Coming into force on 30 December 2024, the EU Deforestation Regulation (EUDR) aims to reduce the EU’s impact on global deforestation, forest degradation, and biodiversity loss. It will promote deforestation-free supply chains, reduce the EU’s contribution to greenhouse gas emissions, and protect human rights and the rights of indigenous people.
It has been in place since 29 June 2023, however compliance with the regulation will become mandatory as of the end of 2024.
At its core, the EUDR requires companies trading in seven key commodities and their derived products to prove that these goods do not originate from areas threatened by deforestation, recently deforested areas, or contribute to forest degradation.
Commodities in focus
The EUDR applies to a wide range of products made from commodities associated with deforestation, including cattle, cocoa, coffee, oil palm, rubber, soy, and wood.
This, therefore, encompasses everything from beef and leather to furniture, packaging, boards, and other wood or paper products, as well as soy flour and oil, chocolate, coffee, palm oil and its derivatives, and rubber products such as tyres.
‘As a major economy and consumer of these commodities linked to deforestation and forest degradation, the EU is partly responsible for this problem and it wants to lead the way to solving it,’ the European Commission said in a statement.
Impact on business
The regulation is expected to have significant implications for businesses in these areas, requiring them to conduct more extensive due diligence on their supply chains. Regulatory scrutiny will be intense, and large volumes of data on products and suppliers will be needed to comply.
The regulation affects both large companies and SMEs, though obligations for the latter are delayed until 30 June 2025.
Failure to comply with the EUDR standards could result in punitive fines and reputational damage. Fines could amount to 4% of the company’s turnover in the EU, and measures for the confiscation of products and income may be enforced. Additionally, the EU Commission will publish a ‘name and shame’ list on its website, including the company’s name, date, and a summary of the infringement, along with the penalties imposed.
Lasting effects
Once the EUDR is mandatory, products will be prohibited from entering the EU market unless it is confirmed that they do not contribute to deforestation or forest degradation; have been produced according to environmental regulations (including land-use rights, forest management, labour, tax, and human rights laws); and are covered by a due diligence statement.
The European Commission states that the EUDR will reduce carbon emissions caused by EU consumption and production of the relevant commodities by at least 32 million metric tonnes a year.
The European Commission has also mentioned that it will review the regulations and, if needed, may extend regulatory protection in the next few years to include commodities and products sourced from other threatened ecosystems, such as wetlands.
‘The EU is continuing to work with partner countries and companies to ensure a successful transition to deforestation-free supply chains,’ the Commission added.
Further information on the EU Deforestation Regulation (EUDR) can be found here.
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