EUDR Compliance: Ensuring Your Products Are Deforestation-Free

What is EUDR?

The Regulation on Deforestation-Free Products, more commonly known as the European Union Deforestation Regulation (EUDR), is a set of rules intended to ensure products consumed by EU citizens or exported from the EU do not contribute to deforestation and the associated greenhouse gas emissions and biodiversity loss. The regulation entered into force on 29th June, 2023, from which point relevant traders and operators are given 18 months (until 30th December, 2024) to implement the new requirements. The EUDR forms a part of a wider commitment by the EU to combat deforestation and forest degradation first outlined in 2019 and later reaffirmed through other proposals such as the European Green Deal. (The United Kingdom version is also in the works.) The aim of the EUDR is to prevent the products purchased, consumed, or utilised by Europeans from contributing to deforestation and forest degradation globally and to reduce the carbon emissions from these relevant products by 32 million metric tonnes per year.

Importance of EUDR

Many of the products we consume include ingredients such as wood, rubber, or other animal-/plant-based constituents. These ingredients are grown, raised, or harvested somewhere in the world (often far away due to labour and other costs). The land and resources required to satisfy such large, continual demands often translate into forests being cleared or degraded around the world. These are the forests that would otherwise be capturing and storing carbon and are home to the species integral to a functioning ecosystem that also includes a healthy food chain on which humanity depends. When forests are cleared or degraded, large portions of the carbon in the associated organic matter (in the plant itself and the soil below) are released as greenhouse gases such as carbon dioxide and methane, worsening climate change. The resulting exacerbation of extreme weather patterns would further disrupt the ecosystem, including our own agriculture, through frequent floods, fires, and other severe weather. (We are already seeing such changes in weather patterns today.) The disturbances in the ecosystem also upset the balance that would normally keep pests and diseases in check. Left unchecked, these effects and their interactions would lead to further knock-on effects, resulting in a feedback cycle.

All of these have latent financial costs as well. Climate change-driven natural disasters and biodiversity loss-related disruptions to production (e.g. agriculture for food and raw commodities) hurt the supply chain and drive up costs and prices. The societal damage and human losses not only bring up ethical and moral questions, but also have the tangible effects of geopolitical destabilisation, negatively impacting the business environment.

Moreover, once forests are destroyed or degraded, efforts of reforestation and restoration would not return them to their original carbon capacity and biodiversity for decades, centuries, or longer. Therefore, prevention is key, and this is why the EUDR is an important tool even for the businesses it regulates.

Affected Companies and Brief Overview of Scope

Any person or company that places relevant products on the European market or exports them in the course of business, regardless of quantity or value, is considered an “operator” subject to the obligations of EUDR. This is true even if the operator merely transforms one relevant product into another. The EUDR specifies the following commodity groups as being relevant:

• Cattle
• Cocoa
• Coffee
• Oil palm
• Rubber
• Soya
• Wood

Each of these categories includes relevant products that are detailed in Annex I of the official text of the regulation. Products not included in the list are not covered by the EUDR. There are also exceptions that are excluded from the EUDR, such as packaging that is not placed on the market in its own right (i.e., “standalone”).

Relevant products placed on the market as a gift or for non-commercial purposes are also covered by the EUDR. All relevant products must satisfy the requirements that they are deforestation-free, have been produced in accordance with the local legislation, and are covered by a “due diligence statement”.

There are slight differences in the due diligence requirements depending on whether the operator belongs to the “micro, small and medium-sized enterprises” (SMEs) category in the EU. Regardless, the overall idea is to collect information on the relevant products (such as the supplier or producer) and the geolocation of the exact locations where the products are grown or produced (including dates). The information serves to prove that the products are deforestation-free. Furthermore, based on the information collected, the risk of non-compliant products needs to be evaluated (such as the presence of forests, deforestation rates, historical compliance). If the risk assessment reveals any risk, operators must undertake and document mitigation measures such that the risk becomes negligible.

