The EU Deforestation Regulation (EUDR) represents a significant advancement in tackling deforestation by enforcing stricter due diligence in supply chains. A key mechanism for identifying potential non-compliance issues is through substantiated concerns (or claims).
The power of substantiated concerns
Natural or legal persons, including non-governmental organisations (NGOs), may submit substantiated concerns to competent authorities when they consider that one or more operators or traders are not complying with the regulation. Competent authorities must assess these concerns. If found credible, NCAs are obligated to take action to investigate the claim and the operator(s) against whom the claim was filed.
This mechanism amplifies the leverage of NGOs and other stakeholders. It introduces a level of vigilance that extends beyond the default inspections by governmental authorities, putting pressure on operators and traders to maintain stringent compliance.
“Historically, activist NGOs have had to rely on protesting, the media, and potentially shareholder activism to get companies to act responsibly. They now have a law, and they intend to use it,” says Nicko Debenham, Sustainability Advisor and Former Vice President of Sustainability at Barry Callebaut
What substantiated concerns could look like
An example of this is when a specific operator places a commodity on the EU market that is produced on a farm with deforestation after the regulatory cutoff date. The due diligence statement describes only farm plots in compliance with the deforestation criteria, while other undeclared parts of the same farm continue to operate without adhering to all compliance aspects. The concern is substantiated by the lack of implemented measures to prevent products from compliant and non-compliant plots from being mixed, resulting in significant risk.
Another issue that could be brought to the attention of NCAs is when a specific operator places commodities on the EU market that lack full chain-of-custody visibility. It is known that some of this operator's upstream suppliers are not adhering to regulatory criteria. In this case, an indirect supplier to the operator is producing on land located within an Indigenous territory, in violation of the producing country's laws. This lack of visibility, coupled with the known non-compliance of the upstream supplier and the ongoing land conflict, constitutes a substantiated concern regarding the operator's potential non-compliance.
Additional time to gather evidence can lead to a surge of well-supported claims
While these concerns can only be submitted once the regulation is in effect, it's crucial for companies to recognise that preparing for compliance is a complex and time-consuming process. Ensuring data quality, addressing deforestation risks, and resolving legality issues require substantial effort and time and cannot be deferred until the regulation becomes applicable.
The EUDR delay provides NGOs with additional time to gather evidence, conduct field investigations, and prepare substantiated concerns. The first day of EUDR enforcement could see a surge of well-supported claims - potentially overwhelming unprepared companies. Consequently, companies may face challenges to their compliance as soon as the EUDR comes into force.
