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EUDR and traceability for deforestation-free supply chains

According to the Food and Agricultural Organization of the United Nations (FAO), a staggering 420 million hectares of forest have been lost to deforestation between 1990 and 2020.

Brief introduction to the EUDR (EU Deforestation Regulation)

The European Union has recently agreed on a pioneering law to address the issue of commodities linked to deforestation and forest degradation. The new regulation, the EU Deforestation Regulation (EUDR), incorporates innovative and comprehensive legislative measures to combat global deforestation and protect forests. It eventually replaced the European Timber Legislation (EUTR), which has lasted almost ten years. However, implementing this law presents challenges for the entities participating in the affected supply chains. 

The European Parliament officially sanctioned the Regulation on April 19th, 2023; it was made available in the EU Official Journal on June 9th, 2023. Businesses must adhere to the Regulation’s provisions by the end of 2024. 

Understanding the EUDR and its impact on businesses

The EUDR stipulates that companies must adhere to the standards for deforestation and forest degradation for seven commodities and the products that go along with them to be marketed or exported into the EU. Cattle, cocoa, coffee, palm oil, rubber, soy, and wood are covered under the statute. This also covers certain derived goods like leather, chocolate, and furniture.

According to the regulation:

  1. Importing and exporting goods linked to deforestation after December 31, 2020, will be illegal within the European Union.
  2. Companies must prove that their supply chains do not contribute to forest destruction or degradation.
  3. Proposed regulations empower Operators and authorities to trace the exact origin of products.
  4. Before products are introduced to the market, a due diligence statement must be accessible to relevant authorities through an EU-run online information system.
  5. Operators are required to expand their due diligence efforts to consider the laws of the production country, covering sustainable forest management, third-party rights, labour and human rights, taxation, anti-corruption measures, trade, and customs.
  6. The law will categorise exporting countries based on their deforestation risk, subjecting high-risk nations to more rigorous scrutiny and simplifying the process for low-risk nations.

Who will be impacted by EUDR legislation?

The EUDR law will affect operators (companies placing products in the single market) and traders. Operators must ensure deforestation-free supply chains through due diligence, while traders are responsible for storing and sharing supply chain information with operators.

What are the consequences of non-compliance?

Failure to comply with the EU Deforestation regulation may result in significant penalties, including commodity seizure, revenue confiscation, activity suspension or prohibition, and fines up to 4% of annual turnover in Member States.

How does the RightOrigins platform help with supply chain visibility?

Our Supply chain traceability and ESG intelligence suite helps onboard all suppliers,  collect data and aggregate all actors in the supply chain. Our platform helps in end-to-end visibility, organises and manages the supply chain information such as product risk ratings, accessing suppliers’ ESG ratings, procurement data etc. A standardised web platform will house all deforestation risk data. A crucial aspect of the regulation involves the necessity for operators to establish a due diligence system. These operators, known as ‘Operators’, must perform a risk assessment and address any significant risks before introducing relevant commodities to the EU market or exporting them. 

How can we help you with EUDR compliance?

Entrepreneurs and traders aiming to sell or export these products within the EU must establish a legality verification system. This entails conducting risk assessments and obtaining the geographical coordinates (latitude and longitude) of the land plots where the goods were sourced or acquired, along with production dates or timeframes. 

Our RightOrigins platform helps aggregate data from all supply chain tiers and showcases the product stories from origin to destination. You can get an overview of your supply chain,  analyse the risk score and reduce risks by conducting independent audits or surveys, collecting more information, or collaborating with suppliers. As operators must adhere to the obligation of annual public reporting, ensuring wide accessibility, including online, regarding their due diligence systems and the actions taken to meet their responsibilities. Traceability serves as a transparent pathway for complying with the procedures.

Leveraging traceability for sustainability and positive impact

The EUDR is a policy designed to stop illegal deforestation and improve supply chain transparency through ecologically friendly raw material extraction and sustainable farming practices, which are essential for maintaining biodiversity and reducing carbon emissions. Based on the data gathered on the origin and the supply chain pathway, traceability aids in providing proof that products are free from deforestation and forest destruction. Industrial agriculture plays a crucial role in biodiversity loss and supply chain transparency promotes responsible sourcing. CIED helps companies throughout their sustainable sourcing journeys, from setting sustainability goals to reporting and disclosure, designing and implementing robust due diligence systems for deforestation-free supply chains.

To learn more about how RightOrigins, our Supply Chain Traceability and ESG Intelligence suite can
support your ESG & Sustainability goals for 2024 & beyond, consult with our in-house expert.

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