Leveraging the EUDR for strategic advantage

The EU’s new Deforestation Regulation, or the EUDR, comes into full effect for all in-scope companies in June 2025, and its requirements are onerous. Companies may be unable to place certain commodities or products in the EU market if they can’t prove a deforestation-free provenance. And worse, non-compliance can lead to hefty fines, loss of participation in public procurement processes, and a loss in public funding.  

But don’t miss the forest for the trees. While the EUDR requires much more rigorous due diligence operations than previous regulations, implementing these supply chain management processes early can benefit your organization greatly. Maintaining compliance to the EUDR will not only prevent fines and other obvious consequences, but also help your business prepare for future environmental, social, and governance legislations. And, incorporating strong due diligence processes across your business now will keep you ahead of competitors who may be scrambling to clean up their supply chain management strategies in just a few years.  

EUDR Key Facts

The EUDR is the EU’s latest legal effort to encourage businesses operating within the EU to take accountability for and action against the deforestation and loss of biodiversity commonly associated with certain commodities. The regulation addresses companies that trade in or distribute cattle, cocoa, coffee, oil palm, rubber, soya, wood, and their associated commodities. Companies are required to assess and verify that these goods have not been produced as a result of recent deforestation, forest degradation, or violations of local laws. The EUDR defines ‘recent deforestation’ as deforestation or forest degradation that has occurred after December 31, 2020.  

Figure 1:  Seven commodity types with direct impact from EUDR  

A broad range of businesses are included in the EUDR’s remit. Since the regulation is focused on the commodities and associated products, any company that places or distributes any of these within the European market must maintain compliance to the EUDR.  

To maintain compliance, businesses must: 

1. Prove that the concerned commodities or derivative products are deforestation-free, as per the EU’s definition of recent deforestation and forest degradation.
2. Prove that the concerned commodities or derivative products have been acquired or produced in accordance with any applicable local laws from which the commodity or product originates.
3. Produce a thorough due diligence statement proving the inquiries above, and including a risk assessment that demonstrates no more than a negligible risk of non-compliance.

The EUDR has already been signed into effect and will be enforced for most companies starting on December 30, 2024. Companies that qualify as SMEs under the EUDR must be able to prove compliance by June 30, 2025. 

Figure 2: EUDR timeline from initial pass to final deadline when the regulation takes full effect  

How to leverage the EUDR for strategic advantage

The due diligence burden is much higher than current regulations within the EU, and businesses may be scrambling to prepare for its full enforcement. You don’t want to fall on the wrong side of the EUDR. Non-compliant businesses can face a fine of at least 4% of EU turnover from the preceding year, exclusion from public procurement processes and funding, and product and revenue requisitions. Plus, regular offenders may even face a temporary ban within the EU from trading with the specified commodities or products.   

However, putting systems in place that will keep your business compliant with the EUDR can give your company so much more than a regulatory well done. Strengthening your company’s due diligence data gathering, assessment, and verification abilities now will help your organization prepare for other incoming supply chain regulations and, more generally, abnormal supply chain events.  

The EUDR requires a deep understanding of where a commodity or product originated from – in the case of commodities such as coffee and cocoa, right down to where a farm is located. Without detailed supply chain data, this information is almost impossible to gather, let alone verify. That’s why it’s important to find the right tools, to ensure your business has access to accurate and timely supply chain intelligence. Automated data gathering and assessment solutions, such as Everstream Discover, pull hard-to-find data from a variety of sources. Using AI, Discover collates and analyzes data to provide your supply chain management team with clear, actionable intelligence, allowing them to make effective decisions and pull together provenance reports easily.   

Next Steps

If your business hasn’t already started, it’s time to put a plan in place to ensure compliance to the EUDR. The first step is to audit and adjust your systems to get the granular level of supply chain data your company will need to put together comprehensive risk and provenance reports.  

Once you have a good grasp of the changes you need to make to abide by the EUDR, take a step back and examine the alterations your company will be making. Here are a few questions that could help you understand how to leverage EUDR compliance for supply chain success: 

• Could the data required for the EUDR reports help your organization make quicker decisions in the face of a disruption?  
• Could the data required for the EUDR help you find different or better sources for your key commodities or derived products?  
• Are there any ways you could further streamline your current supply chain data gathering and risk management practices? 

This is also a good time to assess what tools you’re using to manage your EUDR compliance. Solutions such as Everstream Explore allow businesses to automate their supply chain risk assessments, giving your team less manual data analysis and more time to make educated decisions. Optimizing this process early will give your company a competitive edge when it comes to selecting suppliers, transportation routes, and more. Whereas, Everstream Discover can help streamline your EUDR due diligence requirements by mapping your supply chain and highlighting emerging risks that could impact your company’s compliance status, to facilitate strategic decision-making.   

Preparing for the EUDR may be tricky and time-consuming at first, but, when done right, it can empower your supply chain management team and improve your overall business practices. And, it can help you look ahead as well. Remember, the EUDR isn’t the first, and won’t be the last regulatory effort aimed at creating greener supply chains. Don’t get lost in the trees of the EUDR. Instead, focus on the forest – creating sustainable supply chains will pay off dividends for your company now and in the future.