The EU Deforestation Directive (EUDR) is a new piece of legislation that aims to combat deforestation by minimizing the consumption of certain products in the supply chain. It requires you as a company to have a sustainable supply chain linked to wood, soy, rubber, coffee, cocoa, palm oil and cattle. Let's take a closer look at what you need to know about the law and how you can prepare.
The EU Deforestation Regulation (EUDR) - or the Deforestation Directive as it is also known - requires companies to be able to trace where certain products are grown and that they do not contribute to deforestation or forest degradation. If your company falls under the scope of the directive, you will need to carry out supplier due diligence and report the results in declarations showing your compliance.
So what exactly does the Directive aim to achieve, which companies are covered, what are the requirements and what can you do to prepare?
Deforestation - a global problem
In terms of trees, the World Wildlife Fund estimates that deforestation involves 15 billion trees annually. And that's not counting commercially grown trees. Almost all deforestation occurs in the tropics and has increased in recent years.
Deforestation is a problem that can be linked to the fight against climate change. The EU points out, among other things, that 23% of greenhouse gas emissions can be attributed to agriculture, forestry and related activities. Read more on the European Commission website.
Deforestation is also about protecting ecosystems. For example, forests - or areas in their immediate vicinity - are home to over half of the world's land-based animals and three quarters of all birds, according to the World Wildlife Fund.
It also includes a number of processed products derived from them. The legislation makes no distinction between products produced inside and outside the EU. They are treated to the same standard.
EUDR compliance: corporate responsibility and supplier requirements
The EU does not impose any direct requirements on non-EU producers, but instead targets companies sourcing the goods into the EU, requiring supplier due diligence. As they put it: "Operators are responsible for a thorough investigation and analysis of their own business activities."
So in the EUDR, the burden of proof is on you as a company importing or exporting from the EU - specifically, you who handle or trade in the products. It is up to you to show that there has been no deforestation or forest degradation.
As a company, you need to be able to state where the product comes from, for example where it is grown. By extension, this also means a requirement at the producer level, as companies need to have a dialog with suppliers to conduct supplier due diligence. Companies covered by the EUDR need to:
- Demonstrate that goods produced after 2020 have not contributed to deforestation or forest degradation.
- Demonstrate that production was in accordance with national legislation.
- Provide geo-coordinates of cultivation.
When does the EURD enter into force?
The EUDR came into force on June 29, 2023, but there is a delay until December 30, 2025 before you as a company need to follow the rules and demonstrate compliance. The delay is due to the postponement of implementation.
The extension comes after widespread criticism from several quarters: governments, the forest industry and developing countries. The criticism from the forest industry is that the law is administratively burdensome and that there are uncertainties about implementation linked to traceability. Swedish politicians have also agreed with the criticism and pointed to an unreasonable timeframe. Among other things, they have pointed out that the law restricts forestry and expressed the view that the issue should remain a national concern.
The massive criticism has also prompted the EU to create a website to bust what it considers to be myths linked to the law, a site called EUDR - Myths vs. Reality.
How businesses can prepare for the EUDR
The EUDR poses several challenges from a business perspective. It's not just about knowing what you buy and sell, but about being able to map your suppliers and ensure a sustainable supply chain. This process of supplier due diligence needs to be documented in an efficient and reliable way, to be reported in declarations. Another important aspect is to manage the risks identified in the due diligence process.
Perhaps the single most important is to review how the company works with its processes. As compliance requirements increase, this becomes more important. In the case of manual processes, for example, they present an obvious risk, as they are not only resource-intensive but can also pose quality risks.
The solution - the right system support
The solution is a system that supports the entire organization in its compliance efforts. A system support like the one Stratsys offers in the form of the product ESG due diligence - developed precisely to evaluate and manage risks in supply chains. The product includes, for example:
- Mapping of the supply chain at product level.
- Possibility to register the supplier's products.
- Products linked to specific suppliers.
- Product-level risk assessment, with the possibility to follow the entire supply chain to cultivation.
- Geographical risk linked to cultivation.
Would you like to know more about how your organization can address the EUDR requirements? Please contact us.
Benefits of complying with the EUDR
The EUDR imposes an increased compliance burden. At the same time, there are also benefits of the law from a business perspective for those who manage the risks effectively. In addition to better control over suppliers to ensure a sustainable supply chain, it can also help meet customer demand for sustainable products. This can be a competitive advantage for those who are proactive and embrace the legislation.
Want to learn more about the EUDR? The Deforestation Directive is available on the EU website. Take a look at Chapter 2, for example, which deals with the obligations of companies. It describes, among other things, the obligations of different parties: operators, traders and agents. In the second chapter, you can also read more about the requirements for risk assessment, risk reduction and due diligence.
