EU Deforestation Regulation

What?

From 30 December 2024, businesses dealing with deforestation-linked commodities will have to comply with the European Union’s Regulation 2023/1115 on deforestation-free products (EUDR). The EUDR looks to guarantee that products consumed by EU citizens do not contribute to deforestation or forest degradation and will have far reaching implications for businesses and products that are within its scope.

The seven commodities covered by the EUDR are cocoa, coffee, soy, palm oil, wood, rubber and cattle. It also applies to products derived from these commodities, including, for example, beef, leather, chocolate, tyres and plywood.

To supply or sell these products within the EU, or to export these products from the EU, the products must be:

deforestation-free, meaning they do not contain commodities produced on land that was converted from forest to agricultural use after 31 December 2020;
produced in accordance with the laws of the country of production; and
covered by a due diligence statement.

In order to produce a due diligence statement, companies need to collect prescribed due diligence information (including evidence that the product is ‘deforestation-free’) and undertake a risk assessment calibrated to reflect the risks and locations involved. If the risk assessment reveals a more than negligible risk that the products are non-compliant, the company must take mitigating steps to reduce the risk before it can place the product on the EU market or export it. This may take the form of requesting further information from suppliers or carrying out independent surveys or audits to evaluate the information provided.

A flowchart of this process can be found in the PDF. The EUDR also introduces ongoing requirements, such as setting up risk management systems, assisting supply chain partners, reporting, and record keeping.

Compliance with the EUDR will be directly enforced by EU member states’ regulators. The fine for the most substantial and repeated breaches will be at least 4% of EU turnover. Competent authorities can also confiscate products and revenues and exclude companies from public procurement processes. In addition, private parties can submit substantiated concerns to companies or regulators when they consider that an operator or trader is not complying with the EUDR. These can lead to an obligation on a business to notify the regulator about the concern and an investigation by the regulator into potential breaches.

When?

Businesses within scope will need to ensure that relevant products are in full compliance with the EUDR from 30 December 2024. Smaller businesses will need to comply from 30 June 2025.

The EUDR allows the Commission to evaluate the scope and impact of the EUDR at five-year intervals. In addition, the legislation anticipates that the Commission may extend the EUDR to other biomes, such as grasslands, peatlands and wetlands, in June 2025.

Who?

Businesses will be in-scope if they are either an “operator” or a “trader”, as defined under the EUDR. An operator is a natural or legal person who first places a relevant product on the EU market or exports it from the EU market. A trader means any person in the supply chain, other than the operator, who makes the product available on the EU market.

It is the responsibility of the operator or trader to conduct the due diligence, risk assessment and risk mitigation steps that feed into their due diligence statements. By issuing a statement, the company assumes responsibility for the product's compliance and the statement will be accessible to authorities, traders, and the public.

Why?

The EU’s imports are one of the biggest global drivers of deforestation, accounting for 36% of deforestation linked to crop products and over 25% of deforestation linked to ruminant livestock products and equivalents.

The EUDR is part of a plan of action to tackle deforestation and forest degradation first outlined in the 2019 Commission Communication on Stepping up EU Action to Protect and Restore the World’s Forests. This commitment was later confirmed in the European Green Deal, the EU Biodiversity Strategy for 2030 and the Farm to Fork Strategy[1]. It closely relates to the subject matter of the EU Timber Regulation (EU) No 995/2010 and supersedes that regulation.

[1] The Farm to Fork Strategy is part of the European Green Deal and aims to accelerate the EU’s transition to sustainable food systems, including through legislative proposals, trade policies and international cooperation instruments.

getting ready

	Assess the impact of the EUDR: Entities should be assessing the extent to which they produce, supply or are supplied with any of the products identified in the EUDR. Companies may look to prioritise goods based upon their importance to the business and the products’ footprint. For businesses in some sectors, the EUDR may well prove a significant commercial challenge and should be prioritised accordingly. Even where companies are not directly caught by the EUDR, they may still need to familiarise themselves with the due diligence requirements so they can provide the necessary information to their downstream customers.
	Use and monitor EU guidance: Many stakeholders have raised concerns about the lack of clear and detailed guidance from the EU about the EUDR, especially given its stringent requirements and short timeframes to prepare for compliance. For example, the Commission has yet to release its list of ‘high-risk’ jurisdictions[1] (which would necessitate more intensive risk assessment) and is still working on comprehensive guidance, which is currently expected by the end of May. The Commission has provided some tools and guidance so far, including launching the EU observatory on deforestation and a set of FAQs. With key questions around the EUDR still outstanding, companies should familiarise themselves with the existing EU resources and ensure they are actively monitoring for any further EU guidance. [1] According to the Financial Times and Reuters, EU officials have suggested they will be delaying the classification of countries’ risk levels to give operators and traders more time to adapt to the new rules. The next EU Commission will likely be making the final decision on the approach to classification.
	Prioritise traceability and engage early with suppliers: An increased focus on traceability is important. Businesses bringing in-scope products into the EU will need to work with their supply chain to gather the relevant information. This will likely involve a mixture of contractual measures and direct engagement with suppliers. Businesses may also need to provide information and training directly to indirect suppliers to ensure they can provide the relevant information to the business. Where suppliers cannot provide the necessary information, even after direct engagement, businesses may need to consider alternative supply arrangements. As part of this effort, businesses should consider reviewing onboarding processes for new suppliers, (re)developing supplier codes of conduct and conducting enhanced levels of supplier screening.
	Data, information and audits: The EUDR presents a significant data challenge to businesses. Even where businesses have existing expertise and due diligence systems in place, the data required to prove that products are deforestation-free could be difficult to gather. Addressing this may involve a combination of working with suppliers and third-party data gathering. Satellite observation can generate reports and identify production geolocations. Direct engagement with suppliers may allow for product tracking and more precise geo-localisation. The first step may involve a broad audit of supply chains relating to the relevant forest commodities. Existing sustainability certifications will not be deemed a substitute for meeting the due diligence requirements, though efforts to align with these will likely be helpful for meeting EUDR requirements and some, like the PEFC, are developing EUDR-specific solutions.
	Monitor UK developments: On 9 December 2023, the UK government published further detail on the shape of its equivalent forest risk regime.[1] While a formal proposal is yet to be put forward, the structure of the UK regime seems to broadly mirror the EUDR. That said, the public consultation response published by the UK government indicates that there is likely to be divergence with the EUDR.[2] To avoid duplication, companies with a presence in the UK and the EU should actively monitor the UK’s efforts to ensure that they are well-positioned to comply with the UK approach in due course. [1] Department for Environment, Food & Rural Affairs, “Supermarket essentials will no longer be linked to illegal deforestation”, 9 December 2023 [2] Department for Environment, Food & Rural Affairs, “Consultation on implementing due diligence on forest risk commodities: Summary of responses and government response”, June 2022

Key contacts

David Watkins Partner

Azadeh Nassiri Partner

Harry Hecht Partner

Susan Hughes Partner

Richard Hilton Partner

David Hay Partner

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