Introduction:
The EU Deforestation Regulation (EUDR) aims to curb the importation of products linked to deforestation, imposing substantial requirements for companies operating in or trading with the EU market. Here are four key insights for global companies:
TLDR
Scope and Application - Global impact for agricultural goods.
Due Diligence Requirements - You need to know where your products come from.
Transparency and Reporting - Embrace transparency and automate reporting
Enforcement and Penalties - EUDR has serious teeth - 4% of turnover serious.
1. Scope and Application
The EUDR targets commodities driving forest conversion to agricultural land, including cattle, wood, cocoa, soy, palm oil, coffee, rubber, and related products like leather, chocolate, tires, or furniture. Its impact extends globally, affecting any company that wants to access the EU market that is involved in producing, processing, or trading these commodities, regardless of location. Understanding its extraterritorial reach is crucial for multinational corporations to ensure compliance across their supply chains.
2. Due Diligence Requirements
EUDR mandates due diligence for companies placing specified commodities on the EU market. This entails conducting risk assessments to identify and mitigate deforestation-linked sourcing risks. Establishing robust due diligence systems to trace commodity origins, assess environmental and social risks, and implement prevention measures is essential. Adhering to recognized standards and certifications can aid compliance.
3. Enforcement and Penalties
EUDR enforcement mechanisms include monitoring compliance, conducting audits, and imposing penalties for non-compliance. Breaching the regulation can lead to fines of up to 4% of global turnover, product seizure, temporary exclusion from EU procurement, or market exclusion. Additionally, reputation risks associated with deforestation can harm brands, affecting consumer trust and market share. Compliance and sustainability investments are not just legal obligations but also strategic imperatives for global companies.
4. Transparency and Reporting
Transparency is central to the EUDR. Companies subject to the regulation must provide detailed information on their procurement and sourcing of agricultural products and derivatives with satellite images to support claims. Companies must also report on due diligence practices, including risk assessments and mitigation measures. This information must be reported to competent authorities for regulatory oversight and accountability. Embracing transparency not only ensures compliance but also builds trust among stakeholders seeking greater visibility into corporate supply chains and environmental practices.
Using technology can help with transparency & reporting.
Contact us to find out how Zeus can help.