The European Deforestation Regulation (EUDR)

‍Our key takeaway: Any company that relies on: cattle, cocoa, coffee, palm oil, soya, and wood - as well as products that contain, have been fed with, or have been made using these commodities: leather, chocolate, furniture, rubber, charcoal, printed paper products, palm oil derivatives will be particularly interested in this development. We have covered some of the steps of the journey of the European Deforestation Regulation (EUDR): the European Commission’s first proposal in 2021; the criticism to the coverage of the law, and then the European Parliament’s response in 2022 (i.e., this doesn’t go far enough, and where is respect for human rights and Indigenous communities?). And here we are on in 2023 in the second to final step of the law: the European Deforestation Regulation has been adopted by the European Parliament - 552 votes to 44 and 43 abstentions. The final step of the journey will be the European Council’s endorsement, then this will be EU law. In short: the EU views deforestation as a huge deal (which it is!). 420 million hectares of forest — an area larger than the EU — were lost between 1990 and 2020 due to agricultural use. The EU is now saying: we don’t want any products in the EU that are tainted by deforestation. We want our consumers to be able to buy stuff in confidence, knowing that they are not contributing to deforestation. Companies now will need to conduct due diligence, prepare due diligence statements, provide evidence of compliance with human rights and respect for Indigenous Peoples, and be ready for checks from the EU authorities and penalties. Another example of how human rights and environmental risks are well and truly risks to business. 

• Why and which products? The EU refers to data points from the UN Food and Agriculture Organization (FAO): “420 million hectares of forest — an area larger than the EU — were converted from forests to agricultural use between 1990 and 2020.” 10% of this global deforestation is EU consumption. Deforestation is primarily caused by agricultural expansion to produce commodities - such as soya, beef and palm oil. These three are viewed as responsible for about 80 % of tropical deforestation worldwide. The new law therefore covers all commodities that the EU views as responsible for deforestation: (1) cattle, (2) cocoa, (3) coffee, (3) palm oil, (4) soya and (5) wood. The law also covers products that contain, have been fed with, or have been made using these commodities, such as leather, chocolate and furniture. The European Parliament also added others to the list: rubber, charcoal, printed paper products and a number of palm oil derivatives. ‍

• Due diligence statement: Companies can only sell products in the EU if the supplier of the product has issued a due diligence statement that confirms that the product does not come from deforested land or has led to forest degradation, including of irreplaceable primary forests, after 31 December 2020. Forest degradation includes the conversion of primary forests or naturally regenerating forests into plantation forests or into other wooded land, as requested by the European Parliament. The EU authorities will be able to use geolocation coordinates, and conduct checks with the help of satellite monitoring tools and DNA analysis to check where products come from. They will focus their efforts and checks on high-risk countries (list to be published by the European Commission in due course). Penalties will be proportionate and dissuasive, with the maximum fine at least 4% of the company’s total annual turnover in the EU.‍

• Human rights: We covered last year the European Parliament Committee on the Environment, Public Health and Food Safety’s proposal to include explicit references to human rights and indigenous rights as core to the issue of deforestation. Human rights is included in the law: companies will need to verify that they are complying with countries’ local regulations on human rights and rights of Indigenous people. A few critics of the laws: it excludes biomass imports (e.g. burning of wood pellets) which are viewed as also contributing to significant forest loss; it does not include at-risk ecosystems that aren’t rainforests; country risk assessments may not accurately reflect the situation on the ground since deforestation is hard to trace; and political pressure to overlook non-compliance may be strong.