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What companies need to know about EUDR

June 21, 2024
What companies need to know about EUDR

Between 1990 and 2008, the EU’s imports were responsible for 36% of global crop-related deforestation. In response, the European Commission introduced the EU Deforestation Regulation (EUDR), a key element of the EU Green Deal.

Enforced since June 29, 2023, this regulation aims to ensure that specific products consumed within the EU do not contribute to deforestation or forest degradation. This blog outlines the regulation’s scope and the steps companies in the EU should take to comply. CSE upon public demand has begun preparations for the next high-impact corporate Sustainability training in September to help professionals like you meet the challenges and lead change.

What companies need to know about EUDR

Scope of the Regulation

Companies importing products listed under the EUDR into the EU market must provide proof of origin, including geolocation of all land plots, and verify that the goods did not cause deforestation or degradation after December 31, 2020. Additionally, these goods must comply with relevant local laws, extending beyond environmental protection to include aspects such as land-use rights.

Due Diligence Process

The robustness of the risk assessment varies by the sourcing country’s sustainability risk profile, categorized as low-, standard-, or high-risk. For products from standard- and high-risk countries, companies must conduct a risk assessment, evaluating the origin against 14 criteria covering environmental and human rights factors. Identified risks must be mitigated before importing goods into the EU.

Compliance Deadlines

The EUDR applies to operators (importers) and traders (those processing, distributing, and selling imported goods). While entities further down the supply chain can refer to earlier due diligence, they remain legally responsible for compliance breaches. Deadlines are as follows:

  • Non-SMEs: December 30, 2024
  • SMEs: June 30, 2025
  • Timber products exception: December 31, 2027

Non-compliance can result in penalties, such as import suspensions, refusals, or fines up to 4% of EU turnover. Private parties, including NGOs, can also submit concerns, adding another layer of scrutiny.

Three Key Requirements for EUDR Compliance

  1. Data Collection: Companies must understand supply chain complexity to assess goods under the due diligence process, ensuring traceability to the farm level. Supplier engagement mechanisms are crucial for data collection and compliance.
  2. Risk Assessment: An ongoing, at least annual, risk assessment is required for imports from standard- and high-risk countries. This involves understanding the origin country, supply chain, and historical events. Reliable data sources and risk management tools are essential for this analysis.
  3. Risk Mitigation: Companies must develop strategies for proportionate risk mitigation measures when risks are identified. This may require capacity building and investments in data collection and reporting systems. Establishing policies, controls, and procedures within the risk management process can help address emerging risks swiftly.

The EUDR presents new challenges for companies with global agricultural value chains operating in the EU, necessitating increased supply chain traceability and risk management. Non-EU companies may also need to provide the necessary information to their EU customers. While these requirements demand significant efforts in supply chain management, they also offer opportunities to advance toward resilient, nature-positive value chains and integrate Scope 3 emissions abatement with nature-risk assessments.

About: The Center for Sustainability and Excellence (CSE)

CSE provides pioneer leadership to Fortune 500, SMEs, leaders, and influencers globally with strategic, award-winning, ESG and Sustainability research, education, and program direction. Over the past 19 years, CSE has empowered C-suite executives and sustainability professionals to navigate the complexities of ESG and achieve transformative results.

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