Can’t see the wood for the trees?

17/05/2024

Getting ready for deforestation-free regulations. Allison Kopf takes a look at new laws in the EU and UK Every year, the world loses around 5m hectares of forest. Forest destruction is responsible for about 15% of total greenhouse gases, which makes it a key contributor to climate change. And at least 75% of deforestation is driven by agriculture. Most comes from the production of beef, palm oil, soy and the logging industries for paper and wood. Managing and mitigating deforestation risks is nothing new for sustainable businesses. Deforestation is frequently in the thoughts of sustainability managers, given its contribution to carbon emissions, biodiversity loss and its effect on indigenous peoples. To reduce the devastating impact of deforestation, the European Union has introduced the EU Regulation on Deforestation-Free Products (EUDR). With the upcoming compliance deadline of 30 December 2024, EUDR requires all companies sourcing any one or more of seven specified commodities (as well as certain byproducts) – cattle, soy, palm oil, cocoa, rubber, wood and coffee – to prove that their supply chains don’t contribute to forest degradation or destruction, or breach existing environmental or social laws. Last December, at COP 28, the UK government also published its response to deforestation – the Forest Risk Commodities regime. Sustainability and operations teams across industries and the globe are working fast to get into a position to meet the requirements of the new laws. Differences between the two The Forest Risk Commodities regime is narrower in scope than the EUDR: the UK government has confirmed that the full list of commodities it covers is as follows: non-dairy cattle products (beef and leather), cocoa, palm and soy (and any products derived from them). The EUDR’s list includes these, plus coffee, rubber and timber products. The Forest Risk Commodities regime applies specifically to England, Wales and Northern Ireland, while the EUDR applies to all EU member states. Another difference is the detail available. The EUDR came into force on 29 June 2023, and its compliance deadline is 30 December 2024. The Forest Risk Commodities regime was announced at the end of 2023, and the secondary legislation to implement these requirements in the UK has not yet been published – it is likely to be adopted some time in 2024. What’s similar is that both policies aim to reduce deforestation and promote sustainable corporate behaviour. Both will require companies to conduct due diligence to minimise the risk of placing products associated with deforestation on the market, and both aim to ensure that appropriate measures are taken to address the risks of deforestation in their supply chains. In both cases, the regions will impose penalties for non-compliance. The EUDR requirements in more detail There are three parts to the due diligence required: Information-gathering – companies must collect data about the supply chains of their products, including the geolocation of where the product originated. Risk assessment – they need to assess the information they’ve gathered (for accuracy) to work out any risk of deforestation, forest degradation and illegality associated with the product. Risk mitigation – if there is a risk, they will need to demonstrate that they’ve taken actions to reduce risks to negligible levels. Actions could include requesting further information, independent surveys, scientific product testing or audits. In the information-gathering stage, the regulation requires proof of three things: Traceability – the ability to trace the product to where it originated (its geolocation). Deforestation – the product originates from land where there has been no deforestation or degradation since the cut-off date (31 Dec 2020). Social – the product was produced legally (i.e., no forced or child labour, etc). More broadly, businesses should note that there is a wider trend towards supply chain transparency. The mandatory due diligence obligations in the UK and EU are likely to be just the start as regulation continues to expand. So, while EUDR and other regulations may pose complex and potentially difficult undertakings for companies, once you have full visibility of your supply chain, there are so many advantages – not just compliance. You’ll be able to see which supply chains have appropriate risk mitigation measures in place and which need the greatest improvement to create change. This level of transparency can benefit efficiency and sustainability, representing progress towards the interlinked aims of people, planet and profit. Allison Kopf is the chief executive of TRACT, a sustainability measurement platform, whose foundation is traceability in supply chains. TRACT provides EUDR compliance capability