EUDR: A Comprehensive Guide for Consumer Companies

5 Key Takeaways for Consumer Companies

1. Wide Product Scope: EUDR covers a broad range of products derived from cattle, cocoa, coffee, oil palm, rubber, soya, and wood, affecting many consumer goods sectors.
2. Strict Compliance Requirements: Products must be deforestation-free, legally produced, and accompanied by a due diligence statement to enter or exit the EU market.
3. Supply Chain Transparency: Companies must conduct extensive due diligence, including collecting geolocation data for production areas.
4. Enforcement Mechanisms: Non-compliance can result in significant penalties, including fines up to 4% of EU turnover and market exclusion.
5. Implementation Timeline: EUDR applies from December 30, 2024, with a six-month grace period for small businesses.

What is the EU Deforestation Regulation (EUDR)?

The EU Deforestation Regulation (EUDR), which entered into force on June 29, 2023, is a groundbreaking initiative aimed at curbing the EU market's impact on global deforestation and forest degradation. It establishes strict requirements for companies trading in certain commodities and derived products to ensure they are not contributing to deforestation or forest degradation.

Key aspects of EUDR include:

• Comprehensive due diligence requirements
• Prohibition on placing non-compliant products on the EU market
• Mandatory geolocation data for production areas
• A benchmarking system to assess country and area risks
• Stringent enforcement mechanisms

Who Does EUDR Apply To?

EUDR affects a wide range of companies in the consumer goods sector, including:

1. Food and beverage companies using ingredients like cocoa, coffee, or palm oil
2. CPG companies producing items with derivatives of covered commodities
3. Apparel and footwear brands using leather or rubber
4. Homegoods companies selling wooden furniture or paper products

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Specifically, EUDR applies to:

• Operators: Companies placing relevant products on the EU market for the first time or exporting them from the EU
• Traders: Companies making relevant products available on the EU market

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Both EU and non-EU companies are affected if they're part of the supply chain for covered products entering or leaving the EU market.

Which Products Are Affected?

EUDR covers seven key commodities and their derivatives:

1. Cattle
2. Cocoa
3. Coffee
4. Oil palm
5. Rubber
6. Soya
7. Wood

For consumer brands, this translates to a wide range of products, including but not limited to:

• Food products: Chocolate, coffee, soy-based products
• Beverages: Coffee-based drinks, palm oil-containing beverages
• Leather goods: Shoes, bags, accessories
• Rubber products: Footwear soles, sports equipment
• Wood products: Furniture, paper goods, packaging
• Palm oil derivatives: Cosmetics, personal care products, some food items

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Companies should carefully review the product list in the EUDR annex, which references specific tariff classifications under the Combined Nomenclature.

EUDR Timeline: Key Dates for Compliance

• June 29, 2023: EUDR entered into force
• December 30, 2024: Main EUDR provisions apply, including due diligence requirements
• June 30, 2025: Deadline for micro and small enterprises to comply
• December 30, 2024: Prohibition on placing non-compliant products on the EU market or exporting them
• Ongoing: European Commission to develop implementing and delegated acts, including the information system for due diligence statements

Detailed Requirements Under EUDR

1. Deforestation-Free Products

Products must not have been produced on land subject to deforestation or forest degradation after December 31, 2020. This applies regardless of whether the deforestation was legal in the country of production.

2. Legal Production

Products must be produced in accordance with all relevant laws of the country of production, including:

• Land use rights
• Environmental protection
• Forest-related rules
• Third parties' rights
• Labor rights
• Human rights
• Tax and anti-corruption laws

3. Due Diligence Requirements

Operators must:

• Collect detailed information about the products, including geolocation coordinates
• Assess the risk of non-compliance
• Mitigate any identified risks

4. Due Diligence Statement

Before placing products on the EU market or exporting them, operators must submit a due diligence statement through the EUDR information system, declaring the products are compliant and pose no more than a negligible risk of non-compliance.

5. Traceability and Transparency

Companies must maintain traceability information for their supply chains and be prepared to share this information with authorities and downstream users.

