DEEP DIVE: The EU Deforestation Deadline is Nearly Here: Are Businesses Ready?

(Editor's Note: 3E is expanding news coverage to provide customers with insights into topics that enable a safer, more sustainable world by protecting people, safeguarding products, and helping businesses grow. DEEP DIVE articles, produced by reporters, feature interviews with subject matter experts and influencers as well as exclusive analysis provided by 3E researchers and consultants).

The destruction of the world's forests is one of the most critical environmental issues we face today. According to research from the European Union (EU), the world lost 1.3 million square kilometers of forest between 1990 and 2016. That translates to losing a forest area the equivalent of 800 football fields every hour. Further, since forests absorb carbon dioxide and other greenhouse gases (GHG) from the air, clearing forests releases those emissions back into the environment, accounting for approximately 10% of all GHG emissions worldwide.

The EU Regulation on Deforestation Free Products (EUDR) is a response to this growing global crisis. Also known as Regulation (EU) 2023/1115, EUDR targets products on the EU market, as well as those exported from the EU market, that originate in whole or in part from land impacted by deforestation or forest degradation, human-induced or otherwise, that occurred after 31 December 2020. It came into force on 29 June 2023 and will apply to all EU member states on 30 December 2024.

Any operators who place products on the EU market or export from the EU market must be able to prove due diligence to ensure the product does not originate from deforested land or has contributed to forest degradation. They must also ensure that products comply with the relevant legislation of the originating country of production, including legislation relating to the following:

• Land use
• Labor rights
• Human rights protected under international law
• The Rights of Indigenous Peoples as defined by the United Nations (UN), and
• Anti-corruption.

Penalties for noncompliance include fines proportionate to environmental damage, confiscation of products, and temporary exclusion from the public procurement process.

EUDR covers the following seven relevant commodities: cattle, cocoa, coffee, oil palm, rubber, soya, and wood.

It also applies to products derived from the relevant commodities, including books, leather, chocolate, and wood products.

Legislators estimate EUDR will reduce EU carbon emissions resulting from EU consumption and production of relevant and derived commodities by 32 million metric tons per year.

Contributors to Global Deforestation

EUDR is another contribution to EU efforts to curb deforestation. These efforts include the 2019 Commission Communication on Stepping up EU Action to Protect and Restore the World's Forests, the EU Green Deal, the EU Biodiversity Strategy for 2030, and the Farm to Fork Strategy.

The biggest contributor to deforestation is agriculture. According to the EU analysis, agriculture is responsible for 80% of global deforestation, with beef farming responsible for 41% of all clearing. Soy and palm oil farming account for one-fifth of all forest clearings. Additional contributors include urban expansion, mining, urban and infrastructure development, and diversion of forest for biomass production.

Forest degradation can be the result of several factors, including natural disasters and pests. As climate change becomes more acute, forest fires will increasingly consume larger portions of the world's forests. In Canada in 2023, more than 45.7 million acres burned in more than 6,500 fires.

In addition, wood will continue to be a primary fuel source for many people. The EU estimates that by 2030, more than 2.8 billion people will rely on it as a primary fuel source compared to approximately 2 billion today, which will further deplete the world's forests.

Sustainability experts hope that EUDR's stringent requirements for relevant commodities will help to reduce global deforestation and the associated human rights abuses in the global supply chain. “Implementing these due diligence requirements can help identify and mitigate risks such as illegal logging, habitat destruction, and human rights abuses,” said Cassidy Spencer, Sustainability Regulatory Analysist at 3E. “It also promotes transparency and accountability throughout the supply chain, forcing businesses to potentially reevaluate their current practices.”

Are Companies Ready for EUDR?

The scope of the due diligence requirements for EUDR is extensive. Companies need to provide a due diligence statement to their national authority and make the reference numbers for those statements available along the entire supply chain. Companies in non-EU jurisdictions are expected to reply to requests for that information. National authorities, traders, and some portions of the public will also have access to the due diligence statements.

Companies must provide evidence of due diligence for each product component along the supply chain. This includes geolocation information for every area involved in production of the relevant commodity or its derivative. For example, if a product has components derived from several locations, the due diligence documentation must include geolocation for every plot of land that contributed to the product. For cattle, this would include every location involved in birthing, raising, feeding, slaughtering, and processing.

Given EUDR's complexity, companies should already be preparing to meet the requirements for the EUDR to come into application in December. However, according to 3E's Cassidy Spencer, this message may not have reached every stakeholder. “Many companies may be underestimating the scope and intricacies of this regulation,” said Spencer. “It applies not only to those directly involved in the production of commodities like palm oil, cocoa, and timber, but also to those producing derived products such as chocolate and furniture. Additionally, the regulation extends to the cattle industry, requiring companies to ensure due diligence even for their cattle feed. It’s essential to recognize that this regulation encompasses the entire supply chain.”

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