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Introduction: Why does the EUDR matter?
The EU Deforestation Regulation (EUDR) is the European Union's landmark policy to ensure that products sold on the EU Single Market are deforestation-free. The EU Deforestation Regulation, first tabled in a European Parliament consultation, is an important step towards the protection of the world’s forests. Illegal logging and harmful farming practices often result in excessive deforestation of wooded land, which is widely recognised as a threat to the world economy, and farmer livelihoods, and a significant driver of climate change.
The EU, as one of the world's largest and richest consumer markets, has recognised its role in demonstrating leadership in the fight to end global deforestation with the EUDR. The EUDR requires businesses in the EU to ensure that their supply chains do not contribute to deforestation. It contains strict due diligence requirements and potentially severe penalties for companies that don't comply (up to 4% of EU-based net turnover), and try to sell deforestation-related products in the EU.
Every company that's subject to the EUDR needs to complete an EUDR due diligence statement and carry out a deforestation risk assessment for their products. The due diligence statement requires submission of a specific set of data about company products, and must be provided before goods can be sold in the EU. These statements are uploaded and checked within the EU Information System, so the data companies must use to complete the EUDR due diligence statement is accurate and verified. However, accurate data isn't always easy to come by. There are a series of obstacles that can make filling out a due diligence statement a headache. For example:
- Supply chains can be long and opaque.
- Demonstrating compliance with local deforestation laws and other laws of the country of production that vary from region to region can seriously complicate procurement decisions.
- Declaring products that are composed of multiple ingredients from different sourcing locations can cause data verification issues.
- Geolocation coordinates for all commodities, especially in mixed batch shipments, aren’t always provided by suppliers.
To comply with the EUDR, companies need to get to grips with complex issues such as these. To get over these hurdles, companies subject to the EUDR must get closer than ever to their supply chains and take data accuracy very seriously. In this article, we'll explain everything there is to know about the EUDR, the due diligence statement, and how to complete it as part of any company EUDR compliance policy.
The EUDR compliance basics: Factsheet
The EUDR came into force on December 30, 2024. The Regulation expands upon the existing EU Timber Regulation (EUTR), broadening its scope to include a wider range of commodities and products. The EUDR distinguishes between large non-SMEs and SME traders and operators, with simplified rules for the latter. A trader or operator qualifies as large if they have either over 250 full-time employees or an annual turnover of above EUR 50m. The commodities covered by the scope of the EUDR are:
- Cattle
- Cocoa
- Coffee
- Palm oil
- Soy
- Rubber
The EUDR also covers specific derivative products of these commodities (e.g. chocolate and leather), but not all derivatives. The derivatives covered are listed in full in Annex I of the Regulation. Countries and regions will be benchmarked by the European Commission on their degree of deforestation risk. For companies sourcing from low-risk countries, the requirements are simplified, but for countries sourcing from medium-or-high-risk locations, they'll be expected to take proactive steps to ensure deforestation is eradicated from their supply chain and be able to prove that they’ve done so.
Central to the EUDR is the due diligence system, which requires businesses to trace their products back to their source. This involves gathering detailed information about the product and the supply chain, such as the commodity's country of production, the coordinates of the production area, and compliance with the producing country's laws (e.g. deforestation, human rights, labour laws).
To complete the EUDR due diligence statement accurately, the Regulation requires companies to carry out a due diligence risk assessment to determine the facts and gather the data required by the due diligence statement. Member state competent authorities will check that data. To ensure proper implementation of the EUDR, the European Commission also reserves the right to make checks in certain cases, and also check supplier locations abroad.
Third parties, such as relevant NGOs, can raise substantiated concerns where it is suspected that claims aren’t accurate. Authorities are obliged to investigate substantiated concerns within six weeks. If a company is found to be non-compliant, cease-and-desist orders can be issued. For repeated violations, fines and criminal prosecution are also on the table.
That’s why verifying the accuracy of data before your products reach border officials and national competent authorities is so important for compliance.
Key components of the EUDR due diligence statement
What constitutes an EUDR due diligence statement?
As per Article 9, an EUDR due diligence statement is a formal declaration by a company or legal person that is submitted before placing a product on the EU market for distribution, consumption, or use. It must contain the following information:
- Company information: the name and address of the operator/trader, and the Economic Operators Registration and Identification (EORI).
- Full product information: A full description of the product, its name, Harmonised System (HS) code, and legal origin.
