EUDR: what to expect

By: Lara Martini

About EUDR

EUDR stands for EU Deforestation Regulation, a new set of rules that aims to prevent the EU market from contributing to global deforestation and forest degradation. It aims at tackling both climate change and biodiversity loss through responsible supply chains: according to the UN Food and Agriculture Organization (FAO), 420 M ha of forest?were lost globally to deforestation between 1990 and 2020, and EU consumption represents around 10% of its products.

The regulation came into force on 29 June 2023 and will apply from 30 December 2024 (or 30 June 2025 for micro or small businesses). It covers seven commodities (cattle, cocoa, coffee, oil palm, rubber, soya, and wood) and many products derived from them, such as meat, leather, chocolate, palm oil, rubber products, soybeans, wood products, paper, and books.

The EUDR requires companies that trade these products in the EU or export them from the EU to issue a “due diligence” statement that includes three main elements:

• Goods placed on the EU market were not grown or harvested on land that was converted from forest to agricultural use anywhere in the world after 31 December 2020, or that induced forest degradation (the conversion of primary or naturally regenerating forests into plantation forests or other wooded land) after the same date.
• All goods are also produced in accordance with the relevant legislation of the country of origin, including social and environmental laws
• Measures and controls are in place to reduce the risk of non-compliance to “negligible”

Competent authorities will also exchange information with the European Commission, as a first level of cross-validation. Companies that fail to comply with the EUDR face sanctions including substantial fines up to 4% of the company's EU turnover, and exclusions from public funding or the market.

The EUDR applies to all EU member states, and countries that are part of the European Economic Area (EEA). As for the UK, it has its own domestic legislation that mirrors the EUTR, the UK Timber Regulations (UKTR), focusing on wood and its derivates. There are ongoing discussions as to whether the EUDR could replace the EUTR in the Northern Ireland Protocol, and what implications this may have. Given the ongoing close economic ties between the UK and the EU, however, it is likely that many economic players will consider the EUDR in their way of working and sourcing products.

EUDR compliance: what does it mean in practice?

To comply with the EUDR, companies will need to take the following steps:

1. collecting detailed information, using reliable sources of information and evidence, such as satellite imagery, traceability systems, certification schemes, and third-party audits. This should be done using a standardized template. The goal is to demonstrate the products comply with the EUDR, within reasonable doubt.
2. carrying out a risk assessment?identifying and evaluating the risk of deforestation and forest degradation in their supply chains in relation to each product, using indicators and targets. This will reflect numerous factors including the?risk category?of the country of production as set out by the European Commission.
3. Implement measures to prevent, mitigate, or eliminate the risk of deforestation and forest degradation, such as engaging with suppliers, adopting sustainability standards, and supporting restoration activities. The effectiveness of these measures should be regularly checked.

The due diligence statements?will need to be shared with authorities, across the value chain and, where appropriate, with customers.?National authorities will be empowered – and required - to conduct checks, including without warning, and to mandate immediate remedial action.

Under certain conditions, the EUDR also allows private parties to submit substantiated concerns to both the operators and the authorities.

While the EUDR is a groundbreaking regulation that aims to protect the world’s forests and the people who depend on them, and promoting sustainable trade and development, it’s not without its critics. Concerns focus on the relatively short timelines and difficulty of accessing quality data, especially from small producers.

This has led to fear of increased risks, and of negatively impacting smaller growers and suppliers, especially in the Southern hemisphere. Several players, including industry and international bodies, are building on the EUDR to shape a more comprehensive approach.

As one example, the Tropical Forest Alliance has developed a?‘Smart Mix’ combination of measures,?which consists of five interconnected approaches, including a partnership with producer countries, to improve production standards, dialogue with other international purchasing countries, to ensure produce isn’t simply shipped to other markets with the EU receiving what’s produced sustainably, but without a change in behavior, and attention to financing and valuation.

