On April 19, 2023, the European Parliament adopted the Deforestation-Free Products Regulation (EUDR); the EU Council is expected to approve the EUDR the following month, ushering it into force.
The new deforestation regulation is aimed at curbing the import of illegally harvested timber and agricultural products that contribute to deforestation. The new law has set strict rules for companies importing certain products into the EU. In this blog post, we will explore the key features of the new law, its potential impact on the environment, and the challenges that lie ahead.
What is the new EU’s deforestation law?
The new EU deforestation law is part of a wider effort to address the environmental and social impact of global supply chains. The law seeks to prevent EU companies from importing products that have been linked to illegal deforestation and forest degradation. The products covered by the law include timber, soy, palm oil, beef, leather, and other agricultural products that have a significant impact on the world’s forests.
The law requires companies to carry out due diligence checks on their supply chains to ensure that the products they import are produced in compliance with local laws and regulations. Companies must also assess the environmental and social impact of their supply chains and take steps to address any negative effects. In addition, the law prohibits the placing on the EU market of products that have been produced through illegal deforestation or forest degradation. After the regulation becomes effective, large companies will have 18 months to comply before being penalized.
This is yet another example of how major consumers of agricultural commodities have leveraged their market power to impose “demand-side” restrictions to encourage sustainable production. The United Kingdom approved a similar regulation end of 2021; The United States lawmakers introduced a similar bill in Congress during October 2021. Moreover, Biden recently announced $500 million to curb Amazon deforestation (April 20, 2023) during a virtual meeting of the Major Economies Forum.
What are the potential benefits of the new law?
The new law has the potential to have a significant positive impact on the environment and on biodiversity. Deforestation and forest degradation are major contributors to climate change and are responsible for around 10% of global greenhouse gas emissions (second only to fossil fuels). By curbing the import of products that contribute to deforestation, the EU can help to reduce these emissions and slow the pace of climate change.
In addition, the new deforestation regulation could help to protect biodiversity by reducing the destruction of forests and the loss of habitat for endangered species. Forests are home to around 80% of the world’s terrestrial biodiversity, and their destruction is one of the leading causes of species extinction. Despite the difficulty in estimating the impact, the EU Commission estimates the law will directly protect a forest area the size of 100.000 football fields.
Furthermore, the law could help to promote more sustainable production practices in countries that export these products to the EU. By requiring companies to carry out due diligence checks and to address any negative impacts of their supply chains, the law could encourage companies to adopt more sustainable practices that protect forests and the environment.
What are the challenges of implementing the new law?
The implementation of the new law is likely to face several challenges. One of the main challenges is ensuring that companies comply with the due diligence requirements. Companies may struggle to trace the origin of their products and to verify that they have been produced in compliance with local laws and regulations.
Another challenge is ensuring that the law does not result in the displacement of deforestation in other regions. If companies are unable to import products from countries that do not comply with the law, they may look to source these products from other countries where environmental standards are lower. In addition, the law could face opposition from countries that export these products to the EU. These countries may view the law as an infringement of their sovereignty and may seek to challenge it through trade disputes or other means.
How will the EUDR impact food and beverage companies?
The EUDR will have a significant impact on food and beverage companies, as they will be required to comply with new regulations regarding the use of ingredient sourcing, plastic packaging, single-use items, and food waste reduction. Companies will need to explore new sustainable packaging options, redesign their products, and review their supply chains to ensure they meet the requirements of the new law. Additionally, food and beverage companies will need to be more transparent about their environmental impact, including disclosing their carbon footprint and water usage, and reducing their greenhouse gas emissions. Failure to comply with the EUDR could result in hefty fines and reputational damage for companies. On the other hand, complying with the EUDR can be an opportunity for companies to improve their sustainability credentials, meet consumer demand for environmentally friendly products, and contribute to a more sustainable future.
To access our practical guide on navigating the EU Deforestation Regulation, click here