of your products is legal and traceable.
For the due diligence system, you undertake at least four actions:
- You collect data on the legal origin of the products
- You gather information about the geolocation where the product was grown, produced, processed, or where it was born or raised
- You conduct risk assessments to determine if products contribute to deforestation or degradation of forests
- You implement measures to ensure that the risk of trading illegal products is negligible.
Micro, small, or medium-sized traders, and micro, small, or medium-sized enterprises that only use raw materials already on the market are not required to implement a due diligence system.
In doubt? Use the EUDR Regulatory Assistance Tool to determine what applies to you.
If you are not required to maintain a due diligence system, but are still subject to the EUDR, you must:
- Keep track of which suppliers you purchase your products or raw materials from
- Record to whom you sell
- Pass on the reference numbers of your suppliers' due diligence declarations
- Retain these documents for five years
Integrating EUDR with existing CSRD and upcoming CSDDD reporting
And how does the EUDR relate to the CSRD and CSDDD? It turns out the requirements of the EUDR, the Corporate Sustainability Reporting Directive (CSRD), and the forthcoming Corporate Sustainability Due Diligence Directive (CSDDD) have significant overlap.
All three emphasize risk assessments and management, in areas such as environmental impact and human rights, within corporate operations and supply chains.
For CSRD reporting, companies are required to conduct a double materiality assessment, which involves identifying and evaluating the environmental, social, and governance (ESG) impacts, risks, and opportunities both within their operations and throughout their supply chains. This assessment helps determine the significance of various ESG topics for the organisation, including impacts on biodiversity, the workforce (including those in the supply chain), indigenous communities, and corporate conduct.
Similarly, the CSDDD mandates a detailed risk assessment focused on mitigating environmental and human rights risks. For companies involved in importing and exporting products covered by the EUDR, such as timber and soy, it is essential to address risks related to illegal deforestation, child labor, workers' rights, and corruption.
Given the shared focus on risk assessments across the EUDR, CSRD, and CSDDD, companies can benefit from identifying common elements in these requirements. By harmonizing the processes for data collection, risk evaluation, and mitigation, organisations can enhance their efficiency in preparing for these regulatory obligations.
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