Understanding the EU Deforestation Regulation (EUDR)

Regulation

June 29, 2024

12 minutes read

Understanding the EU Deforestation Regulation (EUDR)

CEO and Founder of DataContexts

Sven is an expert in merging sustainability with technology, focusing on revolutionizing retail through AI-driven solutions. With over a decade...

The EU Deforestation Regulation, is an important step towards protecting the world’s forests. The Regulation requires companies to take action to prevent deforestation and forest degradation in their supply chains, and to ensure that any coffee, cocoa, soy, palm oil, cattle (beef, leather), timber and natural rubber products they purchase are legally and sustainably sourced.

On December 6, 2022, the EU agreed to a new law that prevents companies from selling or sending out commodities from the EU that are associated with deforestation and forest degradation.

Deforestation and forest degradation are major causes of climate change and the loss of biodiversity, two of the most significant environmental problems of this time.

According to the FAO (Food and Agriculture Organization of the United Nations), between 1990 and 2020, 420 million hectares of forest were lost due to deforestation. This means that the world lost an area of land three times the size of France.

The IPCC (Intergovernmental Panel on Climate Change) states that 23% of total human-caused greenhouse gas emissions come from agriculture, forestry, and other land uses. 11% of emissions are from deforestation and other land uses, while the remaining 12% are direct emissions from agriculture (like livestock and fertilisers)

The goal of the EU Deforestation Regulation (EUDR) is to reduce greenhouse gas emissions from deforestation, as well as help in the worldwide effort to protect biodiversity, by promoting the consumption of deforestation-free products and decreasing the EU’s influence on global forests.

Who is EUDR relevant for

The short answer is that if you import, produce or sell a product based on the 7 raw materials, it is relevant to you. You may not get regulated or fined, but your ability to cooperate with other actors will be greatly reduced if you don’t take EUDR seriously.

The European Union Deforestation-free Regulation (EUDR) defines those obligated to adhere to the regulation as “operators” and “traders”. Operators (i.e. companies that first place products on the single market) must conduct due diligence on their supply chains to ensure they are free of deforestation and forest degradation, while traders must store and share information on their supply chain to operators.

Large traders are also included as operators due to their large-scale influence and are therefore required to undertake a full due diligence and risk monitoring process.

Some may already be familiar with the similar EU Timber Regulation from 2010, which was the forerunner of the EUDR.

Why exactly are these 7 specific agricultural commodities regulated

Together, these seven raw materials account for 57 percent of all tree cover loss in connection with agriculture between 2001 and 2015.

Commodity Deforestation (2001-15, Mha)
Cattle (pasture as a land use) 45.1
Palm oil 10.5 (of which 6.2 were direct)
Soy 8.2 (of which 3.9 were direct)
Cocoa 2.3
Plantation rubber 2.1
Coffee 1.9
Plantation wood fiber 1.8

Source World Resources Institute

Of the seven commodities analyzed, cattle replaced the most forest by far—cattle pasture now occupies some 45.1 million hectares (Mha) of land deforested between 2001 and 2015, accounting for 36 percent of all tree cover loss associated with agriculture during the time period. It is therefore essential that cattle production be regulated in order to protect forests. Oil palm ranks second (10.5 Mha), followed by soy (8.2 Mha), then cocoa, plantation rubber, coffee, and plantation wood fiber (all around 2 Mha each; though the results from rubber and wood fiber only cover a subset of countries). Given the magnitude of deforestation associated with these commodities, it is clear that they must be regulated in order to protect forests and maintain sustainable land use.

How to be compliant with EUDR

In order to comply with the regulation, the companies must prioritize and work with the following topics:

  • Policies
  • Data Collection
  • Risk assessment
  • Risk mitigation
  • Training
  • Reporting

By complying with the EU Deforestation Regulation, companies can demonstrate their commitment to sustainability and environmental protection, helping to protect forests and the species that depend on them.

Our clients often ponder, “How can I effectively manage this complexity? Is there a way to ensure the process does not become too costly or chaotic?”

Therefore, here you have our recommendations on how to comply with the 6 topics.

Policies

Communication is a huge part of the work with Due Diligence in your Supply Chain, it is therefore important to have policies drawn up as Code of Conduct. Just as it is important to get them signed and have version control of what they have signed. Communication must go through all links in the chain, just as it is very likely that the whistleblower solution must be communicated in line with the EUDD.

Therefore, develop policies to communicate so that you can monitor and reduce the risk of illegal deforestation in their supply chains.

If you are using prduct’s contract module, you can easily create policies as Code of Conduct, requirer your suppliers to sign them and get an overview of who has signed what and which versions.

Data Collection

Gathering data from your supply chain is essential if you are going to automate any of the risk monitoring tasks. Here you need to be aware of several things in order not to fall into time-consuming traps, these can be topics such as: 1) How do you best share relevant data back and forth in the supply chain, 2) what data should you collect from your supply chain, 3) how do you ensure that the supply chain delivers this data to you and 4) how to best use data when you receive it.

EUDR has several requirements related to collecting data from your product´s supply chain, including the country, geo positioning and time period of primary production.

If you are using prduct’s Sustainability Data Management, you are able to collaborate with your suppliers on ESG data. You can request whatever data is needed for your company to be compliant with regulations, certifications or voluntary goals.

