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This week, we’re diving into one of the most significant new policies in the European Union—the EU Deforestation Regulation (EUDR). With increasing concern from global industries and environmental advocates, the EUDR is set to transform how businesses manage their supply chains, focusing on products linked to deforestation. In this blog post, we’ll explore the origins of this regulation, its key provisions, and the wide-reaching effects it will have on companies both within and outside the EU. We’ll also delve into the ongoing debates around this regulation, its potential impact on global trade, and why it’s seen as a critical step in protecting the world’s forests.
In June 2023, the European Union’s Deforestation-Free Products Regulation (EUDR) came into force, marking a major leap in the EU's efforts to combat global deforestation. Part of the broader European Green Deal, the EUDR targets key commodities such as soy, palm oil, beef, coffee, cocoa, and wood—products often linked to deforestation. The regulation introduces a new level of accountability for companies importing goods into Europe by requiring these commodities to be deforestation-free before they can enter the EU market.
But what does this really mean for you, your business, and the future of international trade? Much has been said in the media, but the impact is clear: the EUDR builds on earlier efforts like the EU Timber Regulation (EUTR) of 2013, but with much stricter guidelines. It doesn't just aim to prevent illegal logging; it also addresses broader issues like forest degradation and sustainability. The regulation sets a high bar for compliance, pushing businesses to rethink their supply chains and adopt more sustainable practices if they want to continue trading within the EU. This shift signals a future where sustainability is not just preferred, but required, reshaping the landscape of global trade for years to come.
The roots of the EUDR can be traced back to 2019, when the EU’s Green Deal first outlined a vision for achieving climate neutrality by 2050. This landmark policy identified the preservation of global forests as a key priority. The regulation itself was formally proposed in 2021, driven by rising public and political pressure to address the EU’s role in driving global deforestation through its consumption of forest-risk commodities. Civil society movements, including the widely supported #Together4Forests campaign, helped shape public opinion, with over 1.2 million EU citizens calling for stricter deforestation controls. After rigorous debate, the European Parliament passed the regulation in December 2022, and it officially came into effect in mid-2023, signalling a new era of forest protection. Larger companies are required to comply by December 2024, while smaller businesses have until June 2025 to adjust their practices.
ander the EUDR, companies must prove that their products are deforestation-free, meaning they were not produced on land that was deforested after December 31, 2020. This requirement involves conducting due diligence by collecting geolocation data and ensuring full traceability of the supply chain. The regulation specifically targets commodities like palm oil, soy, cocoa, and beef, which are closely associated with forest loss, but also includes products derived from these commodities, such as chocolate, leather, and rubber.
Non-compliance could result in fines of up to 4% of annual turnover, reinforcing the seriousness of the regulation. The EUDR also mandates that national authorities regularly inspect companies to ensure adherence to the rules.
The EU is the second-largest importer of deforestation-linked products after China, meaning this regulation will have wide-reaching effects on global supply chains. Major exporting countries, including Brazil, Indonesia, and Ghana, will face pressure to ensure their goods meet the EU’s standards, or risk losing access to one of the world’s most lucrative markets. To manage this process, the EU has introduced a risk-based approach, classifying countries based on their deforestation risk. "High-risk" countries will be subject to more stringent requirements, while "low-risk" countries may face fewer hurdles.
However, the regulation has sparked controversy, particularly among developing nations and small-scale farmers. Many of these countries argue that they lack the infrastructure needed to meet the EUDR's strict requirements, especially in terms of geolocation data and supply chain transparency. Farmers in regions like Sub-Saharan Africa and Southeast Asia are particularly vulnerable, as they may struggle to provide the necessary traceability for their products. Startups like Space4Good are addressing these challenges by using satellite data to help track land use and deforestation, particularly in Southeast Asia. Such innovations aim to bridge the gap in infrastructure and provide a solution for smaller producers to comply with the EUDR. Critics still claim, however, that the regulation could disrupt local economies by restricting market access for commodities vital to their economic well-being.
In response, the EU has pledged financial support to help these countries adapt. Team Europe, an initiative launched alongside the EUDR, has allocated over €70 million to support smallholders in complying with the new regulations. This support includes helping farmers establish traceability systems and meet the EU’s deforestation-free requirements, providing a lifeline for regions that rely heavily on exports to the EU.
While the EUDR has been met with both praise and criticism, it is undeniably a significant step toward creating a more sustainable global trade system. By holding businesses accountable for the environmental impact of their supply chains, the regulation is expected to drive change in agricultural practices worldwide. At the same time, it presents challenges for exporters and producers, particularly in developing countries, who may need time and resources to meet these new standards.
Moving forward, the success of the EUDR will depend on the EU’s ability to enforce the regulation effectively while offering sufficient support to the regions most affected. Innovations such as cheap and effective satellite data for monitoring land use can play a crucial role in this enforcement. Startups like Space4Good are already utilising satellite technology to track deforestation, providing a cost-effective solution for monitoring large areas. This approach can help ensure that both large and small-scale farmers in vulnerable regions meet the EUDR’s requirements, without incurring significant financial burdens. By encouraging sustainable land use and curbing deforestation, the EUDR not only aligns with the EU’s net-zero goals but also sets a precedent for other global markets to follow in reducing the environmental impact of global trade.
At Scature, our mission aligns closely with the goals of the EU Deforestation Regulation (EUDR), as we focus on supporting sustainable land use and carbon removal efforts. A key component of this is our work with nature-based carbon removal credits, which are directly tied to protecting and restoring forested areas. Forests not only play a critical role in carbon sequestration, but also play a crucial part in balancing the water-cycle!
Through our carbon credit programs, which are rooted in nature-based solutions, we help companies address their Scope 1, 2, and 3 emissions, and invest in projects that have a significant impact in improving the ecosystem. This includes working with local farmers to restore degraded land, preventing deforestation, and fostering reforestation projects. Satellite data plays a critical role in this process, enabling us to monitor forest areas, track above-ground biomass, and verify carbon removal efforts in real-time.