Getting Clear On The EU’s Deforestation Legislation
Coming into force for large business in December 2024, with small businesses requiring compliance by June 2025, the EU’s new Deforestation Legislation is effecting businesses involved in the supply chains of coffee, cocoa, wood, cattle, soy, palm oil and rubber. Here is everything you need to know about the up coming legislation. And if you’re still not sure if or how this applies to you, email us to see how we can help.
Why do we have this legislation?
It’s part of the EU Green Deal’s Directives and Regulations to reduce CO2 in the atmosphere and biodiversity loss, while ensuring sustainable business practices and transparent supply chains. Between 1990 and 2008, the EU imported and consumers 1/3 of the globally traded agricultural products associated with deforestation. A study concluded that the 7 products mentioned above are the ones most associated with deforestation. It’s important to note the difference between Regulation and Directive. Regulation means the EU’s text applies to all countries with the EU. Which makes it much easier for businesses. Directives are where the overall aims apply, but it’s down to each member state as to how they action and enforce that.
Image Source: Unsplash
Who does it apply to?
Every business that sells into the EU will need to be compliant by June 2025 regardless of whether you are B2B or D2C. There is also a special mention of online sales. Even if your business is outside of the EU but you sell your products to customers within the EU, you must comply. The person or business responsible for compliance is the one who places it for sale within the EU. So despite many reports that the people who need to be compliant are the small holders at the bottom of the supply chain. That’s just not true. In fact there are several mentions of small holders within the legislation to ensure they are being supported. And this will be further enforced through the Corporate Sustainability Due Diligence Directive.
What does it cover?
It covers the products and the derivatives of coffee, cocoa, cattle, wood, soy, palm oil and rubber. It does not apply to any recycled products. Lots of products can be derived from these, hopefully some of these examples will help make it a little clearer.
cattle - this applies to beef and leather products. Shoes, accessories and clothing fall under this regulation. However, if you are a brand selling ready made clothing and were to have a leather button on a cotton jacket, you buy that button from a supplier already made and there is no other leather on your garment; you do not need to report on it. But, if you are the button supplier and your customer is in the EU (the person or business placing the PO), you do need to comply with the EUDR for the leather.
wood - this applies to products made directly from wood, such as timber and furniture. And it also applies to wood pulp products such as paper and packaging. It does not apply to products that are derived from wood pulp. For example; it does not apply to viscose which is made from wood pulp. But if the viscose fibre is manufactured in the EU, then the regulation applies to that raw material. And it is the responsibility of person or business selling the wood pulp to the fibre supplier to comply.
rubber - this is natural latex and also applies to vulcanised rubber which is used in footwear. It also applies to any neoprene products using natural rubber.
Something to note for small holders here: If the crop is grown under tree cover, the EU will not recognise that area as forest, instead it described as agricultural land.
Image Source: Unsplash
How does the reporting work?
Great news is that the EU is going to make it super easy to report on! Countries are going to be divided into 3 groups; low risk, standard and high risk of deforestation. The lower the risk the less reporting required. What will be needed for all though is everything you normally put on import paperwork plus a geolocation for the times and dates the products are being grown / harvested etc. Sadly, you can’t just use Google maps for that! Support for this will come through the EU Observatory who will provide land cover maps in real time and develop an early warning system for observed deforestation. This forms the first part of the Due Diligence Statement you’ll submit through an online portal. You will need to keep all this information for 5 years, including the number you’ll be given upon statement submission.
If you are a trader, this is all the information you need to keep hold of for your customers in the EU. Except where you are a large business, in which case you will be considered an operator and you will need to comply with risk assessment and mitigation. For low risk countries, a standard supply chain risk assessment and mitigation policy will suffice. But for any high risk countries it must be product, country and area specific.
For standard and high risk countries there will be different levels of reporting required for each product, country and even area. These are generally standard risk assessment and mitigation for supply chains. One difference being is that you need to be aware of your supplier’s compliance. And in the case of operators and small holders; it is the operators responsibility to communicate the needs and if the operator has found any non compliance. As well as offering support to bring the small holder into compliance.
If you are a business that operates outside of the EU, but buys EU products and then sells back into the EU. This is quite relevant for chocolate businesses who buy their chocolate from Belgium for example. You only need to keep the a record of the reporting number related to each batch for 5 years.
Penalties for non compliance.
What happens if there are questions around your Due Diligence Statement, or if you are found in violation?
Customs can put your shipment on hold for 3 days while they work with you to resolve it, or 72 hours for perishable goods.
In the first instance correct action plans will be issued, and at worst that will mean either the destruction or donation of goods in line with the EU’s waste management policy.
For repeated or serious violations there will be fines that are proportional to the environmental damage, which will be no more than 4% of the operators total EU turnover for the financial period ending before the final decision, and product confiscation.
For serious repeated infringements the business can be banned from selling goods within the EU for a maximum of 12 months.
Should you wish for more information, or to understand your business readiness, please reach out and we’ll be more than happy to help.
