A new European regulation to fight global deforestation became effective on 29 June 2023.
By Hedwige Serot, Sustainability Consultant, and Marc-Antoine Horenfeld, Sustainability & Strategic Project Senior Consultant at DNV.
Aiming at limiting global deforestation and forest degradation provoked by EU consumption and production, the EU Deforestation Regulation (EUDR) imposes strict rules in terms of due diligence to all companies wishing to place affected products on the European market, or to export them.
The proposal received 1.2 million responses during the European Commission’s public consultation, showing an obvious concern by European citizens regarding global deforestation and how the products we consume contribute to this.
Which products are impacted by the legislation?
The regulation concerns seven commodities and their derived products. These are: cattle, cocoa, coffee, oil palm, soya, wood, and rubber. Essentially, a company will only be authorized to place these products on the European market or export them provided they are:
- deforestation-free,
- produced in accordance with relevant local legislation, and
- covered by a due diligence statement.
The scope is therefore very wide since a huge number of products are derived or manufactured from these commodities, including leather, meat, chocolate, coffee, soybeans, palm nuts, tires, furniture, cosmetics, printed books, pulp, and paper.
Enforcing its application… with sanctions
The EU Deforestation Regulation (EUDR) was formally adopted and came into effect on 29 June 2023. Companies will have 18 months (until 30 December 2024) to be compliant, except for micro- and small undertakings (as defined in Article 3 of Directive 2013/34/EU) for which the Regulation will apply from 30 June 2025.
Members states’ competent authorities will conduct checks within their territory following a risk-based approach, particularly considering the relevant commodities, the complexity and length of supply chains, the country of production, or companies’ history of non-compliance. Customs authorities will check due diligence statements before releasing relevant products for circulation on the European market or for export. The Commission shall eventually establish an information system and electronic interface for data transmission to facilitate declarations.
Mandatory due diligence
Before being allowed to distribute to the European market or export the products concerned, operators must exercise due diligence, which should include: an exhaustive information collection linked to production (with geolocation of all plots of land and production dates), the assessment and mitigation of risks (14 assessment criteria covering the whole supply chain) to reach “no or only a negligible risk”.
Declaration verification: optional, but recommended
The new regulation does not mention an obligation to have declarations validated/verified by a third party. However, verification can bring several benefits: enabling the company to assess and prepare itself, ensuring that all requirements are considered, and improving the level of confidence and credibility of the declaration.
Moreover, it is the perfect opportunity for companies to show their alignment with environmental and social responsibilities, which is a strong differentiating factor on the market today that can be leveraged with customers. DNV can help you generate and control this process.
Substantial business impacts
Assessing the costs of compliance is a delicate exercise. How should a business evaluate the organizational, operational, and thus financial impacts? Each company concerned by this regulation will have to answer this question, depending on its sector and the complexity of its supply chain. Financial impact management requires early planning to realistically be able to take all the necessary actions within the available timeframe.
Green Claims and Digital Product Passports (DPP)
Traceability is THE challenge of this regulation, requiring precise visibility over the entire supply chain, transparency on procurement and suppliers, proactive risk monitoring, publication of CSR (Certificate Signing Request) performance reports, and the verification of information/statements.
Traceability in the value chain has thus become essential and central to many texts of the European Green Deal, not only to meet the demands of consumers – who want to know the origin, manufacturing process and impact of products – but also for companies. Businesses will eventually have to comply and importantly, learn to use these requirements as a lever to identify and mitigate risks and reduce their impacts, increase their efficiency, and achieve sustainable development goals.
Part of the Green Deal package, a digital product passport can consolidate all the necessary information and make it available to all stakeholders, helping them identify the most responsible and sustainable products, and credibly demonstrating the company’s commitment to sustainability.
What next?
Would you like further details about the new regulation and the consequences it entails? Would you like to better understand the challenges of product traceability? If so, contact our team now.
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