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4 min read
The European Union officially adopted the EU Deforestation Regulation (EUDR) - a landmark law to reduce the EU’s impact on global deforestation. The EU Deforestation Regulation has introduced a major shift in how companies operate across global supply chains.
What Is EUDR?
The EUDR supports adopting deforestation-free products to significantly lower greenhouse gas (GHG) emissions and help combat global biodiversity decline. Businesses involved in marketing, importing, or exporting any of the specified commodities or their byproducts to or from the EU are required to comply with the EUDR. This compliance confirms that their products are not linked to deforestation, environmental damage, or violations of local environmental or social legislation in the country of production.
The policy aims to fight global deforestation and promote sustainable supply chains through several core objectives:
- Prevent deforestation in global supply chains by prohibiting products linked to forest degradation.
- Improve supply chain transparency and EUDR traceability by mandating due diligence systems and detailed documentation.
- Hold businesses accountable for sourcing sustainable materials, requiring proof of deforestation-free and legally produced products.
- Promote ethical business practices and reduce environmental harm by increasing demand for sustainable products and addressing human rights concerns.
What products are in scope under the deforestation regulation of the EU?
- Cattle – live cattle, meat, and leather
- Cocoa – cocoa beans, paste, butter, powder, and chocolate products
- Coffee – roasted, unroasted, and decaffeinated coffee, and substitutes containing any proportion of coffee
- Oil palm – nuts, kernels, palm oil, glycerol, and palm oil-derived fatty acids
- Rubber – natural rubber, gums, and all articles of vulcanized rubber, whether hard or not, including tires and clothing
- Soya – soya beans, meal oil and residues, including oilcake
- Wood – logs, processed wood, wooden furniture, paper, and packaging
Companies handling these commodities must implement rigorous due diligence to guarantee their supply chains are free from deforestation risks.
EUDR Implementation Timeline for Businesses
- June 29, 2023 - The EU Deforestation Regulation (EUDR) was formally adopted, setting the stage for a more sustainable future.
- December 30, 2026 - The regulation officially takes effect for large operators. From this point on, they must follow strict due diligence and reporting obligations.
- June 30, 2027 - Micro and small enterprises must begin compliance by this date.
- June 30, 2030 - The European Commission will conduct a review of the EUDR’s implementation and its impact.
Data Requirements for EUDR Compliance
To comply with the EU Deforestation Regulation (EUDR), businesses must gather, organize, and retain specific information for at least five (05) years after placing relevant products on the EU market or exporting them. The required data includes:
- Product Details: Description including trade name, type, and, for wood products, both the standard and scientific names of the species.
- Quantity: Net weight in kilograms and any additional relevant units.
- Origin: Country of production and, where applicable, specific areas within it.
- Geolocation: Exact GPS coordinates of all land plots where the commodities were produced, along with production dates or time periods.
- Supply Chain Information: Names, postal and email addresses of all suppliers, and recipients (operators or traders) of the products.
- Deforestation Compliance: Verifiable evidence that the products are deforestation-free and meet the legal standards of the production country.
EUDR Supply Chain Risk Categorization
The EU Deforestation Regulation (EUDR) introduces a three-tier risk classification system to evaluate countries or specific regions based on their likelihood of deforestation-linked non-compliance. Member States and third countries, including their subdivisions, will be assessed and classified into one of the following categories:
- High Risk: Areas with a strong possibility that products or raw materials do not meet the EU’s deforestation-free criteria outlined in Article 3(a).
- Low Risk: Countries or regions where non-compliance with deforestation-free rules is minimal or highly unlikely.
- Standard Risk: The default category for regions that do not fall under high or low risk.
This classification directly impacts supply chain operations. Companies sourcing from high-risk regions will be subject to more rigorous due diligence, higher compliance costs, and may encounter barriers to EU market access. In contrast, those sourcing from low-risk regions may benefit from streamlined compliance requirements and simplified market entry.
As a result, organizations are expected to reassess sourcing strategies, possibly shifting procurement away from high-risk zones. The framework necessitates greater traceability and transparency in supply chains, especially for commodities originating from high-risk areas.
Overall, this risk-based approach urges businesses to carefully balance compliance, cost-efficiency, and market accessibility, while aligning with the EU’s overarching goal of achieving zero-deforestation.
Who is responsible for ensuring EUDR compliance?
| Entity Type | Key Responsibilities |
| Economic Operators | - Ensure products are deforestation-free, legal, and traceable - Provide detailed supply chain data, including geolocation of production areas, and submit due diligence statements - Review suppliers, mitigate risks, and cooperate with authorities |
| Large Traders | - Conduct due diligence similar to operators - Maintain supplier and buyer records - Collaborate with authorities |
| SME Traders | - Keep detailed supplier and buyer records - Provide documentation to authorities when requested - Report non-compliance indications |
Non-compliance is heavily penalized, including fines of up to 4% of EU annual turnover, temporary bans from public contracts and funding, and potential confiscation of non-compliant goods.
How Freyr Supports EUDR Compliance?
At Freyr, we specialize in Regulatory compliance and offer tailored services to guide you through the complexities of the EUDR framework. Our key areas of support include:
- EUDR Due Diligence Training
We assist in developing and refining due diligence processes to align with EUDR standards and ensure effective implementation. - Risk Evaluation and Mitigation Strategies
Our team conducts in-depth risk assessments and provides actionable strategies to minimize compliance risks across your supply chain. - Accurate Compliance Reporting
Freyr supports the preparation and submission of precise, detailed compliance reports that meet all EUDR documentation requirements. - Ongoing Training and Regulatory Updates
We deliver practical training to empower your team with the knowledge needed for ongoing compliance, while keeping them updated on Regulatory developments.
Conclusion
The EUDR is driving a significant shift in how companies approach sustainability and deforestation risk. While the regulation introduces complex challenges, it also offers a valuable opportunity for businesses to demonstrate their commitment to responsible sourcing and environmental stewardship.
Freyr is dedicated to helping you navigate this Regulatory landscape with confidence. Our comprehensive services, including due diligence design, risk mitigation, compliance documentation, and expert training, are designed to ensure your organization meets EUDR requirements while contributing to the global fight against deforestation.
