EUDR: How New Anti-Deforestation Regulations Impact Business in the EU?

The European Union Deforestation Regulation (EUDR) is a response to global challenges related to forest degradation and climate change. The newly introduced regulations impose new obligations on businesses to reduce their negative impact on the environment. Learn about the details of this regulation, its objectives, requirements, and impact on business.

What is EUDR?

EUDR is an EU regulation aimed at limiting deforestation and forest degradation resulting from EU consumption. Its legal basis is Article 192 of the Treaty on the Functioning of the European Union, and the regulations came into force on June 29, 2023.

The regulation replaces previous legislation (EUTR – European Union Timber Regulation) and introduces more stringent requirements covering not only timber but also other key products linked to deforestation.

Why was the Anti-Deforestation Regulation introduced?

Deforestation and forest degradation account for approximately 10% of global greenhouse gas emissions. The reasons for introducing EUDR include:

• Climate protection: Forests are natural carbon storage units, and their destruction accelerates climate change.

• Preventing biodiversity loss: Tropical forests are home to most of the Earth’s species.

• Sustainable trade: Ensuring that products available in the EU are ethically and legally sourced.

Objectives of EUDR

The regulation aims to:
– Increase supply chain transparency to reduce deforestation risks;
– Promote sustainable business practices;
– Ensure product compliance with local laws and environmental protection principles;
– Build consumer trust in products available in the EU market.

What goods and products are covered by EUDR?

The EUDR regulation covers various raw materials and products that directly impact deforestation and forest degradation. Key goods covered by the regulations include:

• Soy – One of the main causes of deforestation, particularly in Latin America, where soybean plantations replace forests.

• Cattle (including meat and leather) – Deforestation in countries like Brazil is often caused by creating pastureland for cattle.

• Cocoa – High demand, especially in West Africa, has led to significant tropical forest clearance.

• Coffee – Coffee cultivation, particularly in tropical regions, often results in deforestation.

• Palm oil – A major driver of deforestation in Southeast Asia, where rainforests are cleared for palm plantations.

• Rubber – Harvesting rubber often involves clearing forests to establish rubber plantations.

• Timber and wood-based products (e.g., furniture) – Illegal logging, particularly in tropical countries, contributes to deforestation.

It is important to note that the list of products covered by EUDR may expand in the future. The European Commission regularly reviews the situation and may add other raw materials significantly linked to deforestation or ecosystem degradation.

Who does EUDR apply to, and how does it impact businesses?

EUDR has a broad scope and applies to:

• Operators – Companies that introduce products to the EU market for the first time. They are responsible for collecting information, demonstrating compliance with EUDR, and ensuring that products do not originate from deforested areas after December 31, 2020.

• Traders – Companies engaged in further selling products within the EU market. They must document the origin of goods and ensure compliance with EUDR requirements, even if they are not responsible for their initial market introduction.

Impact on businesses:

• Supply chain analysis: Companies must thoroughly examine their supply chains to ensure that products do not come from deforested areas. This involves verifying every production stage, from raw materials to the final product.

• Risk for importers and exporters: Non-compliance with new regulations can lead to serious consequences, including losing access to the EU market, financial losses, and reputational damage.

• Compliance adjustments: Businesses must invest in product tracking systems, supplier audits, and collaboration with partners to demonstrate EUDR compliance. The evolving regulations may also require modifications to existing processes and the implementation of new tracking technologies.

Obligations of market operators

Companies introducing products to the EU market must meet detailed requirements, including:

1. Gathering information: Companies must collect all necessary data, such as geolocation of farms or raw material origins, and evidence of compliance with local environmental laws. Documentation proving that products do not originate from deforested areas after December 31, 2020, is required.

2. Conducting risk assessments: Businesses must evaluate the risk associated with each product in their supply chain. This helps identify items requiring special monitoring to prevent deforestation-linked imports.

3. Risk mitigation: Measures to minimize non-compliance risks include supplier audits, increased production controls, and collaboration with independent auditors.

4. Submitting compliance declarations: Businesses must file declarations confirming that their products meet EUDR requirements and do not originate from deforested areas. These documents must provide detailed information about product origins, sourcing methods, and compliance measures.

Prohibition conditions and due diligence procedure

Under EUDR, products originating from areas deforested or degraded after December 31, 2020, are banned from the EU market. This applies regardless of whether they are raw materials or processed goods.

The due diligence procedure includes:

1. Risk identification and analysis: Businesses must analyze supply chain risks and ensure that products do not come from deforested areas.

2. Monitoring compliance with local laws: Companies must verify that their sourcing complies with national and international environmental protection laws.

3. Indigenous community consent: Products sourced from indigenous lands must comply with human rights protection standards, including obtaining free, prior, and informed consent from local communities.

Obligations, penalties, and enforcement of regulations

Under EUDR, EU member states must establish national authorities responsible for enforcement. These authorities oversee business compliance and impose penalties on non-compliant companies.

Penalties may include:

• Fines – Based on the value of non-compliant goods.

• Temporary business suspension – Companies may be suspended until compliance is demonstrated.

• Loss of certification – Non-compliant products may lose certification, preventing further sales.

Poland is preparing national regulations for full EUDR implementation. The Ministry of Climate and Environment is responsible for coordinating these efforts and establishing relevant control institutions.

Implementation deadlines

• June 29, 2023 – EUDR came into force.

• December 30, 2025 – End of the transition period; full enforcement of EUDR.

• June 30, 2026 – End of the transition period for small and micro-enterprises.

Conclusion

EUDR compliance is a key element of responsible business practices in the EU. Companies must ensure that their products do not originate from deforested areas after December 31, 2020. Businesses should implement due diligence procedures, monitor supply chain compliance, and prepare for inspections by national authorities. Ignoring these requirements may lead to severe consequences, including fines, certification loss, or business suspension.