Seeing the wood for the trees: preparing for new deforestation due diligence rules in the UK and EU

What is happening? 

The EU has brought in new regulations aimed at reducing global deforestation by ensuring that retailers monitor the origins of certain “forest-risk” products. From 30 December 2024, companies caught by the EUDR will be prohibited from selling forest-risk products in the EU unless they are certified as “deforestation free”.

Why does it matter?

“Forest-risk” is a more catch-all term than one might think: obligations under the EUDR will affect all products originating from land where there is a risk of deforestation, such as cocoa, coffee, oil palm, rubber, soya, cattle, wood and derived products. This means retailers and consumer brands importing anything from beef mince to wooden furniture will need to ensure their supply chains are deforestation-free. 

To show that a supply chain is “deforestation-free”, businesses will need to evidence that the entirety of the land used to produce the product has not been converted from forest to agricultural use since the 31 December 2020, and that the products have been produced in compliance with applicable local laws. 

Companies will need to conduct comprehensive due diligence of their supply chains and submit a due diligence statement confirming this (note SMEs can benefit from certain exemptions or reduced requirements). The rules are strict, and if a large batch of product is found to partially originate from even a single producing plot that was deforested after the cut-off date, the entire batch will be deemed non-compliant. 

The consequences of non-compliance may be far-reaching for businesses, who may be subject to fines (with a maximum level of at least 4% of total annual EU-wide turnover) or confiscation of the products or of the revenues obtained from them. The specific penalty imposed will depend on the EU Member State and national regulator investigating.

Getting such granular information about supply chains is a big ask for many businesses, and despite there being increasing calls for the regulation to be delayed over concerns around global preparedness for implementation, the European Commission has given no indication that it will hit pause on the new measures. This means that retailers and consumer brands trading in or with the EU need to be ready for its impact on their supply chains.

What action should you consider?

Conduct a due diligence audit

Conduct an ‘audit’ of the business’s existing due diligence systems to identify necessary changes – eg updating supplier questionnaires, creating internal checklists of the new traceability data required, and updating risk assessment processes to build in the specific criteria under EUDR. 

Map your supply chains

Legal and procurement teams should map the business’s supply chains to identify suppliers and products in-scope of the EUDR. This will be particularly challenging for larger businesses with complex global supply chains. Businesses can use traceability software, trading data and supplier questionnaires to identify relevant suppliers, producing countries and plots of land where relevant commodities were produced. 

Collect geolocation data

Businesses must provide geolocation coordinates for all plots of land where relevant commodities were produced. This can be done using digital apps (eg Geographic Information Systems (GIS)), geospatial technology, and handheld satellite devices. Businesses can leverage existing datasets and tools like Global Forest Watch (GFW) to identify potential deforestation at relevant plots of land. 

Start collecting evidence now

Although the law doesn’t come into effect until December 2024, it applies to products being produced right now. For products with longer lead times, like footwear and apparel, businesses should start collecting the required evidence and data now to prove they are deforestation-free to avoid penalties at the end of this year. Monitor EU guidance. There is currently still limited guidance from the EU about the EUDR. Whilst the EU has launched the EU observatory on deforestation and published a helpful FAQs document, further detailed guidance is expected.

Monitor EU guidance

There is currently still limited guidance from the EU about the EUDR. Whilst the EU has launched the EU observatory on deforestation and published a helpful FAQs document, further detailed guidance is expected.

Explore Retail Compass Autumn 2024