EUDR : where technology will make all the difference

Some of the practical measures required to comply with EUDR are:

1. Obtaining the geolocation for production, including for millions of smallholders who often supply exporters or mills indirectly through collectors/aggregators, or auction systems. This requires collaboration with a series of middlemen, ahead of the preparation of export documentation.

• Satellite imaging, LIDAR and other at-scale data sources appear as a viable resource, allowing for both reliability and granularity. Working with them will still require the ability to match information on production with the procured views. AI can help, including with additional sources such as weather patterns, smart devices and purchase records, to build a body of additional evidence that can be cross-referenced.
• Both digitizing paper data and simplifying data inputs will likely be necessary, including in areas with low connectivity coverage.
• AI can be applied again to search for mistakes and incongruencies, and simplify and anticipate flows.2. Maintaining reliable and updated traceability, while matching land ownership titles and sourcing, from actors whose ownership is unclear, is still a meaningful risk. Unfortunately, not all national registers are up to date and several producing countries consider land ownership sensitive data out of public reach.
• While this remains a risk area, ad-hoc workflows and data matching / data integrity work can help focus attention, support contract compliance and facilitate the dialogue up and down the supply chain
• Blockchain and IT security will also play a critical role in building trust

3. Much gathering of evidence is still done through on-site inspections as well as utilizing aerial and space-based technologies. This makes the system inefficient, costly, and prone to a level of gaming.

• It is possible to envision offering digital access to records, both for spot controls and for compliance updates. The use of blockchain and NFTs associated with physical goods would increase transparency and reduce working times. We envision a world where digital inspections are the norm, and on-site ones are only triggered by identified concerns.

4. EUDR compliance documents will need to be included and maintained together with other certifications, including but not limited to import and export documents, food safety, environmental and health records where applicable, other certifications (such as Fairtrade), and navigating local regulations.

• In most cases, the same data will be “sliced” in different ways to produce these, and regular updates will be needed to the forms themselves. Automated workflows can help not only manage but produce and store these documents securely, and make them accessible in updated form.
• There is a clear opportunity to connect the work around EUDR to other mandatory and voluntary sustainability and climate-related disclosures. The underlying systems need to interconnect and cannot be planned in isolation.
• Once the data has been gathered and is available, we see an opportunity to offer added transparency by allowing customers, whether businesses or end consumers, to have access to them. Families will now be able to see where their food – and the table it lays on – are from.

5. Not least, the EUDR creates an additional, strong requirement to maintain the integrity and traceability of processed materials and ingredients. This has often been a challenge for millers, coffee brewers, florists and other manufacturers who combine different batches of products.

• We expect an additional drive to increase both the granularity of the data, and the need for transparency across the value chain. This is likely to include more collaborative contracts, increased supply chain predictability, and a heightened attention to traceability as well as better-informed operations.
• It is interesting to note that Antitrust authorities in several countries have been willing to review their approach to support collaboration when it comes to sustainability and impact measurement.
• The work, however, cannot start in a vacuum, so integrating with existing legacy system and digitizing or accessing older data in legacy formats will play a key role, as well as address some of the concerns around a fair transition. The EUDR is a landmark regulation requiring fast changes within the next 12 months. Technology can play a key role in simplifying and reducing the costs of compliance – and that same work is likely support and enable faster innovation, strengthen trust, and increase supply chain resilience. In turn, it opens opportunities to capture better value for the highest quality products in support of a healthier planet.

About TheoryMesh

TheoryMesh is an industry leader in agri-food supply chain data management and traceability. Founded in 2020, it specialises in food chain processes, from producer to consumer. Our team brings software, sustainability and sector understanding. Our products are scalable, flexible, designed for ease of use, and integrated with mainstream SaaS solutions and smart devices.

Lara Martini ini is TheoryMesh’s Senior Advisor for EMEA. She brings over 20 years of executive experience in digital transformation, operating in international markets, and expertise in sustainability and sustainable finance. She is also an active Non Executive Director and advocate for sustainable business practices and nature-based solutions.