EUDR Compliance: Achieving a Deforestation-Free Supply Chain

On December 30th, 2024, a new era in the fight against deforestation begins when the EUDR comes into force. Businesses must comply with EUDR regulations and prove their products are part of a deforestation-free supply chain. From coffee to chocolate, furniture to fashion, the EUDR covers numerous products and items.

But what does this mean for your business, particularly retailers and brands in the Fashion Industry? Are you prepared to navigate the complexities of EUDR? This article explores the far-reaching impacts of the EUDR, providing a clear roadmap for EUDR compliance.

What is the EUDR?

The European Union Deforestation Regulation (EUDR) is legislation in the fight against global deforestation. Deforestation is defined as the purposeful clearing of forested land, often to create space for factories, farming and housing.

The EUDR will come into force on 30th December 2024, it aims to ensure that the supply chains of seven commodities— palm oil, cattle, soy, coffee, cocoa, timber, rubber and, importantly, derived products made from these, such as leather and cellulosic fabrics made from wood pulp fibres, like viscose, lyocell etc —are free from deforestation in the supply chain.

Businesses placing goods on or exporting goods from the EU market must ensure that

1. The relevant products are deforestation-free (Article 3a)
2. They have been produced under the relevant legislation of the county of production (Article 3b)
3. They are covered by a due diligence statement (Article 3c) - This statement must be filed placing the products into the EU market or exporting them from the EU.

Why is the EUDR legislation important?

According to World Counts, if deforestation continues at its current pace, all rainforests could be gone by 2100. Therefore implementing legislation like the EUDR to tackle the EU market's significant role in global deforestation is critical.

Deforestation is caused by the need for land to accommodate housing, commercial buildings, and infrastructure due to population growth, as well as to harvest timber for everyday products like furniture and paper. It also occurs to make space for agriculture, such as cattle ranching and crop farming, and to produce materials for industries like palm oil processing and fast fashion, which uses tree-derived fibres like viscose and rayon. 

The EUDR will help fight issues caused by deforestation such as biodiversity loss. Forests are home to 80% of Earth’s land animals and plants with many facing extinction due to the destruction of their natural habitats. For example, there are only 600 Sumatran tigers and fewer than 65,000 orangutans left today due to deforestation.

Trees create health, soil stability and food security

The impact of deforestation extends beyond wildlife, as it displaces indigenous tribes, erodes soil, and pollutes water sources, threatening human health and food security.

Additionally, deforestation contributes around 20% of global greenhouse gas emissions, exacerbating climate change by reducing the number of trees that absorb these harmful gases. 

The EUDR aims to counter these harmful effects by promoting deforestation-free supply chains, helping reduce the EU's contribution to greenhouse gas emissions, protecting human rights, and ensuring that the demand for commodities does not drive further environmental harm or social injustice.

What Does EUDR Compliance Look Like?

EUDR compliance means that companies must meet three main requirements to ensure their products are both legal and deforestation-free

1. Deforestation Free: Under the EUDR, companies placing products on the EU market or exporting them from the EU must ensure the products come from land that wasn't deforested after 31st December 2020. 
2. Legally Produced: The production of these products must comply with all relevant laws and regulations of the country in which they were produced.
3. Due Diligence: Companies must follow to ensure their products comply with deforestation-free and legal production standards. This process begins with gathering extensive information about the products. Businesses are required to provide traceability information across their supply chain, including geolocation data and production details.

When do Companies have to Comply with the EUDR Legislation?

Large and medium-sized companies have to apply with EUDR from 30th December 2024.

Small and micro-businesses have until 30th June 2025 to comply.

You can check the size classification of your company with your finance team, as this depends on EU market turnover, balance sheet and number of employees in a financial year.

What Products are in scope?

The EUDR applies to the following products and commodities:

• Relevant Commodities: cattle, cocoa, coffee, oil palm, rubber, soya and wood.
• Relevant Products: products derived from relevant commodities including meat, leather, chocolate, glycerol, pneumatic tyres, soya-bean oil, wood furniture, newspapers, and books.

Products in the scope of the regulation are detailed in Annex 1 by the custom codes. After 2 years of the regulation coming into force, the custom codes will be reviewed.

As an example, those referring to Leather are:

The EUDR applies regardless of whether such items are produced in the EU or imported from outside the EU.

What penalties are there for non-compliance?

