Everything you need to know about EU Deforestation Regulation (EUDR)

Why are forests important?

We take forests for granted, but forests and woodlands play a vital role for our health and well-being. Nearly a third of the planet is covered in trees and those trees not only generate the oxygen we breathe, but also contain the densest, most bio-diverse collections of life on the planet. Forests support innumerable species, including our own but they are often only valued for the timber they produce or the land that they occupy. But they do so much more.

Forests keep us cool. A breezy tree canopy absorbs sunlight, creating shade and cooling the ground below. Urban trees have been shown to reduce the urban heat island effect, reducing the need to use fans or air conditioners. In fact, a nearby woodland can help reduce temperatures in the local vicinity.

Forests influence weather. They can create micro-climates locally and, in the case of the Amazon rain-forest, can influence global weather events many thousands of miles away.

Forests protect us. They act like sponges, preventing flooding in low-lying areas, helping to absorb excess rainfall from extreme weather events and reducing the risk of damage to our homes and businesses. They soak up agricultural run-off and protect other, more delicate ecosystems. They also create buffers for strong winds protecting us from storms.

Forests keep us healthy. They create a sense of tranquility and muffle noise pollution. Spending time in a forested area has proven health benefits, lowering blood pressure and pulse rates, reducing stress and improving mental, social and physical well-being.

Forests provide. We harvest food and raw materials from forests and wooded areas and many indigenous peoples are highly dependent on forested land for their livelihoods.

Why do we need a deforestation regulation?

Humans are now clearing millions of acres of natural, primary forests each year, especially in tropical regions, threatening our most valuable and diverse ecosystems. The UN FAO estimates that 10 million hectares of forest were cut down every year from 2015 to 20203. However, the good news is that recent data suggests that the world passed ‘peak deforestation’ rates in the 1980’s4. None the less, deforestation continues at alarming rates and there is still much work to be done to restore and protect the earths forests and the biodiversity to which it is home.

Deforestation is the second largest source of greenhouse gas emissions5 and once felled, trees not only stop absorbing carbon dioxide, but they start emitting their stored carbon. Halting global deforestation is critical, but challenging given that the majority of deforestation happens in the tropics and the consumption of the forest products happens elsewhere, like the EU.

By introducing updated regulation on deforestation, the EU is attempting to counter its role as a major driver of deforestation and forest degradation, which it has contributed to through its economic and consumer activities. All measures to protect our forests are welcome and necessary. We would urge all our members, if not already doing so, to start considering forest related issues and also wider nature and biodiversity considerations in their own operations, within their supply chain and beyond.

What is the EU Deforestation Regulation (EUDR)?

The EUDR, approved in 2023, will replace the EU Timber Regulation and takes effect from the end of 2024. It aims to ensure that products sold in the EU have not contributed to deforestation. It will focus initially on these key commodities:

It will also include products that contain, have been fed with or have been made using these commodities (such as leather, chocolate, and furniture – see Annex I of the regulation for the full list of relevant commodities and products). The definition of deforestation as per the regulation is the conversion of forest to agricultural use, whether human induced or not.  

The regulation is aiming to reform the trading of deforestation-free products and supply chains across deforestation-linked commodities over the next decade. It will likely result in increased operational costs for businesses, regulatory scrutiny and fines for non-compliance. 

What does it require?

The regulation will require products placed on the EU market for sale, traded withing the EU market and/or exported from the EU market to be accompanied by a due diligence statement. This statement will have to include geolocations showing no deforestation or forest degradation after 31st of December 2020. The regulation will also require the provision of verification that relevant legislation and regulation in the country of production has been respected, including in relation to human rights, the environment, labour, tax, trade, customs, and more. 

Definitions 

Operator – is an entity that imports, exports, or produces goods in the EU and places them on the EU market for the first time. 

Trader – means any person in the supply chain other than the operator who, in the course of a commercial activity, makes relevant products available on the market. 

