More Due Diligence for Deforestation-Free Supply Chains through the EU Deforestation Regulation (EUDR)
On June 29, 2023, the EU Regulation for Deforestation-Free Supply Chains came into effect. The goal of the regulation is to ensure that raw materials, especially those responsible for deforestation, and products made from them are demonstrably produced on lands that were not deforested after December 31, 2020, and are in accordance with the legal regulations applicable in the country of production.
The implementation of the EU Deforestation Regulation (EUDR) is required by December 30, 2024. Small businesses have an additional 6 months for compliance.
Who is affected?
Primary entities affected include manufacturers, importers, and traders who introduce the following raw materials/products for the first time in the EU:
- Wood
- Beef
- Rubber
- Palm oil
- Cocoa
- Coffee
- Soy
Secondary entities in the downstream supply chain are also affected, and they must retain all information serving as evidence for compliance with due diligence obligations, along with the importer's diligence declaration reference number.
What must companies do?
Companies must ensure that relevant raw materials and products meet the following conditions before being placed on the market or exported:
- They are deforestation-free.
- They are produced in accordance with the relevant legal requirements of the producing country.
- A due diligence declaration is available for them.
By submitting the due diligence declaration to the authorities, the company assumes responsibility for ensuring that the products meet the above criteria. Due diligence includes:
- Collection of information, data, and documents to ensure due diligence obligations and the involved market participants.
- Measures for risk assessment.
- Measures for risk mitigation.
Furthermore, the process for risk assessment and mitigation must be thoroughly documented.
In case of information about potential violations, an immediate notification to the relevant authorities and traders is required. If subjected to an inspection by the authorities, they must be supported, for example, by providing access to the premises and allowing inspection of relevant documents.
Conclusion
SMEs should familiarize themselves with their obligations as traders of the defined raw materials/products, as well as market participants related to the seven products – as information obligations apply to them as well. In addition to the German (LkSG) and European Supply Chain Act (CSDDD), which primarily place the responsibility for protecting human rights in the supply chain on European companies, the EUDR now focuses more on environmental protection aspects in the value chain. Ensuring compliance with human rights and environmental protection rules, as mandated by the EU Supply Chain Act, can provide a solid foundation for product-related due diligence under the EU Deforestation Regulation. Companies affected should be mindful of the overlaps between CSDDD and EUDR, as they may need to gather certain information only once.