EUDR (EU Deforestation-free Regulation)
The EU Deforestation-free Regulation (EUDR) is a strategic legislative initiative by the European Union designed to stop deforestation, reduce GHG emissions and control agriculture-led deforestation or degradation associated with EU consumption patterns. It imposes stringent due diligence requirements on companies importing or trading key commodities, including soya, cattle, rubber, oil palm, wood, cocoa, and coffee, ensuring these products are not linked to deforestation activities.
This regulation sets the liability on the importers and traders inside the European Union to demonstrate conclusive and verifiable data that the relevant commodities are deforestation-free and produced in accordance with local legislations and land use permits. The EUDR underscores the EU's commitment to environmental stewardship and climate change mitigation by minimizing the ecological footprint of its market activities.
The European Union wants to protect Primary forests because they are unique and irreplaceable. Plantation forests and planted forests have a different biodiversity composition and provide different ecosystem services compared to primary and naturally regenerating forests. This regulation also takes in account the protection of human rights and the rights of indigenous people and local communities, both in and outside the Union.
The EUDR (EU Deforestation-Free Regulation) is now in force since the 29th of June 2023 and repeals EUTR (EU Timber regulation). Importers and traders inside the EU have to comply with the new rules by the 30th of December 2024.
YOUR CHALLENGES
In December 2022, the EU and its member states signed an agreement to take measures to halt deforestation and forest degradation caused by imported products.
There are significant challenges with the implementation of EUDR:
- Supply Chain Complexity: Tracking and verifying product origins can be intricate and costly due to the multi-tiered nature of global supply chains, involving numerous intermediaries, producers and processors.
- Data Availability and Accuracy: Ensuring accurate and reliable data on commodity sources and geolocation requires robust data collection and verification systems, posing a significant challenge.
- Compliance Costs: Compliance to EUDR requires substantial financial investments in setting up the management system, monitoring, reporting, and verification processes. These costs can be particularly burdensome for small and medium-sized enterprises (SMEs).
- Technology Integration: Implementing advanced technologies, such as supplier traceability combined with satellite data on deforestation, requires both technical expertise, integration and significant capital investment.
- Supplier Onboarding: Ensuring supplier compliance to EUDR requires close collaboration, potentially renegotiating contracts, or sourcing new suppliers.
- Legal and Regulatory Understanding: Thorough understanding of EUDR requirements, follow amendments and mitigation timeline is resource intensive and may require specialized dedicated legal expertise as well as forestry expertise.
- Market Dynamics: Adjusting to EUDR compliance may impact market competitiveness, as companies outside the EU, not subject to these regulations, may offer lower-cost alternatives.
- Reputational Risk: Non-compliance with EUDR can result in significant reputational or brand damage, legal and financial penalties, and loss of consumer or client trust, making full compliance imperative.
To address these challenges, operators and traders need to prepare strategic and risk management planning, invest in technology, expertise and robust supplier traceability management systems.
Typically penalties for not complying with EUDR are a minimum 4% of the operator (importer) or trader’s Union-wide previous financial year revenue, confiscation of relevant products, confiscation of revenues gained, temporary exclusion from public procurement, temporary prohibition for trading or selling the relevant product, prohibition from exercising the simplified due diligence etc.
WHAT NEEDS TO BE DONE TO MEET THE REQUIREMENTS?
Depending where your company stands in the supply chain when one relevant commodity is first placed on the European market, you need to:
- Understand how the regulation applies to your company
- Perform a gap analysis towards EUDR compliance
- Create a management system that includes data collection, supplier traceability, geolocation origins of the relevant commodities, risk management, risk mitigation, due diligence, reporting, data storage, and connection to EU Commission information system
- Verify the conformity of the management system
- Perform supplier audits in medium or high-risk regions
WHO IS AFFECTED BY THE EUDR REGULATION?
All operators (importer) or traders working in the European market that import or export the following families of products: cocoa, coffee, soy, palm oil, cattle, wood, rubber. EUDR obligations differ depending on where the company stands in the downstream supply chain and on the size of the company.
FACTS:
HOW WE SUPPORT YOU
Bureau Veritas offers a set of end-to-end, modular and technology agnostic services, to nurture traceability and transparency in your supply chain, thanks to our global forestry experts, relevant commodities experts, experienced advisors and regulatory experts in contact with the EU Commission.
Bureau Veritas Certification can support EUDR due diligence process by providing third party off-site and/or on-site audits of the relevant commodities’ suppliers data. Our forestry and relevant commodities experts can verify your supply chain data and ensure accuracy, traceability, and compliance to EUDR requirements. Supplier audits in medium or high-risk regions, by a worldwide recognized company like Bureau Veritas, will be a key element that will help shape trust in your due diligence process.
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