The regulation specifies minimum levels of checks that authorities must carry out each year to cover at least 3% of operators with minimum percentages of the numbers of operators linked to each risk category.

Fines

Fines are listed as being proportionate to the environmental damage and the value of the relevant commodities or products concerned. The most severe consequences for EUDR non-compliance are financial and will allow for fines of up to 4% of the operators or trader’s annual turnover in the Member State or Member States concerned. This could amount to millions of Euros for bigger firms.

Restricted Market Access

Secondly, non-compliance to the EUDR can lead to an immediate ban on selling into the EU market, as well as the confiscation of the relevant commodities or products and confiscation of revenues gained from the relevant commodities and products concerned, leading to severe business and reputational loss.

The EUDR also stipulates that temporary exclusion from public procurement processes and access to public funding can be enforced, including temporary prohibition from placing or exporting relevant products and prohibition from the use of the simplified due diligence system.

Reputational Damage

Failure to act on legislation and certification, causing failure to comply, will invite negative consequences in the public sphere, including harmful press coverage, potential boycotts of products, damage to brand reputation, and reduced consumer brand loyalty, all ultimately impacting the bottom line. Such damage takes time, effort and investment to recover from, so best to avoid it.

6 Key Steps To Follow for EUDR Compliance

To comply with the EUDR regulation, companies must take a series of steps to align their supply chains with deforestation-free requirements.

1. Assess Your Compliance Requirements

Companies need to evaluate if the EUDR applies to their operations, especially if they sell products in the EU. Even businesses outside the EU will need to engage with their European partners by sharing necessary data. It's important to determine whether your products are covered under the regulation’s designated commodity list and understand the different obligations of operators, traders, and SMEs. So, do you retail products that originate from cattle, cocoa, coffee, palm oil, rubber, soya, and wood, or any of the derived products as listed in the legislation, in areas suffering from deforestation? Only by having supply chain visibility will you be able to answer that question in good faith. 

2. Align Internal Teams

Once you confirm your obligations, internal teams must work together for effective compliance. Procurement teams should engage suppliers, sustainability teams can guide deforestation-free strategies, and risk management should incorporate EUDR-specific due diligence procedures. Legal teams can help confirm your regulatory responsibilities and ensure everyone is prepared for compliance.

3. Create a No-Deforestation Policy

Develop a clear no-deforestation policy that aligns with the EUDR's guidelines. This policy should include cut-off dates no later than 2020 for deforestation. It should also include commitments to protecting human rights, particularly the rights of indigenous peoples. Set responsible sourcing standards for your suppliers and ensure internal governance is in place to enforce the policy.

4. Strengthen Supplier Relationships and Improve Traceability

Engaging with suppliers is essential for collecting the necessary data, such as geolocation information of farms or forests where products originate. Ensure your data collection tools are effective and integrated with risk management systems. This will help verify that products in your supply chain are deforestation-free and legally sourced. Segura’s traceability software enables companies to capture geolocation and boundary to each supplier's plot using third-party data sourced from Global Forest Watch.

5. Implement Ongoing Monitoring

Monitoring tools such as satellite imagery and geolocation data allow companies to track deforestation risks in their supply chains. Companies are responsible for detecting and responding to any deforestation that may occur. Using recognised platforms and monitoring solutions such as Segura’s mapping software will help ensure compliance and mitigate potential issues.

6. Collaborate Beyond Your Supply Chain

Beyond compliance, forming partnerships outside your supply chain is key to supporting broader deforestation-free efforts. Collaborate with stakeholders across industries, landscapes, and jurisdictions to create a larger impact. Join policy efforts and multi-stakeholder initiatives to contribute to the lasting success of the EUDR. 

At Segura, we have teamed up with Canopy Planet, an organisation which works with global companies to find groundbreaking solutions that transform supply chains. Their goal is to prevent the destruction of forests, ensuring they are not used for disposable products like packaging or clothing.

Another example is how companies can collaborate with Forests Forward, a WWF initiative that partners with businesses to protect and restore forests globally. By offering expert guidance and support, the programme helps companies commit to sustainable practices, invest in forest landscapes, and improve forest management.

What other Deforestation Legislation & Certification Matters for Retailers and Brands?

In reaction to consumer pressure, retailers have been looking to work with suppliers who are openly compliant with certification and legislation. EUDR compliance will be an important piece of legislation that consumers will be aware of when purchasing items. 

