European Union Deforestation Regulation (EUDR): Navigating implementation Challenges

In response to the pressing need for environmental action, the European Union has taken a significant step forward with the approval of the European Union Deforestation Regulation (EUDR).

The EUDR is a commendable effort towards sustainability, yet it presents implementations challenges for diverse stakeholders, notably small-scale farmers, their associations and importers. Collaboration across the supply chain is key to overcoming these challenges, as explored in topics below [1].

1. Communication and Consultation

Lack of communication and consultation with producing countries has led to concerns, with several governments expressing their reservations. The main point of concern is the timeline for starting implementation of the regulation (December 2024), which is deemed unrealistic particularly for countries with smaller-scale agricultural operations.

2. Impact on Small-Scale Farmers

Small-scale producers, particularly those with limited resources, face potential exclusion from the supply chain due to the complexities and costs associated with compliance with the regulation. While direct compliance might not be mandatory for them, coordinating the provision of information, such as geolocation, with other actors in the supply chain in producing countries becomes a prerequisite if they aim to export their products to the EU. The regulatory burden may disproportionately affect and hinder their participation in international markets.

• During an ESG assessment carried out by RCS Global - part of SLR - for a global coffee trader working directly with small coffee producers, firsthand observations revealed how due diligence regulations such as the EUDR cascade throughout the supply chain.
• For the small producers and their associations, ensuring compliance will entail investing in infrastructure upgrades. While these steps are crucial for accessing markets, they also impose significant financial pressure on farmers and associations operating with limited resources. Companies in the EU should strive to understand the challenges their suppliers, such as small farmers, associations, and cooperatives, face when adapting to the EUDR. Exploring avenues to support them through training and guidance is essential to ensure their readiness.

3. Data Entry and Infrastructure Issues

Importing companies must provide geolocation data indicating the origin of the products to ensure they have not been produced in areas affected by deforestation. This poses a challenge, especially with large shipments involving a mix of products from various sources. The current manual process for entering this data is resource-intensive and inefficient, which presents a considerable challenge for importing companies. Additionally, insufficient infrastructure and functional IT systems in both administrations and companies may hinder the effective implementation of the EUDR.

• In this context, traceability systems play a pivotal role in supporting these efforts by collecting and managing the necessary data, conducting risk assessments, facilitating risk mitigation, and ensuring the traceability of products. RCS Global has identified this as a common need in various supply chain sustainability issues, with technological advancements proving to be instrumental in addressing the demands and challenges of data management.

4. Industry Discussions

Relevant stakeholders across the various supply chains in scope of the EUDR have used platforms such as the Global Forum on Food and Agriculture (GFFA) [2], held in January 2024 in Berlin, to underscore its significance on the international stage. Various stakeholders highlighted the importance of global collaboration in addressing deforestation and sustainability challenges in the agricultural sector, and provided recommendations to address implementation challenges, including:

a) Extended Timeframe

Stakeholders suggest extending the implementation timeframe to provide more room for preparation, especially for countries and industries facing infrastructure challenges. During this period leading up to the official implementation date (December 2024), companies in the EU should review their due diligence systems to identify gaps and implement necessary adjustments to ensure compliance with the EUDR.

b) Support Mechanisms

Acknowledging the need for support, especially for small farmers, GFFA participants called for the establishment of support mechanisms such as funds and initiatives to facilitate compliance. A critical step would entail training suppliers in producing countries with the information they need to understand the EUDR, its scope, impact, and how to align with its requirements.

c) Dialogue and Cooperation

Emphasis on fostering open dialogue and cooperation between the EU and producing countries to ensure that the regulations are well-aligned with local conditions and challenges.

d) EUDR Alignment

The EUDR’s due diligence framework aligns with international standards, which also constitute the foundation for other European regulations aimed at enhancing companies’ due diligence activities in ESG matters. Understanding the EUDR’s scope and identifying gaps in the company’s due diligence systems are crucial for compliance, highlighting the need to create a comprehensive roadmap for implementing necessary changes or developing new systems.

e) Leveraging Local Solutions

Leveraging local policies and solutions to ensure that the implementation of regulations aligns with the unique conditions of each producing region.

How can SLR help?

SLR, along with acqusition RCS Global, is a one-stop solution provider for all needs emerging from regulatory requirements in responsible sourcing, assisting our clients in the implementation of regulations such as the EUDR by:

• Expert interpretation of the EUDR and provision of reports on regulatory complexities and updates.
• Gap analysis of your company’s management systems against the due diligence requirements set by the EUDR.
• Roadmap for compliance and alignmentstrategy. 
• Development or update of due diligence management systems.
• Training programme to suppliers in producing countries.
• Risk assessments (with field trips) to assess the presence or risk of deforestation and other environmental red flags inselected supply chains.
• Supplier deforestation risk assessment to assess risksthat specific suppliersrepresent. 
• Mapping and auditing of full supply chains to identify, trace and obtain relevant datasuch as geolocation for the EUDR and other regulations.
• Vine due diligence platform to effectively and engagingly visualise the supply chain, monitor risks and improvement actions with ease. Tools and indicators from the Vine platform assist in the reporting necessary for regulatory requirements.
• Widely used among top battery and automotive producers, the Vine platform for due diligenceis capable ofbeing scaled to agricultural products, based on mapping and auditing results.

Please get in touch to discuss further.

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References

[1] https://eur-lex.europa.eu/legal-content/EN/TXT/?uri=CELEX%3A32023R1115&qid=1687867231461

[2] https://www.gffa-berlin.de/en/home/