The EU's deforestation regulation is changing global trade.
From the fiscal year 2025-2026, products such as timber, soy, beef and coffee must be required to be able to document that production has not led to deforestation. On May 16, 2023, the European Union launched a transformative regulation aimed at combatting global deforestation and forest degradation. This landmark directive seeks to significantly curb the EU’s role in greenhouse gas emissions, biodiversity loss, and promote the trade of sustainable, legal products. With voluntary measures falling short of expectations, the EU has now integrated timber and other key products into a robust legislative framework, replacing the previous Timber Regulation (Regulation 995/2010).
Urgency to adapt: why immediate action is crucial
The new regulation, anchored in Article 192 of the Treaty on the Functioning of the European Union (TFEU), addresses environmental and climate change challenges with a global perspective. It targets climate and land-use changes linked to deforestation and forest degradation, focusing on commodities such as soy, beef, palm oil, timber, cocoa, rubber, and coffee, as well as processed products like leather, chocolate, printed paper, and furniture. Products failing to meet these stringent requirements will be prohibited from the EU market.
Key requirements; what you need to know
- Deforestation-Free Mandate: All relevant products must come from land that has not been deforested after December 31, 2020. Timber must be harvested without causing forest degradation post this date.
- Forest Definitions: The regulation defines deforestation as converting forest areas to agricultural land. Forests are categorized based on size, tree height, and canopy cover, while forest degradation refers to the transformation of primary forests into other types or the alteration of naturally regenerating forests.
- Economic Impact: The European Commission estimates that implementing the regulation will save at least 31.9 million tons of CO2 annually, equivalent to 3 billion euros in savings each year.
Navigating compliance: the role of advanced software
The regulation imposes rigorous compliance requirements for economic operators and traders, mandating that raw materials and products be deforestation-free, legally produced, and supported by a due diligence declaration. This includes:
- Due Diligence Assessments: Operators must submit detailed assessments, including information on product origin, risk assessments, and risk prevention measures. Certification schemes can assist but do not replace individual due diligence.
- Benchmarking System: A country benchmarking system will categorize producing countries based on risk levels, impacting how businesses manage their supply chains.
- EU Database: An EU database will register importers and exporters, ensuring transparency and compliance verification.
Why your business needs the right tools now
Given the complex requirements of the regulation, implementing a robust due diligence system is crucial. This is where advanced software solutions, like the SUSAN tool developed by Factlines, come into play. These digital tools offer:
- Streamlined Compliance: Automate the collection and analysis of due diligence data, reducing the risk of non-compliance.
- Efficient Risk Management: Utilize real-time data and risk assessment features to ensure that all products meet regulatory standards.
- Enhanced Transparency: Maintain clear records and easily access compliance documentation through a centralized system.
Economic and administrative considerations
The financial and administrative implications of the regulation are substantial. Businesses may face costs ranging from 5,000 to 90,000 euros to establish and maintain due diligence systems. However, investing in specialized software can mitigate these costs by improving efficiency and reducing manual workloads. Regulatory compliance will also require increased resources from national authorities, including the Norwegian Environmental Agency and the Norwegian Agricultural Agency.
What now? Seize the opportunity
The EU’s new regulation represents a pivotal moment in environmental policy, aligning with global climate goals and promoting sustainable trade practices. As businesses navigate these changes, the right technology will be instrumental in achieving compliance efficiently and effectively. Investing in advanced software now will not only help meet the regulation’s requirements but also position your company as a leader in sustainable practices.
Don’t wait—ensure your business is prepared for the future. Explore the latest compliance solutions like Factlines Sustainable Supplier Network today and stay ahead in a rapidly evolving regulatory landscape.
