European Deforestation Regulation (EUDR)

If a reporting obligation applies, companies must comply with several new due diligence obligations in order to meet the requirements. These include:

1. ensuring that defined raw materials are free of deforestation,
2. producing the raw materials in accordance with the national laws of the producing country,
3. submitting a due diligence declaration to the EU information system.

If products are not deforestation-free or do not comply with national regulations, there is a risk of fines, loss of profits and trade bans. Affected companies must adapt their compliance processes accordingly. In future, supply chains will have to be analyzed in detail, information must be obtained from suppliers and the company's own processes must be adapted. The aim is to restrict the import and distribution of raw materials that contribute or have contributed to deforestation after 31.12.2020. 

Implementation deadlines

In November 2024, the EU Parliament postponed the application obligation by 12 months. Accordingly, the following applies:

• Big and medium-sized enterprises: 30.12.2025
• Small and micro enterprises: 30.16.2026

Reasons for the postponement include concerns expressed by companies and EU member states regarding the challenges of a timely implementation. Parallel, the development of necessary instruments and guidelines for implementation by the EU Commission also requires more time.

Successful implementation of the EU Deforestation Regulation - How to ensure compliance?

Successful implementation of the EU Deforestation Regulation may require the adaptation of human resources, processes and documents. As part of the implementation of the EU Deforestation Regulation, the following human resources are useful:

• An EUDR compliance officer,
• An independent audit body for reviewing internal compliance strategies and
• Optional: An authorized representative to submit the due diligence declaration.

The processes must be adapted so that relevant information and data is provided to enable risk assessment and risk mitigation, taking into account the EUDR criteria. Furthermore, processes for testing and documenting should be created.

For documentation, SME traders, non-SME operators and SME operators must introduce measures to assess and minimize risk in supplier relationships. This may include the creation of a documentation matrix and the continuous review of the effectiveness of these measures.

Implementation plan

The implementation of the due diligence obligations can be divided into the following three phases:

1. Preparation

In this phase, the first step is to determine which products fall within the scope of application. For this purpose, the CN code from the EU Combined Nomenclature should be compared with the HS code from Annex I of the EUDR.

The second step involves identifying the company's role within the framework of the EUDR. This includes defining its position as operator or trader concerning its products, as well as classifying it as SME or non-SME. During the preparation phase for the EUDR implementation, it is advisable for companies to first assess whether the regulation applies to them. The key question is: "Does any of my products fall within the scope of the EUDR?" This requires a detailed analysis of their products and supply chain.

Companies then need to determine the extent of due diligence obligations for each product. It is essential to understand which obligations apply to which products, when these products were manufactured, and when they were placed on the market.

Also, personnel resources and the procedural structure needs to be determined. As part of this, responsibilities must be clarified, e.g. regarding the procurement of information.

• Who is responsible for evaluating the data and who mitigates any risks?
• Who submits the due diligence declarations and documents the entire process?

An important question that has to be considered as well is whether and to what extend external service providers should be involved in the process. 

2. Due Diligence Implementation 

In the second phase, companies should fulfill their obligation to obtain the necessary information from relevant suppliers. Here it must be clarified whether the suppliers are able to provide the necessary geolocation data, either directly or via their upstream suppliers. If it turns out that the required data cannot be provided by the suppliers, a reorientation regarding the suppliers is necessary. 

Companies should draft and implement specific regulations to align existing supplier relationships with EUDR requirements. These include information and cooperation obligations to minimize risks, such as the right to audit.

Several steps are required to prepare the due diligence statement: 

1. Evaluation of the information obtained
2. Define the standard for reviewing existing due diligence statements (risk-based approach [contractual assurance, questionnaires, audits], double check)
3. Comparison of geo-data, e.g. using an EU Tool or private satellite data providers
4. Establishment of an evaluation process regarding the compliance with relevant national legislation of own due diligence statements
5. Preparation of any risk minimization measures. Defining the limits at which a negligible risk can be assumed. A decision must also be made on how to proceed with risk minimization (questionnaires, audits, etc.) 

When assessing risks, companies should also consider publicly available sources such as the Global Forest Watch or the ITUC Global Rights Index. If a risk is identified that cannot be classified as negligible, appropriate risk minimization measures must be taken.

3. Preparation and submission of the due diligence statement

The final phase involves the actual preparation of the due diligence statement. It is advisable to acquaint yourself with the submission process and ensure that all required content is correctly presented in the due diligence statement.

It should be noted that no relevant products may be exported, placed or made available on the market without the submission of the due diligence statement.

Certain obligations, such as risk assessment and risk mitigation, do not apply equally to all companies, but depend on the individual circumstances of each case. For example, SME traders do not have to carry out a risk assessment (see Art. 10 EUDR).

EUDR: Regulation - 2023/1115 - EN - EUR-Lex