- Geolocation data: Coordinates demonstrating where the commodity was produced. Geolocation data for ALL plots of land where relevant commodities were produced is required.
- Supply chain linkage: Details of the known persons or companies that handle the relevant products and commodities through the supply chain.
- Risk assessment: Demonstrate how you verify your EUDR field data to determine the degree of risk that your products have caused deforestation or forest degradation.
- Information on the steps taken to ensure these risks are severely minimised to be negligible.
Download Due Diligence Statement template here.
Companies can submit their due diligence statement in the EU's information system. For future commercial activities related to the same product or for activities that relate to a product that already underwent due diligence, companies can reference previous statements manually via their reference number.
Voluntary certification schemes, supplier contracts and wider policy plans can be uploaded as part of their risk assessment procedure as per Article 10.
A step-by-step guide to completing your due diligence statement
The success of the Regulation depends on carefully completing and submitting your due diligence statement before placing your product on the EU market. This process might seem complex, but you can make it easier by following our step-by-step EUDR due diligence statement guide.
Step 1: Identify your EUDR data obligations
Firstly, you should assess the extent to which your company is exposed to non-compliance risks. Understanding the commodities that comprise the goods you sell or trade is the first step to completing your due diligence statement. To get detailed information on what goods are covered, Annex I of the EUDR lists the HS codes of each listed commodity.
Step 2: Understand the extent of your EUDR commodity supply chain
If you trade or use the commodities subject to the Regulation, you should start building relationships with suppliers to gather information on the extent of your supply chain. Some products have multiple manufacturing stages and can move through multiple parties before they reach your business. You'll need to map this out from the first mile to the end consumer.
Step 3: Gathering and assessing relevant information
Once you know the extent of your responsibilities, the next important step is to gather all the relevant information about your value chain and product as required in the EUDR’s Article 9. This means collecting data for every stage, from harvest up to when the product hits the market. You need specific details such as product descriptions, including the HS code, quantities, supplier information (like names and addresses), and the country of production, to meet EUDR requirements.
To help collect this data, many businesses use trusted service providers to provide accurate and verified data about farm locations and deforestation risks. These systems keep data organised, making it easier to track products and find out where they come from in the supply chain. Granular, accurate data is crucial for a solid risk assessment.
Step 4: Complete your EUDR risk assessment
As per Article 10 of the Regulation, the risk assessment stage requires companies to analyse and verify the EUDR data they gather for deforestation and non-compliance risks. A variety of factors need to be considered here, such as:
- The proximity of a production area to protected areas.
- The amount of forest overall in the production country.
- The presence of Indigenous peoples and their approval of the production process.
- The overall country risk level as benchmarked by the EU Commission.
- The prevalence and risk of local and national deforestation.
- Consideration of other concerns in the country of production, such as conflict and corruption.
- The complexity of the relevant supply chain and the risks of circumvention of the Regulation.
- Substantiated concerns on the history of non-compliance of relevant suppliers or stakeholders.
- Complementary information, such as certifications and local schemes.
Make sure you get your geolocation and risk assessment data verified before you submit your EUDR due diligence statement, which is a legal document that carries liability.
Step 5: Put risk mitigation measures in place
The EUDR risk assessment can reveal numerous deforestation, data and legality risks in the supply chain. Each will require a mitigation policy to negate the risk of deforestation and to reduce inaccurate data and non-compliance as much as possible. It's not just as simple as locating your production areas and checking whether deforestation occurred; errors in supplier data, language problems, variations of laws from region to region, and the sheer complexity of some production supply chains may contribute to complex problems that require complex solutions.
A large percentage of tropical commodities are insufficiently traceable, posing significant compliance risks under the EUDR. Even recently mapped farms can form an EUDR compliance risk, as mapping data isn’t always reliable. Inaccurate polygons, overlapping polygons, unusual boundary spikes, data indicating farms are in the ocean - these inaccuracies are more common than one would think. Aside from regularised updates from suppliers, implementing an EUDR data verification and management system with safeguards that control for legality, data quality and compliance can mitigate these risks, and demonstrate a genuine commitment to risk mitigation under the EUDR.
Step 6: Documenting and reporting compliance with a due diligence statement
Once you complete the risk assessment, the next step is to complete your due diligence statement in line with the requirements listed above. You can submit your due diligence statement to the EU Information System.
