European regulation against deforestation and forest degradation (EUDR)

Deforestation and forest degradation are major environmental problems, contributing significantly to global greenhouse gas emissions and biodiversity loss. According to the FAO, some 420 million hectares of forest were lost between 1990 and 2020, mainly due to agricultural expansion for the production of commodities such as soy, palm oil, timber, coffee and cocoa.

What are the anti-deforestation regulations?

Adopted on May 31, 2023, the European Union Regulation against Deforestation and Forest Degradation (EUDR) is an EU initiative to combat imported deforestation. Its aim is to ensure that products consumed by European citizens do not contribute to deforestation or forest degradation.

The regulation came into force on June 29, 2023, and will be fully applicable to companies from December 30, 2024.

This regulation currently applies to 7 products particularly at risk of originating from deforested areas: beef products, cocoa, coffee, palm oil, rubber, soy and wood.

To comply with the regulation, products placed on the market or exported must meet a number of requirements:

• Specific products and raw materials must be "zero deforestation".
• Companies must be able to prove that products comply with the legislation of the country of origin: in other words, that they do not come from recently deforested land.
• Companies are also required to make a due diligence declaration.

What is the due diligence declaration?

This new European regulation against deforestation and forest degradation has introduced a due diligence procedure for products likely to be affected.

In future, companies will be required to implement and maintain a due diligence declaration , guaranteeing that the products they market or export comply with the regulation.

Three-step due diligence:

Data and information collection

The data collection required to comply with the anti-deforestation regulation includes :

1. Product description (name, list of materials used, and quantity of products used)
2. Country of production and geolocation of all production plots
3. Production date or period
4. Certification that products are deforestation-free and comply with the legislation of the country of production.

Risk assessment

Companies must evaluate :

1. Country risk level
2. Presence of forests, indigenous populations
3. The scale of deforestation
4. Supply chain complexity
5. Risk of circumventing regulations

A plan for risk mitigation

Where there is a risk of deforestation, companies must inform :

1. Additional data
2. Additional surveys and audits
3. Implementing control strategies

Companies will be able to carry out simplified due diligence (no risk assessment or risk mitigation stage) if their products come from countries classified as low risk by the European Commission.

Application timetable

• June 29, 2023: The regulation comes into force.
• June 30, 2024: 1st impact assessment: the European Commission must publish a report on extending the regulation to other wooded areas.
• December 30, 2024: Date by which companies must be fully compliant with the new requirements.
• June 2025: Date by which very small businesses must comply with the new requirements.

The regulations will be reviewed no later than June 30, 2028, and at least every 5 years thereafter.

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What are the controls and penalties in the event of non-compliance with the European regulation against deforestation?

The European Commission has included compliance checks in this regulation. These will be carried out by the Member States themselves.

Annual checks must cover at least :

• 1% of operators whose products come from low-risk countries or parts of low-risk countries
• 3% of operators whose products come from standard-risk countries or parts of countries
• 9% of operators whose products come from high-risk countries or parts of high-risk countries, and 9% of the quantity of each product

Penalties for non-compliance with the regulations will be as follows:

1. Confiscation of non-conforming products
2. Confiscation of revenue from non-compliant products
3. Fine of up to 4% of annual sales.

How to prepare?

Companies will need to adjust their supply chains to comply with the new requirements, particularly in terms of traceability and verification of product sources. This means investing in traceability systems, supply chain audits and compliance reporting.

1. Risk assessment: Identify at-risk products and raw materials in the supply chain.
2. Set up traceability and data collection systems: use tools to organize an efficient data system to track the origin of products.
3. Training and awareness: Train all our stakeholders and supply chain partners in these new requirements.
4. Collaboration with suppliers: Working closely with suppliers to ensure compliance with deforestation standards.
5. Documentation and reporting: Implement documentation processes to facilitate due diligence reporting and thus prove product compliance.

Waro can help you organize and centralize your data and traceability system to anticipate the requirements of the EUDR regulation.

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