Deforestation-free commodities regulation enters into force in EU
Combating climate change is at the forefront of business and government agendas worldwide, and on 29 June 2023, the Deforestation Regulation (EU) 2023/1115 entered into force. To fight climate change and biodiversity loss, the regulation requires companies to ensure that certain commodities sold in the EU and exported from the EU have not led to deforestation and forest degradation.
EU deforestation-free regulation
The EU Deforestation-Free Regulation (EUDR) is part of the EU Green Deal and a broader EU strategy to protect the world’s forests. Initially proposed by the European Commission in November 2021, a provisional agreement was reached by The Council and the European Parliament in December 2022. Following publication in the Official Journal of the European Union, Regulation (EU) 2023/1115 entered into force on 29 June 2023, repealing Regulation (EU) No 995/2010.
Seven commodities that represent the largest share of Union-driven deforestation are targeted: palm oil, cattle, wood, coffee, cocoa, rubber and soy, as well as ‘relevant products’ which are products that contain, have been fed with or have been made using the relevant commodities, as captured in Annex 1 of the Regulation.
Food Business Operators (FBOs) need to meet certain due diligence requirements including the collection of information such as: description, country of origin, and quantity of the product, as well as risk assessments, by 30 December 2024; although there is a longer timeline for smaller businesses. Risk assessments need to consider: presence of forests and indigenous people, and prevalence of forest degradation, amongst other criteria.
Companies will need to thoroughly assess their supply chains to understand their position as an operator in the market. For example, the FBO who first makes the product available in the EU (say FBO1) will need to submit due diligence reports to the authority; if another FBO (say FBO2) imports or exports this same product, FBO2 will also need to assess the due diligence statement of FBO1 as well as submit their own report to the relevant authority.
Due diligence on forest risk commodities - UK
In 2022, the UK’s Department for Environment Food & Rural Affairs (DEFRA) published the results of a public consultation on the implementation of due diligence on forest risk commodities provisions in the Environment Act 2021. Following consideration of consultation responses, DEFRA is seeking to implement due diligence provisions in the Environment Act through secondary legislation. The Commission will establish low-risk and high-risk countries, with competent authorities carrying out regular checks on operators and traders to ensure the fulfilment of their obligations.
The list of commodities in DEFRA’s consultation includes the additional commodities of leather and maize, when compared to the EU regulation.
What impact will the changes have?
Import and export controls will be tightened with authorities carrying out inspections for enhanced monitoring. This could potentially disrupt supply chains when there is a shortage of commodities, or when manufactures want to change formulations with specific targets in mind.
With changes to formulations likely, it is important for companies to understand whether their products are affected by the regulation, undertake due diligence and compliance checks on formulations and potential reformulations, as well as horizon scan for emerging deforestation regulations around the world.
Collaboration is essential
While the implementation of regulatory and due diligence provisions in the EU and UK respectively underscores a commitment to forest protection, ongoing collaboration between industry, governments, and regulators will be essential in achieving lasting positive impacts on our environment and ecosystems.