The European Union Deforestation Regulation (EUDR) represents a significant milestone in environmental protection and sustainable trade practices.
This new regulation requires increased due diligence from companies that place goods linked to deforestation and forest degradation on the EU market.
In this blog post, we delve into the intricacies of the EUDR, shedding light on its scope, implications for businesses, and Interu's role in facilitating compliance.
Understanding the EUDR is not just about meeting regulatory requirements but also about fostering transparency, accountability, and responsible sourcing practices.
Let's embark on a journey to unravel the essence of the EUDR and explore how Interu empowers businesses to navigate this regulatory landscape effectively, as well as reap the benefits of improved traceability.
What is the EU Deforestation Regulation?
The European Union Deforestation Regulation (EUDR) is a pivotal legislative framework designed to combat deforestation and degradation and promote sustainable forestry practices in Europe.
Enacted in June 2023, the EUDR replaced the EU Timber Regulation (which was previously aimed at just EU Operators of timber) and represents a concerted effort by competent authorities to address the pressing environmental challenges of deforestation.
The EUDR comprises a comprehensive set of rules, standards, and guidelines to enforce deforestation legislation across member states. It delineates specific methods, criteria, and conditions under which forestry activities, including logging and land clearing, can be conducted legally and environmentally responsibly.
By defining these parameters, the regulation seeks to curb unsustainable practices that contribute to deforestation, thereby safeguarding vital ecosystems and biodiversity.
The significance of the EUDR extends beyond regulatory compliance; it embodies a commitment to combating the adverse effects of global deforestation and reducing greenhouse gas emissions on the environment and the EU's impact on global forests.
Forests are essential in regulating the global climate, acting as carbon sinks, maintaining soil fertility, and providing critical habitats for countless species. However, deforestation undermines these key functions, leading to soil erosion, increased risks of flooding, diminished carbon storage capacity, and habitat loss.
In light of these environmental challenges, the EUDR is a crucial first step towards reducing deforestation and promoting sustainable land use practices.
The regulation imposes stringent requirements on businesses operating into or from the EU, emphasising the need for transparency, accountability, and responsible stewardship of natural resources. However, 18% of the EU Timber Operators we surveyed, admitted to being unaware of any deforestation regulations.
Notably, the EUDR sets forth two key compliance deadlines: one for enterprises, which is the 30th December2024, and another for micro and small organisations, June 30th 2025.
These deadlines underscore the urgency and importance of adopting sustainable forestry practices to protect our forests and mitigate the adverse impacts of deforestation.
Which commodities does the EUDR apply to?
The European Union Deforestation Regulation (EUDR) casts a wide net in its application, encompassing a range of commodities that have a significant impact on deforestation and environmental degradation.
Here's a breakdown of the commodities to which the EUDR applies:
- Wood: Wood products, including timber products and wood-based materials, like paper and pulp, are among the current commodities covered by the EUDR.
- Rubber: Rubber, derived from rubber trees primarily cultivated in tropical regions, falls under the purview of the EUDR. Products can include (but are not limited to) tyres, shoes and manufacturing seals.
- Palm Oil: Pam oil, widely used in food, cosmetics, and biofuel industries, is also one of the commodities listed in the EUDR due to its significant environmental impact, and current contribution to deforestation and habitat loss.
- Soy: Soybeans and soy-derived products are decisive in various sectors, including animal feed, food processing, and biofuels.
- Beef: Beef and leather production is also subject to the EUDR's scrutiny.
- Coffee: Coffee, a globally consumed commodity, is included in the EUDR's scope due to its connection to deforestation in coffee-producing regions.
- Cacao: The EUDR also covers cacao, essential for chocolate production. It addresses concerns related to deforestation in cacao-growing regions.
How does the European Union Deforestation Regulation due diligence process work?
The European Union Deforestation Regulation (EUDR) outlines a structured due diligence process that companies must adhere to in order to comply with the regulation effectively.
Here are the key steps recommended by the European Commission:
- Collect the information: Article 9 of the Regulation specifies the information that companies need to collect, including a description of the commodity or product, the country of production, and the geographical coordinates of the place of cultivation. This step is significant for establishing transparency and traceability within the supply chain.
- Conduct a risk assessment: Companies must verify and evaluate the risk of non-compliant products entering their supply chain (high risk, standard risk, or low risk). This risk assessment is conducted based on the criteria outlined in Article 10 of the regulation, which includes factors such as the presence of protected areas, deforestation rates, and compliance with relevant sustainability standards.