How to Prepare for EUDR Compliance: A Step-by-Step Guide

1. Assess product portfolio and supply chains
   • Identify which of your products fall under EUDR's scope
   • Map your supply chains for these products back to the point of production
2. Implement robust data collection systems
   • Set up processes to gather required information, including geolocation data
   • Consider investing in blockchain or other traceability technologies
   • Integrate EUDR data requirements with existing sustainability data collection efforts
3. Conduct risk assessments
   • Evaluate the risk of deforestation or illegal production in your supply chains
   • Consider the European Commission's forthcoming country benchmarking system
4. Develop risk mitigation strategies
   • Implement supplier engagement programs
   • Consider alternative sourcing options for high-risk areas
   • Invest in capacity building for smallholder farmers and suppliers
5. Establish due diligence procedures
   • Create a systematic approach to conducting and documenting due diligence
   • Prepare templates for due diligence statements
6. Enhance supply chain transparency
   • Improve visibility into your extended supply chain
   • Consider joining industry initiatives or using third-party verification systems
7. Review and update contracts
   • Ensure supplier contracts include EUDR compliance requirements
   • Consider including provisions for data sharing and audits
8. Train staff and build internal capacity
   • Educate relevant employees on EUDR requirements and their role in compliance
   • Consider creating a dedicated EUDR compliance team
9. Prepare for enforcement
   • Develop internal audit procedures
   • Establish processes for addressing non-compliance issues
10. Monitor developments and stay prepared
    • Keep track of EUDR implementation progress and any changes to requirements
    • Participate in relevant industry consultations and forums

Leveraging Life Cycle Assessments and Carbon Accounting for EUDR Compliance

While EUDR doesn't explicitly require life cycle assessments (LCAs) or carbon accounting, these tools can significantly support compliance efforts and provide additional benefits:

1. Supply Chain Mapping: LCAs require detailed supply chain information, which aligns with EUDR's traceability requirements. This data can help identify potential deforestation risks.
2. Risk Assessment: Carbon footprint data from LCAs can indicate land use changes, potentially flagging deforestation risks in the supply chain.
3. Data Collection Synergies: Many data points collected for LCAs and carbon accounting can support EUDR due diligence, streamlining overall sustainability reporting.
4. Supplier Engagement: The process of conducting LCAs often involves close supplier collaboration, which can facilitate gathering EUDR-required information.
5. Demonstrating Due Diligence: Comprehensive LCAs and carbon accounting can serve as evidence of thorough supply chain analysis, supporting EUDR due diligence requirements.
6. Identifying Improvement Opportunities: LCAs can highlight hotspots in the supply chain where interventions could reduce both environmental impacts and deforestation risks.
7. Preparing for Future Regulations: As the EU moves towards more comprehensive sustainability reporting (e.g., CSRD), having robust LCA and carbon accounting practices in place will position companies well for future compliance.

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How Planet FWD Can Help You Prepare for EUDR

At Planet FWD, we understand the complexities of sustainable sourcing and the challenges posed by regulations like EUDR. Our platform is designed to help consumer companies in food, beverage, CPG, apparel, footwear, and homegoods industries measure their environmental impact and identify opportunities for improvement. We can support components of EUDR compliance such as:

1. Supply Chain Mapping: We can help you visualize your supply chains, identifying potential high-risk areas for deforestation.
2. Supplier Engagement: Our supplier communication tools can facilitate the collection of necessary information from your supply chain partners.
3. Integration with Carbon Accounting: By combining EUDR compliance data with carbon accounting, we can provide a more comprehensive view of your products' environmental impact.

Next Steps: Embracing EUDR as a Catalyst for Sustainable Sourcing

The EU Deforestation Regulation represents a significant shift in how companies must approach sourcing and supply chain management. For consumer brands in the food, beverage, CPG, apparel, footwear, and homegoods sectors, this means a more comprehensive approach to ensuring products are not contributing to global deforestation.

By embracing EUDR requirements, companies can not only ensure compliance but also drive positive change within their organizations and across their value chains. This proactive approach to sustainable sourcing can lead to improved supply chain resilience, enhanced stakeholder trust, and potentially, a competitive advantage in an increasingly environmentally-conscious market.

Preparing for EUDR compliance may seem daunting, but it's an opportunity to strengthen your company's sustainability strategy and showcase your efforts to investors, customers, and regulators. By starting early and following this guide, you'll be well-positioned for compliance and leadership in sustainable business practices.

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Ready to take the next step in your CSRD compliance journey? Contact us to book a free regulatory consultation with Planet FWD today. Our experts will provide personalized guidance on how our software solution can help you meet CSRD requirements efficiently and effectively.

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Still hungry for more? Download our comprehensive Regulatory Guide to learn more about CSRD and other key sustainability regulations impacting consumer companies. Stay ahead of reporting requirements and turn compliance into a competitive advantage.

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