Risk assessment

Depending on the size of your assortment, performing risk assessments can be complex to extremely complex. Basically, the probability of error is incredibly high, as few have the full overview of synonyms for coffee, cocoa, soya, palm oil, cattle, timber and natural rubber and in addition the resulting products and components that can be manufactured from the same Raw Material.

Also be aware that the raw materials can also be used in a wide range of product categories that you might not immediately think of. In addition to food, furniture and building materials, eg. Palm oil is often used in cosmetics.

Once the relevant product is identified, you can start your assessment of the collected data to identify the risk of deforestation, forest destruction and illegality associated with the product.

You have to establish a due diligence system that includes mapping, risk assessment of suppliers to ensure that your coffee, cocoa, soy, palm oil, cattle, timber and natural rubber-based products are from legal and sustainable sources.

If you are using prduct’s Sustainability Data Management, you are able to use our assortment scanning & monitoring module, that identify more than 1.250 EUDR relevant materials based on their ingredient or material list. It also generates a report for you with suppliers listed by risk and data gaps and allows you to obtain missing information from the supplier by issuing a login to report and/or alert existing on the platform for missing data.

Risk mitigation

Deforestation Risk Mitigation is an important part of ensuring the sustainability of forests and their associated ecosystems. There are a number of measures that can be taken to reduce deforestation and forest degradation in supply chains. One of the most important is to develop a monitoring and reporting system to track progress in reducing deforestation and forest degradation in their supply chains. This system should include regularly scheduled assessments of the condition of the forests, reporting of any illegal activities, and a system for reporting any potential threats to the forests.

Additionally, companies should develop and implement policies that promote sustainable practices, such as sustainable forestry management and the use of timber from certified sources.

Finally, companies should ensure that any suppliers are adhering to their sustainability policies and taking necessary steps to reduce deforestation and forest degradation in their supply chains.

By implementing these measures, companies can reduce the risk of deforestation and forest degradation in their supply chains and promote a more sustainable future with deforestation-free products.

If you are using prduct’s Sustainability Data Management, you are able to use our assortment scanning & monitoring module, you can generate a report on your suppliers listed by risk and data gaps, it also provides a way to collect missing information from the supplier by issuing a new user or request an existing user on the platform to submit missing data.

Training

Training staff on how to implement policies and due diligence systems is essential for any organization. It is important to ensure staff are aware of the policies and procedures and understand the importance of following them.

The first step to training staff on how to implement policies and due diligence systems is to provide them with an overview of the policies and procedures. This should include an explanation of the purpose of the policies and procedures and how they should be followed. It should also include information about the consequences for failing to comply with the policies and procedures.

The next step is to provide staff with examples of how the policies and procedures should be applied in practice. This may include scenarios that staff can work through to help them understand how the policies and procedures are applied in different situations.

Once the overview and examples have been provided, staff should then be given the opportunity to practice applying the policies and procedures. This can be done through role-play, simulations, or other methods. During this practice, staff should be given feedback on their performance and be given the chance to make any corrections or adjustments as needed.

Finally, it is important to provide ongoing training and support to staff. This can include refresher sessions to ensure staff are always up to date on the policies and procedures and any changes that may have been made. It is also important to provide support to staff when they are faced with an unfamiliar situation and need guidance on how to apply the policies and procedures.

By providing a comprehensive training program on how to implement policies and due diligence systems, staff will be better equipped to follow the policies and procedures and provide the best possible service to their customers.

When using prduct, we will provide you with the necessary training material and hold regular seminars. If further help is needed, you can always contact one of our many implementation and training partners.

Reporting

Reporting on deforestation is an important responsibility for companies operating in the European Union (EU). The EU requires operators and larger traders to be transparent about their work and to publish information on digital channels such as their websites. This transparency is important to ensure that companies are accountable to their stakeholders, customers, and the public.

Transparency helps to ensure that companies are not contributing to the destruction of forests and that their activities are not adversely impacting the environment. It also helps to ensure that companies are following the necessary regulations and are taking steps to reduce the impacts of deforestation.

Reporting on deforestation also helps to create trust and confidence in the company’s operations, which can help to build customer loyalty. By providing open and transparent information on their operations, companies can show that they are taking steps to protect the environment and to ensure that their activities are not contributing to deforestation.

By reporting on deforestation, companies can also demonstrate their commitment to sustainability and environmental stewardship. This can give customers the assurance that the company is taking the necessary steps to reduce the impacts of deforestation and to ensure that their operations are sustainable and environmentally responsible. This can help to build customer loyalty and trust in the company’s operations.

When using prduct, you can ensure transparency and compliance with regulatory requirements with our tools. Our website and mobile labels tool will help you create a transparent product journey for your customers, while taking any trade secrets into consideration. Find the right balance between compliance and customer satisfaction.

Key Requirements

  • Due Diligence: Companies must perform thorough checks on their supply chains to ensure compliance. This includes collecting and verifying data about the origin of the commodities and their production practices.
  • Traceability: Businesses need to trace the entire journey of their products from the source to the market, ensuring transparency and accountability.
  • Compliance Reporting: Regular reports demonstrating compliance with EUDR standards must be submitted. These reports should include detailed information on sourcing practices and measures taken to prevent deforestation.

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