For any company wishing to better understand their obligations under the new regulation, the EUDR FAQ’s is essential reading (due to be updated soon). In addition, the document outlines a three-step process to set up and maintain a Due Diligence System, along with the obligations of EU operators. Step one of the process is to collect the necessary information including the geolocation coordinates, in the Due Diligence statement, which will be submitted via the Information System, currently being set up by the EU and which will be available by the end of 2024.

In the second step operators will need to feed the information collected into the risk assessment pillar of their Due Diligence System. As part of this step operators need to demonstrate how the information collected was checked against the risk assessment criteria. In step three operators need to take adequate and proportionate mitigation measures to make sure they are not risk of non-compliance.  

What the regulation aims to look like in practice

It should be noted that while the Commission will not be issuing commodity specific guidelines, the Commission does aim to put forward best practice examples, including in guidance documents, which will to some extent cover commodity-specific aspects and it is recommended to keep an eye out for these. Although no date of publication has been given yet it is expected that it will be before the end of the year.  

Potential non-compliance risks: 

• Fines of up to 4% of annual turnover  

• Seizure of goods 

• Temporary prohibition of placing good on the EU market 

• Personal Liability 

Potential future adjustments: 

• June 2024 – scope of the regulation may be extended to include other ‘wooded’ land. 

• June 2025 – scope of the regulation may be extended to include other natural ecosystems. 

The full text of the regulation can be found here – Regulation – 2023/1115 – EN – EUR-Lex (europa.eu) 

For ease of reference, below is a list of articles from the regulation which will be of most relevance to businesses: 

• Article 2 Definitions 

• Article 4 Obligations of operators 

• Article 5 Obligations of traders 

• Article 7 Placing on the market by operators established in a 3rd country 

• Article 8 Due Diligence 

• Article 9 Information Requirements 

• Article 10 Risk Assessment 

• Article 11 Risk Mitigation 

• Article 12 Establishing and maintenance of due diligence systems, reporting and record keeping. 

• Article 13 Simplified due diligence 

• Article 22 Reporting 

• Article 25 Penalties 

• Annex I Full list of relevant commodities and products 

• Annex II – Information to be contained in the Due Diligence Statement 

Will it work?

Critics are now saying that the EU is ill-prepared to implement the EUDR. Despite the regulation coming into effect in December 2024, it is claimed that the European Commission and state authorities are not ready to effectively implement it. There have been calls to scale back or suspend implementation and some EU leaders have watered down aspects of the regulation in response to growing unrest within the agriculture sector and demands from the coffee lobby.  

Producing countries like Indonesia and Brazil are claiming the law is discriminatory and risks excluding small holders from accessing the lucrative EU market because of challenges with compliance. These countries will likely have difficulty meeting their own deforestation targets because of weak enforcement and limited funding, resulting in them being labelled as high risk by the EU. This may result in these producing countries considering alternative export markets, diverting goods to Africa and China where regulations are less stringent. 

On the flip side, there has been huge support coming from global corporations across multiple sectors in the hope that the EUDR will create a level playing field, where irresponsible producers can no longer benefit from selling deforestation or slavery-linked commodities at rock bottom prices.  

These include Stora Enso and 41 other companies in the pulp and paper industry who have raised their voices in asking for more robust legislation. In the global fashion sector, which contributes to deforestation through the use of leather, rubber and textiles, companies like Nike, ASOS, New Look, H&M, Primark, Marks & Spencer and Adidas along with 30 other organisations, raised their voices in support of the EUDR. The automotive industry chimed in through companies like BMW and Volkswagen, and in the food space, Nestle, Danone, Unilever, Mars and Tesco manifested their support for the regulation. The chocolate producers like Cadbury (Mondelez), Mars, Tony’s Chocolonely and Hershey’s were particularly vocal about their support for the regulation. With such strong support from the corporate world, it is encouraging to know that there are companies out there that are determined to do the right thing. 

This article has been co-authored by BITCI and Business for Biodiversity Ireland.