EUDR: Europe’s Answer to Global Deforestation

The regulation applies not only to the seven raw material groups but also to products made from them, such as chocolate, leather goods, paper, tires, and furniture. Its aim is to ensure that these materials are not sourced from land deforested after December 31, 2020. This affects companies across a wide range of sectors, including food processing, construction, furniture manufacturing, textiles, automotive, retail, and the entire timber industry. Small and medium-sized enterprises are also required to comply with the rules, though with some allowances.

The EU classifies countries of origin into three risk categories: low, standard, and high risk. Currently, only four countries are considered high risk: Russia, Belarus, Myanmar, and North Korea. A total of 140 countries, including EU member states, India, and China, are classified as low risk. Fifty countries, such as Brazil and Indonesia, fall under the standard risk category. The lower the risk classification, the less likely it is that authorities will conduct inspections.

Due diligence includes information gathering, risk assessment, and risk mitigation. For standard and high-risk countries, companies must carry out a more thorough due diligence process. In contrast, for low-risk countries, collecting origin data and ensuring legal compliance is considered sufficient.

First, determine whether you are considered an operator under the EUDR by placing relevant products on the EU market for the first time or by exporting them, or whether you act as a trader. Then proceed with the following steps:

• Identify relevant goods and suppliers: This includes the specified raw materials and products, as long as they are listed in Annex I of the regulation, along with the associated suppliers.
• Analyze internal data and improve data transparency: Check whether all necessary information is being collected throughout the entire value chain.
• Geolocation of origin: For all affected products, the exact origin must be obtained from suppliers and properly documented.
• Transparent supply chain structure: The full supply chain must be clearly traceable. Mixing with untraceable raw materials is not allowed.
• Risk assessment: For products from standard or high-risk countries, a proper due diligence assessment must be conducted.
• Due diligence declaration via TRACES: Submission must be made through the EU's digital platform TRACES before a product is placed on the EU market or exported.
• Internal integration: Processes in procurement, IT, compliance, and production must be aligned accordingly.

The new reporting obligations offer an opportunity to gain deeper insights into your suppliers and to increase supply chain transparency. Using digital platforms and networks can help suppliers ensure sustainability and deforestation-free sourcing. Once a certain number of suppliers is reached, implementation without a dedicated software solution will no longer be feasible. When choosing a provider, consider their industry expertise, implementation experience, and ability to integrate with existing ERP systems as well as with TRACES and customs authorities.

The EUDR not only introduces new reporting obligations but also requires significant changes to existing supply chain and data processes for specific products. With implementation deadlines approaching, the pressure to act is increasing. Companies should now assess which products and suppliers are affected and what information is already available. Based on this, a due diligence process must be established.

inloop supports businesses in analyzing their current situation, designing effective processes, and selecting suitable technologies. The focus is on a pragmatic approach that integrates the requirements into day-to-day operations, while also leveraging synergies within supply chains.

Contact: Lydia Schwarhofer