However, businesses should also ensure they conform to the UK Environment Act which came into force in 2021. The law allows the use of forest-risk commodities and their derivatives in business only if there is compliance with all relevant local laws.

What more can fashion brands do to stop deforestation?

Alarmingly, over 200 million trees are felled annually to make cellulosic fabrics like viscose for clothing. To combat this, fashion brands and retailers must prioritise sourcing materials certified 'deforestation-free' and invest in innovative, plant-based alternatives that don't rely on tree felling. Removing virgin trees in the production of Man-Made Cellulosic Fibres (MMCF) by investing in closed-loop textile-to-textile recycling holds significant potential. (We investigate sustainable closed-loop alternatives to viscose in this Sustainable Sourcing challenges article.)

Cattle grazing is another driver for deforestation around the world, and fashion retailers are vulnerable to sourcing leather from affected areas. Greater transparency of the long and complex supply chains for leather is a first step, then sourcing from verified deforestation and conversion-free cattle farms. We look at the possibilities of sustainable leather production in our Net Zero Material Transition article on Leather.

“Textile Exchange and Leather Working Group (LWG) are co-leading the Deforestation-Free Call to Action for Leather, which asks brands to commit to sourcing their bovine leather from deforestation-free supply chains by 2030 or earlier”
Deforestation-Free Call to Action for Leather

As well as complying with legislation, companies should also try to ensure sustainability in other ways. As consumers are becoming increasingly aware of the impacts of our forests being destroyed, they are making more informed choices, and thus driving change in retailers and brands.

Forest use needs to be carefully managed by replacing what we take, and replanting young trees to replace older trees. The number of new tree plantations is growing each year, but we also need to slow down the rate of deforestation by using less virgin wood and recycling more.

FSC Certification

The Forest Stewardship Council (FSC) is an international, non-governmental organisation dedicated to promoting responsible management of the world’s forests. Forests are inspected and certified against strict standards. In addition to forest certification, the FSC system includes a certified chain of custody that tracks the timber through the supply chain from the forest to the final user.

Consumers may look for the Forest Stewardship Council-approved logo and or the Zero Waste to Landfill certification on the products they purchase.

Sustainable packaging

On one hand, we want to reduce plastic packaging, and we want to use a sustainable source instead. On the other hand, we need to stop deforestation. Trees and wood pulp are great sustainable materials, if retailers ensure that paper, card and cardboard are sustainably sourced from FSC certified wood-pulp, or that they are produced from recycled material. In addition, retailers need to increase packaging efficiency to use less where possible and ensure packaging can be easily recycled at home.

How Can Segura Support You in EUDR Compliance?

Segura can support EUDR compliance by providing:

• Supply Chain Mapping:  visualise the entire supply chain, ensuring companies can trace the origin of products which are regulated by EUDR.
• Data Collection and Validation: Segura provides companies with a centralised platform which captures and validates essential supplier data, such as geolocation information to capture supplier boundaries, ensuring products meet deforestation-free requirements.
• Deforestation Analysis: Segura can collaborate with Global Forest Watch to collect data for each facility declared to support deforestation analysis. This includes displaying areas where tree cover change has occurred and tracking changes over time.
• Risk Data and Risk Monitoring: Segura can import third-party data, such as the Corruption Perceptions Index, to identify suppliers located in high-risk countries which may require further corroborating evidence. Segura can monitor information collection to identify and alert retailers to any gaps or potential risks.
• Transparency and Monitoring: The software improves visibility and transparency across multi-tier suppliers, making it easier to monitor compliance with EUDR’s due diligence and traceability obligations.
• Centralised Communication: It keeps supplier communications in one place, ensuring ongoing updates and adherence to EUDR regulations.

By managing data and supplier relationships effectively, Segura helps ensure companies meet the EUDR's requirements for deforestation-free and legally sourced products.

Segura offers a solution to retailers

Get a grip on leather, viscose and packaging sourcing to ensure compliance

Retailers and brands need clarity and transparency in their supply chain to ensure they partner with suppliers that source ethically. Ensuring transparency within supply chains, confirming that those nominated routes are being adhered to, and being able to see that suppliers’ certifications are valid, is vital to drive change. Being able to audit, track and prove compliance is increasingly important to be able to trade at all.

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