The EUDR imposes unprecedented due diligence obligations on companies to protect forests around the globe. The IntegrityNext EUDR Solution helps unravel the challenges and ensure compliance with minimal effort.
Large-scale deforestation and forest degradation are key drivers of two of the greatest challenges of our time, which are inextricably linked: Climate change and biodiversity loss.
As part of the Green Deal, the EU has set out to eliminate deforestation from global supply chains and promote the adoption of more sustainable land-use practices. This paved the way for the EU Deforestation Regulation (EUDR), which entered into force on June 29, 2023. Article 3 of the EUDR mandates that certain commodities and related products can no longer be placed or made available on the EU market or exported, unless they are:
The latter includes local laws on land use rights, environmental protection, timber harvesting, human and labor rights, the principle of free, prior and informed consent (FPIC), and anti-corruption, among others.
The EUDR covers seven commodities and some derived goods that are associated with high levels of deforestation and forest degradation in different parts of the world (see Annex I of the Regulation for the full list). They include:
All companies importing or exporting these products to/from the EU, fall under the EUDR. There are no restrictions on the scope of application in terms of minimum product quantities or values and, unlike with most EU sustainability legislation, there are no revenue or employee thresholds.
Among the industries most impacted are agriculture, automotive, chemicals, food and beverages, energy, manufacturing, packaging, and textiles. Note that the scope of commodities and related products may be expanded in the future.
The EUDR also particularly affects suppliers in producing countries, including smallholder farmers and indigenous communities. The new standards are an enormous challenge for them, for example in terms of land use documentation and sustainable agricultural practices.
In-scope companies must implement a robust due diligence system to ensure compliance with the EUDR. Tracing and verifying the origin of products is at the core of these efforts. Companies must provide geographic data on the production areas to demonstrate that the land has not been subject to deforestation or degradation after the cut-off date of December 31, 2020.
The due diligence obligations fall into four main categories. Data collection and verification (EUDR Article 9), risk analysis (Article 10), risk mitigation (Article 11), and documentation (Article 12):
Required data includes the country of origin, geographic coordinates of the production areas, supplier, proof of legal harvest, product HS code and quantity, and more. This information feeds into the subsequent risk assessment to verify and evaluate the risk of non-compliant products entering the supply chain. If companies identify relevant risks, they must take adequate mitigation measures to address them.
Companies have to maintain accurate records and report annually on their due diligence system and processes. The obligations apply to both operators and traders, with different requirements for SMEs and non-SMEs.
The EUDR puts significant strain on companies’ resources. The complexity of many supply chains can severely compound data collection and risk analysis, two fundamental requirements of the EUDR. Many companies struggle to obtain and manage all the data, including information on the exact geolocation of production areas. Traceability is at the heart of the regulation and poses major challenges, such as tracking what happens on the ground.
As with most due diligence regulations, companies with good visibility into their supplier networks and prevailing sustainability practices typically have a head start. Ongoing supplier monitoring and transparency initiatives therefore need to become routine tasks.
In addition, the need to comply with a multitude of laws in the countries of origin means that affected companies must research and keep abreast of local rules and either develop internal expertise or rely on external (legal) support. Key questions for companies are:
The key to success for some of the pain points outlined above is also an overarching challenge in and of itself: Ensuring close collaboration and continuous engagement with suppliers and building their capacities. This is particularly true for lower-tier suppliers, such as smallholders and local communities, who will need new skills and additional resources to help EU-based companies fulfill their legal obligations.
Important dates you should be aware of:
Useful resources:
If, in addition to the EU, you have operations in the United States or the United Kingdom, you should keep in mind that rules similar to the EUDR are in the works in these markets, namely the Forest Act of 2023 and the Forest Risk Commodities (FRC) regime, respectively. If you are subject to more than one of the regulations, it is advisable to take a holistic approach, ideally using the more stringent provisions as a benchmark. Since the EUDR is well ahead of the other two regulations, it lends itself well as a solid foundation.
IntegrityNext provides an end-to-end solution to help you meet all the legal and due diligence requirements of the EUDR with minimal effort:
Benefits of the IntegrityNext EUDR Solution:
To learn more about our solutions and how we can help you, please schedule a personal demo of our platform with one of our experts.
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