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The EU’s Regulation on Deforestation-Free Products

Arjun Kalra, Rebecca Miller, Jen Baker
8/29/2024
Learn about what the EUDR entails and what companies and commodities are affected.

This article was updated on Oct. 11, 2024.

Learn about what the EUDR entails and what companies and commodities are affected.

According to the European Union (EU), deforestation and forest degradation are responsible for 10% of global greenhouse gas emissions. To address this problem, in April 2023, the EU adopted the Regulation on Deforestation-Free Products (EUDR), which encourages the export of products not produced on land subject to deforestation or forest degradation. Intended to be effective in December 2024, the EU recently delayed implementation. Once this change is approved, this law will be applicable on Dec. 30, 2025, for large companies and on June 30, 2026, for smaller companies. The EU suggests using this delay as an implementation period as all implementation tools are readily available.

Companies placing one or more of the defined commodities on the EU market must demonstrate that each product complies with the EUDR. Ultimately, a statement of compliance must be uploaded to the EU’s EUDR public information exchange. Companies can expect fines and exclusion from the EU market if found noncompliant.

Commodities and companies affected by the EUDR include the following:

In-scope commodities

Soy
Coffee
Cocoa
Wood
Palm oil
Rubber
Cattle
Derived products
Relevant commodities correspond to relevant products with designated harmonized system (HS) codes used to classify goods entering and exiting the EU. In-scope commodities can include products derived from these raw materials. For a full list of commodities and HS codes, see Annex I of the regulation.

In-scope companies

The EUDR applies only to the listed commodities and companies providing those listed commodities. A company must import to, place on, or export from the EU market one or more of the listed commodities to be in scope of this regulation.

Operators that place the products on the EU market for the first time, traders that resell the products, and intermediaries that transform one product into another product have obligations under EUDR. Operators and traders are required to analyze their supply chains and collect the required information. They must publish a due diligence statement.

Micro, small, or medium-sized enterprises are not required to complete a due diligence statement (if already covered by another market participant), but they are required to collect some relevant data points to be shared upon request.

Due diligence requirements

Companies that must address requirements can take the following steps:

  1. Collect all needed information. Information required might include quantity, supplier, country of production, evidence of legal harvest, and geographic coordinates of land where the commodity was produced, among others.
    An item is not permitted to be placed on the EU market if this data is not available. Products are not in scope if placed on the market before Dec. 31, 2020.
  2. Assess risks that might lead to noncompliance. According to the EUDR, entities must demonstrate how the information gathered was “checked against the risk assessment criteria and how they determined the risk.”
  3. Take adequate and proportionate risk mitigation measures. Entities must document how risk mitigation efforts were performed if more than a negligible risk of noncompliance was found during due diligence.
  4. Create documentation for public reporting. Entities are required to annually report on their due diligence and risk mitigation steps to ensure compliance with the regulation.

Due diligence statements

Due diligence statements are required annually and must have the following elements:

  • Operator’s name, address, and commodity designation
  • HS system code, free-text description (including trade and scientific name), and quantity (typically in kilograms)
  • Country of production and the location of all plots of land where the relevant commodities were produced
  • The reference number of the due diligence statement
  • A statement of compliance provided by the regulation as follows:
    “By submitting this due diligence statement, the operator confirms that due diligence in accordance with Regulation (EU) 2023/1115 was carried out and that no or only a negligible risk was found that the relevant products do not comply with Article 3, point (a) or (b), of that Regulation”
  • A specifically formatted signature that includes the names and functions of relevant parties and the date

Penalties of noncompliance

If found to be noncompliant, companies can expect fines of up to 4% of their revenue in the EU, confiscation of revenue gained from the concerned products, and temporary prohibition of placing relevant commodities on the market.

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If you’re looking for more guidance on what the EUDR means for your company, our integrated ESG team can help. See how we can work with you on your compliance goals.
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Arjun Kalra
Arjun Kalra
Principal, Consulting, and Office Managing Principal, San Francisco/San Jose
+1 415 946 7449
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Rebecca Miller
Rebecca Miller
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+1 614 365 2239
Jennifer Baker
Jen Baker
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+1 614 280 5207
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