Understanding the impact of the EUDR on businesses

Image: Smithsonian Institute

The European Union (EU) has recommended a new law to fight global deforestation and forest degradation driven by EU production and consumption. The proposed legislation, which was announced 6 December 2022, aims to prevent companies from selling items such as coffee, cocoa, beef, soy and other commodities linked to deforestation around the world into the EU market. (T&CTJ covered the proposed law in “A new Green Deal in the EU impacts Coffee”.)

Deforestation and forest degradation are major drivers of climate change and biodiversity loss. The goal of the new law – EU Deforestation Regulation (EUDR) – is to prevent a significant share of global deforestation and forest degradation, and in turn, reduce greenhouse gas emissions and biodiversity loss.

On 8 February, the NCA (National Coffee Association of the USA) held a webinar, Supply Chain Due Diligence, to discuss the potential impact the EUDR will have on the US coffee industry. However, the webinar benefitted any coffee business in any country interested in importing or exporting coffee (or any of the aforementioned products — tea is not one of them) within the EU. The presenter, Anna Triponel, a lawyer and founder of Human Level, a London-based boutique human rights advisory firm, outlined aspects of the EUDR and discussed how legal expectations for businesses – involving human rights and climate change – are evolving based on the United Nations’ Guiding Principles.

“We are starting to see laws [and international standards] focusing on human rights and climate change,” she said. “Now risk management is not only risk to business but risk to people as well [because] it is clear that a severe risk to people is a risk to business.

Pursuant to the EUDR, Triponel said that businesses must carry out due diligence, which includes conducting risks assessments and mitigating identified risks; obtain geo-location coordinates from where commodities are sourced or harvested; and communicate publicly on actions taken to ensure compliance with the EUDR. She said that there will also be a central information system on companies (operators and traders) established in the EU, which is accessible to national and customs authorities and a benchmarking system that ranks countries as low, standard and high risk for deforestation.

Triponel noted that with the new law, the EU be a very different landscape for companies five years from now. “The EU does not want any goods that are affiliated with deforestation or degradation. Businesses cannot import these goods into the EU unless they can prove the goods are deforestation free.”

She further explained that there will be more focus on ensuring that companies are respecting Indigenous People’s rights and land rights, that is, was deforestation committed and were people’s rights/lands respected?

So where do we now stand? The European Parliament and the Council must formally adopt the new EUDR before it can be enforced. Once the new Regulation has been adopted, businesses (operators and traders) will have 18 months to implement the new rules. Small businesses will be granted a longer adaptation period and other specific provisions.

Triponel said that the EU Commission’s draft of the Corporate Sustainability Due Diligence Directive (CSDDD) from earlier this year sets out an obligation on companies to have a policy. During this ‘waiting period’, companies should be developing their due diligence policy. Triponel said there is text from the EU Parliament as well as the European Council that companies can build on when drafting their CSDDD policy.

In terms of due diligence obligations, the EUDR expects companies to take the following actions:

What: Products of the commodities included in the EUDR can only be placed on, or exported from, the EU if they meet the following requirements:

  • Deforestation-free;
  • Produced in accordance with the relevant legislation of the country of production; and
  • Covered by a due diligence statement.

How:

  • Compile and ensure access to information on the commodity, quantity, supplier, country of production. For example, companies can obtain the geographic coordinates of the plots of land where the commodities they place on the market were produced.
  • Analyse and assess the risks of deforestation and/or forest degradation in the supply chain using the information collected; take adequate and proportionate mitigation measures to address risks.
  • Consideration of applicable laws – in particular, human rights laws and Indigenous People’s rights laws.

Caveat: Level of due diligence depends on whether the country is deemed low, standard or high risk.

T&CTJ will continue to cover the adoption, implementation and impact of the EUDR on coffee businesses (as well as tea if it is added to the list of products subject to the new legislation).

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