- Risk mitigation efforts: Following the risk assessment, companies must implement mitigation efforts to address identified risks. These efforts may include sourcing from certified sustainable suppliers, implementing sustainable farming practices, or establishing traceability mechanisms. Article 11 of the regulation mandates that these risk mitigation efforts be documented in the due diligence statement.
It's important to note that companies must submit a declaration to the Information System confirming that they have successfully completed their due diligence.
This declaration serves as a formal acknowledgement of compliance with the EUDR and demonstrates the company's commitment to responsible sourcing and environmental stewardship.
What does EUDR mean for companies?
The European Union Deforestation Regulation (EUDR) extends its reach far beyond European borders, impacting companies globally that market or export products linked to deforestation into or from the EU market.
However, the lack of preparedness not only poses environmental risks but also carries significant economic and regulatory implications. For instance, non-compliance with the EUDR could incur penalties of up to 4% of European revenues, translating into potential fines amounting to hundreds of millions of euros for some of Europe's largest organisations.
Here are the key implications of the EUDR for companies:
- Due diligence requirement: Companies must perform due diligence to ensure that the products they market or export do not originate from deforested or degraded land. This entails a comprehensive assessment of the supply chain to verify the sustainability and legality of sourced products, including tracing the origin of raw materials.
- Compliance with relevant legislation: Besides meeting the requirements of the EUDR, companies must ensure that their products comply with relevant legislation in the country of production. This includes adherence to environmental regulations, respect for human rights, and compliance with labour standards.
- Challenges faced by companies:
- Identifying high-impact products: One of the challenges companies face is identifying products and raw materials with the highest environmental impact. This requires thorough analysis and assessment to prioritise sustainability initiatives and mitigate risks associated with deforestation.
- Adapting to regulatory changes: Companies must build implementation plans and due diligence processes for their supply chains to regulatory changes. This includes staying updated with evolving legislation, incorporating new sustainability standards, and adjusting practices accordingly to ensure ongoing compliance.
- Suppliers' support for traceability: A significant 58% of the respondents of our Deforestation Regulation Readiness Report indicate their suppliers' reluctance or incapacity to assist in enhancing traceability efforts, posing a major obstacle to compliance and operational transparency.
Navigating the requirements of the EUDR demands proactive measures, collaboration across supply chain stakeholders, and a commitment to sustainable practices.
Companies that embrace these challenges as opportunities for positive change can comply with regulatory mandates and enhance their reputation, build consumer trust, and contribute to global efforts towards environmental conservation and responsible business conduct.
What are the specifics of EUDR where Interu can help?
Interu plays a vital role in enhancing the traceability and due diligence processes mandated by the European Union Deforestation Regulation (EUDR).
Here's how Interu contributes to addressing the specific requirements of the EUDR:
- Enhanced traceability: Interu's technology enables comprehensive traceability throughout the supply chain, allowing companies to track the origin and journey of products from source to market. This level of transparency is crucial for verifying compliance with the EUDR's sustainability and legality standards.
- Due diligence support: Interu facilitates due diligence efforts by providing a robust platform for securely collecting, storing, sharing and verifying products' sustainability credentials. This includes gathering essential information, such as commodity descriptions, countries of production, geographical coordinates, and risk assessment data, as required by the EUDR.
- Partnership collaborations: Interu recognises the complexity of addressing deforestation challenges and acknowledges the need for best-of-breed solutions to collaborate effectively. Through strategic partnerships with entities like Orbify and DoubleHelix, Interu leverages synergies and expertise to strengthen its traceability capabilities and enhance due diligence processes.
- Client information integration: Interu's platform allows for seamless integration of additional client-specific information for EUDR compliance. This flexibility enables companies to gather and incorporate relevant data points tailored to their unique supply chain requirements, ensuring thorough due diligence practices.
As companies navigate the intricacies of EUDR compliance, Interu serves as a trusted partner in streamlining traceability efforts, enhancing due diligence practices, and fostering collaboration across industry stakeholders.
By leveraging advanced technologies and strategic partnerships, Interu empowers businesses to meet the specific requirements of the EUDR while promoting sustainability, transparency, and responsible sourcing practices.
Interu enhances traceability by allowing users to securely collect, prove and share information across complex supply chains, without compromising privacy. Contact us to know more.
