From 30 December 2024, companies that place, make available, or export certain commodities and products on or from the European Union market will need to comply with the requirements of the EU Deforestation Regulation (EUDR).
Deforestation is a major environmental issue with far-reaching impact, including biodiversity loss, climate change, and disruption of ecosystems. It’s also a business-critical issue with economic consequences. For food and beverage companies, deforestation is a supply chain problem. Solving it will require statistical data with capabilities for supply chain mapping.
In this article, we will explore the requirements of the EU Deforestation Regulation (EUDR).
What is EUDR?
The European Union has introduced the EUDR to curb deforestation and promote sustainable practices in the supply chains of certain commodities. Food producers (Operators) and Traders doing business in the EU will need to prove there was no deforestation involved for key commodities and derivatives.
The EUDR replaced the EU Timber Regulation (EUTR), which covered a more narrow range of commodities, and of those, it covered only the trade of illegally produced commodities. The new directive prohibits products that can’t be proven “deforestation-free,” even if they were produced legally.
Deforestation-free means the products come from plots of land where no deforestation or forest degradation has occurred since 31 December, 2020. The EUDR defines these terms as follows:
- Deforestation: The conversion of forest to agricultural use, whether human-induced or not
- Forest: Land spanning more than 1.2 acres with trees higher than 16.5 feet and a canopy cover of more than 10%
EUDR Requirements
Relevant commodities and products produced are not to be placed, made available, or exported on or from the market unless they meet the following three conditions:
- They are deforestation-free
- They have been produced in accordance with the relevant legislation of the country in which they’re produced
- They are covered by a due diligence statement indicating no more than a negligible risk of non-compliance
💡 The EUDR requires that products are produced in accordance with the relevant legislation of the country of production concerning the legal status of the area of production in terms of:
- Land use rights
- Environmental protection
- Forest-related rules
- Third parties’ rights
- Labour rights
- Human rights
- The principle of free, prior, and informed consent (FPIC)
- Tax, anti-corruption, trade, and customs regulations
It is important to note that companies must publicly report on their due diligence system annually. They must also keep all documentation related to the due diligence for at least five years, and make it available to the relevant authorities upon request.
EU regulation on deforestation-free products
The deforestation regulation applies to seven key commodities associated with deforestation and their relevant products: cattle, cocoa, coffee, oil palm, rubber, soya, and wood. A complete list of relevant products can be found in Annex 1 of the regulation.
Products that are not included in Annex 1 are not subject to the requirements of EUDR, even if they contain relevant commodities in the scope. For example, products like soap are not included even if they contain palm oil. Goods produced entirely from material that has completed its lifecycle and would otherwise have been discarded as waste are also exempt.
The directive applies to relevant products whether they are produced in the EU or imported.
Who is affected by EUDR?
EUDR requirements apply to Operators and Traders doing business in the EU. An Operator is any natural or legal person who, in the course of a commercial activity (defined as distribution for commercial or non-commercial consumers, or for use in the business of the Operator or Trader itself) places relevant products on the EU market or exports them.
Traders is how the regulation refers to any person in the supply chain other than the Operator who, in the course of commercial activity, makes relevant products available on the market.
Operators and Traders that are not small- and medium-sized enterprises (SME) must exercise due diligence and submit a corresponding due diligence statement. If a due diligence statement has previously been submitted for a product or part of a product, the Operator or Trader may refer to it in their due diligence statement after ascertaining that the due diligence has been exercised. SME operators may refer to previously submitted due diligence statements.
It is important to note that an Operator or Trader that refers to a previously submitted due diligence statement retains responsibility for the compliance of relevant products.
EUDR due diligence
Unlike the EU’s Corporate Sustainability Reporting Directive (CSRD) and its associated Double Materiality Assessment, the EUDR does regulate how you do your due diligence. SME traders may rely on statements obtained from the Operators or Traders who supply them with the products. Everyone else must carry out due diligence and provide a corresponding due diligence statement for each product they place, make available, or export on or from the EU market.
CSRD Reporting
Preparing for CSRD reporting? Check out our guide on how to prepare your CSRD report; the timeline, the report format, and expert tips on drafting your CSRD report.
What are my due diligence obligations as an EU operator?
1. Comprehensive information collection
The regulation requires gathering comprehensive information, data, and documents as referred to in Article 9 proving that the relevant products comply with the three core requirements of the directive — that they are deforestation-free, have been produced in accordance with the relevant legislation of the country of production, and are covered by a due diligence statement.
Required information includes a description of and the respective quantities of relevant products, the country of production, evidence of legal harvest, and adequately conclusive and verifiable information that the products are deforestation-free, among others.
A key step in this process is obtaining the geographic coordinates of the plots of land where the relevant commodity was produced. If an Operator or Trader is unable to collect the required information, they must refrain from exporting or placing the relevant product on the market.
2. Risk assessment
The second step is to feed the information gathered in step one into the risk assessment pillar of the Due Diligence System to verify and evaluate the risk of non-compliant products entering the supply chain. There are 14 criteria, all of which can be found in Article 10 of the regulation. Operators must demonstrate (1) how the information gathered was checked against the risk assessment criteria and (2) how they determined the risk.
With the ability to identify, tag, and assess the relevant products and commodities in the supply chain against the listed criteria, CarbonCloud is well positioned to help with the risk assessment portion of the due diligence. CarbonCloud provides global deforestation data for carbon emissions and has the data you need to assess the presence of forest in the country of production, presence of deforestation in the country of production, supply chain complexity, and EUDR risk scores, while also accounting for certification schemes in your supply chain.
3. Risk mitigation
In the case that more than a negligible risk of non-compliance is found during step two, Operators and Traders must take adequate and proportionate mitigation measures to make sure that the risk becomes negligible. The full list of measures is described in Article 11 of the regulation, including policies, controls, and procedures such as model risk management practices, reporting and record-keeping, and internal control and compliance management.
Due diligence requirements are simplified if all commodities and products come from low-risk countries. However, at the time of this writing, risk assessment by country from the Commission is delayed. This means that for the foreseeable future, the other aspects of the risk assessment are key.
A comprehensive summary of the information to be contained in the due diligence statement can be found in Annex II of the regulation.
EU deforestation regulation timeline
The EUDR implementation date is from 30 December 2024 for all companies doing business in the EU, excepting micro and small enterprises, for which implementation is from 30 June 2025.
Considering the large volumes of data needed to prove compliance, the time to start preparing is now. Understanding the legal obligations of the EUDR and ensuring you have the right infrastructure in place for data gathering and supply chain mapping should be an immediate priority for food and beverage companies.
EU deforestation regulation summary
Due diligence and the corresponding due diligence statements required for each product placed or made available on the EU market, or exported from it, must follow the prescribed method. The primary responsibility lies with the company placing the product on the market, meaning that SME Operators or Traders who refer to a previously submitted due diligence statement for the relevant product must still confidently ascertain that the due diligence was exercised.
Early planning is needed to take the necessary actions in the allotted time frame. The EU Deforestation Regulation’s scope is far-reaching, and for good reason. Its implementation is expected to help limit greenhouse gas emissions and limit biodiversity loss, which can help build resilience in supply chains.
At its core, the EUDR is an opportunity for food and beverage companies to reassess their supply chains and make a step change towards a more sustainable business model. (As are all ESG reporting frameworks.)
CarbonCloud can help you assess deforestation risk, engage with and map your supply chain, and build scenarios to help you understand the impact of changing the source of an ingredient. Still have questions? We can help you prepare your business for compliance — contact our team of experts today.
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