Background of the EU Deforestation Regulation

Forests provide a broad variety of essential environmental, economic, and social services as they harbor most of the Earth’s terrestrial biodiversity. Yet every year 10 million hectares of forest are deforested. The FAO estimates that 420 million hectares of forest have been lost worldwide between 1990 and 2020, with EU consumption causing around 10 % of these losses. 

The EU Deforestation Regulation (EUDR) aims to reduce the EU's consumption-driven deforestation by ensuring that products entering its market do not contribute to deforestation or forest degradation. The EUDR is a significant step towards protecting forests, reducing the impact of the EU market on global deforestation, and fostering responsible supply chains.

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Overview of the EU Deforestation Regulation

The EU Deforestation Regulation (2023/1115) mandates companies importing certain commodities into the EU to provide evidence that their supply chains are free of deforestation. The regulation affects seven commodities responsible for the largest share of EU-driven deforestation: cocoa, coffee, palm oil, soy, rubber, cattle, and timber, as well as derived products such as beef, furniture, and chocolate.

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The EU Deforestation Regulation sets forth specific provisions to mitigate the risk of deforestation and forest degradation in the supply chains of certain products. The key provisions of the regulation include:

• Establishing due diligence requirements for operators placing commodities and derived products on the EU market;
• Prohibiting the placing of products on the market if they have caused deforestation or forest degradation after 31 December 2020;
• Requiring operators to establish and maintain a due diligence system to ensure compliance.

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Which companies will be affected?

The rules will be applicable to companies involved in the commercial activity of placing these products on the EU market or making them available for export. The main obligations target non-SME companies, while SME companies are permitted certain exemptions from the rules.

Non-SME companies will have 18 months to implement changes to comply with the main obligations of the regulation, while SME companies have a longer period of 24 months to comply with the new rules.

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EUDR Compliance Timeline

The EU Deforestation Regulation entered into force on 29 June 2023. Non-SME companies will have 18 months to implement changes to comply with the main obligations of the Regulation, while SME companies have a longer period of 24 months to comply with the new rules.

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Due diligence requirements

Companies must follow a thorough due diligence process before selling relevant products on the EU market:

• Providing information on the product's origin, including the country, region, and, where relevant, the specific production site;
• Conducting a risk assessment based on the collected documentation to establish whether there is a risk of deforestation and forest degradation in the supply chain;
• Implementing appropriate risk mitigation measures such as gathering additional information, conducting independent surveys and audits;
• Regularly reviewing and updating the due diligence system.

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Penalties for infringements

Violations of the EUDR will result in severe penalties. EU Member States must lay down specific rules on penalties, which according to the EUDR shall include:

• Fines of up to at least 4% of the company’s annual EU-wide turnover in the preceding year;
• Confiscation of relevant products or revenue gained from violations;
• Debarment from public procurement processes and access to public funding for up to 12 months for serious or repeated infringements;
• Temporary prohibition against selling relevant products on or exporting them from the EU market.

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The role of satellite imagery

Satellite data plays a key role in ensuring traceability and compliance as it provides the technical and scientific means adequate to determine whether the relevant products are deforestation-free. In order to better monitor changes in the world’s forest cover, earth observation monitoring tools are crucial that provide easy-to-understand data and information linking deforestation, and forest degradation, to the respective commodities and products.

References

FAO and UNEP (2020). The State of the World’s Forests 2020. Forests, biodiversity and people, Rome.

FAO (2016). State of the World’s Forests 2016. Forests and agriculture: land-use challenges and opportunities, Rome

Pendrill F., Persson U. M., Kastner, T. (2020). Deforestation risk embodied in production and consumption of agricultural and forestry commodities 2005-2017.

Regulation (EU) 2023/1115 of the European Parliament and of the Council on the making available on the Union market and the export from the Union of certain commodities and products associated with deforestation and forest degradation.