The recently adopted Regulation (EU) 2023/1115 marks a significant step towards fighting deforestation and promoting sustainable supply chains within the European Union. This regulation aims at ensuring that products placed on the EU market do not contribute to deforestation or forest degradation worldwide. Despite the noble purpose, the EUDR presents substantial practical challenges for the companies involved which could lead to a postponement of the effective date of the new obligations.
The EUDR establishes stringent due diligence obligations for all operators, including SMEs, involved in placing, making available, or exporting specific products from the EU market. The relevant products include cattle, cocoa, coffee, oil palm, rubber, soya, wood and derived goods, such as chocolate and printed paper. Under the EUDR, as from 30 December 2024 (likely to be postponed), products containing any of these raw materials may not be placed, made available or exported from the EU market unless they meet the following criteria: a. they are deforestation-free; b. they have been produced in compliance with relevant legislation in the country of production; and c. they are covered by a due diligence statement. These obligations pose significant challenges for companies, particularly regarding the implementation of effective due diligence statements when managing multiple suppliers and raw materials.
Variations in supplier practices, levels of transparency, and documentation related to raw material sourcing make compliance more complicated. Critical questions arise: what if a supplier fails to provide the necessary information? Is it essential to issue a separate due diligence statement for each individual supplier? We aimed at addressing the issue by examining the Regulation and the Commission’s FAQs.
First, companies are mandated to exercise due diligence for each supplier by asking for information, with the depth of the diligence increasing based on the assessed risk of deforestation – according to the risk-based approach. If a supplier fails to provide the necessary information, the obligated entities may not place or export the relevant products from the EU market and must take appropriate measures, which may include terminating their relationship with the non-compliant supplier.
Secondly, once due diligence has been exercised for each raw material and supplier, it may suffice to submit a single due diligence statement certifying that all products being placed on or exported from the market are deforestation-free. The statement shall have a maximum validity of one year and shall be submitted via the Information System, which is yet to be established. These are just a few practical considerations that require clarification from the EU with various executive acts which have not yet been released.
So, while the EUDR represents a crucial opportunity for the EU to lead in sustainability, companies must navigate the complexities of due diligence, particularly when managing diverse suppliers. This complexity has prompted discussions about potentially postponing of the effective date of the EUDR by one year, as proposed by the Commission and agreed by the Council. Such a delay shall grant businesses additional time to prepare for compliance with the new regulation, also in light of forthcoming guidelines. We shall now await the final approval from the Parliament for the postponement that would shift the law’s applicability to 30 December 2025.