Penalties for breaking the rules could be hefty, including (but not limited to) having the products and relevant revenue confiscated and fines totalling a few percent of the operator’s annual EU-wide turnover.

Remote Sensing & Location Intelligence

The information system for submitting due diligence data and statements is currently under development (as of 12th June 2024), but will likely consist of a graphical interface and portals to upload data and information required for the due diligence statements, as well as their application programming interface (API) counterparts. Aside from commercial information, such as the producer(s) and value(s) of the relevant products, the core part of the due diligence comprises the geospatial data about the origin(s) of the products.

What we know so far is that the original producer of the relevant materials must be geolocated to the plot-of-land level. The data are expected to be submitted as vectors (polygons) delineating each piece of land associated with the producer, most likely in the GeoJSON format. Here, satellite or drone imagery can help operators identify the locations and boundaries of the producing plots of land, or verify the accuracy and truthfulness of the geolocation data received from the producer.

Moreover, remote-sensing imagery is indispensable when it comes to the verification of whether or not deforestation or forest degradation occurred as a consequence of the production of the relevant products. For example, land use can be distinguished by colors or color indices using optical imagery. Imagery derived from synthetic-aperture radar (SAR) can provide weather-independent information about the density and thickness of the vegetation. LiDAR imagery can provide information on the height of the vegetation canopy. These types of information all contribute to determining the existence and health of forests.

The EUDR sets the baseline date of 31st December, 2020, after which no deforestation or forest degradation should occur. The EU Observatory provides a global map of forest cover for the year 2020, and subsequent annual maps of forest-cover changes. However, these maps are meant to be additional tools to help companies perform due diligence. The use of these maps does not necessarily guarantee the verification (i.e., they are not legally binding). The safest approach is still to utilise other data sources. By comparing the aforementioned remote-sensing imagery between the production date(s) and the baseline date, one could theoretically verify with more accuracy whether or not forests were harmed. In practice, however, this could be tricky and tedious.

The appearance of land surfaces and vegetation could vary widely between locations on Earth, the regional climate, and even across seasons. The usually large number of land plots and wide geographical distribution of the producers only make the tasks of verification even more challenging. Analytical algorithms, including the usage of machine-learning models (colloquially referred to as “AI” or artificial intelligence), can and should be used to improve the assessment accuracy and speed. In some challenging cases, AI could also provide vegetation species information in order to ascertain that the trees of the forests are consistent with expectations.

Building up the required tools and procedural pipelines to perform due diligence can be a difficult and time-consuming task. In many cases, partnering with another organization or company with the relevant expertise and experience will be more reliable and cost-efficient.

Conceptual Workflow

How does an operator actually go about performing due diligence? While the information-submission step will depend on the final details of the EU’s dedicated information system, the due diligence itself will mostly follow the conceptual steps below:

1. Initial assessment of the supply chain

• Determine, based on Annex I of the EUDR, whether or not the product is considered EUDR-relevant.
• Determine the original producer(s) of the relevant products, which may be part(s) of a larger product or in another relevant form (in the case of a transformed product).
• Collect data about the product (e.g. product code, country of origin, quantity), their suppliers and producers, evidence of legality of harvest (in the country of origin), and the geo-coordinates of the location of production.

2. Map the producers

• Verify the truthfulness and accuracy of the data, including the geolocation(s) of the production site(s), by checking against remote-sensing imagery.
• Utilize a geographical information system (GIS) for this purpose.

3. Analysis, risk assessment, and mitigation

• Utilize a GIS and a variety of remote-sensing data to check for signs of deforestation or forest degradation since 31st December, 2020.
• Based on the analysis and other factors such as the track record of the country of origin, assess the risk of deforestation or forest degradation associated with the product(s).
• Take corrective or mitigation measures based on the findings.
• Report all of the above to the relevant authorities through the EUDR’s information system or its APIs.
• Keep all documentation for five years from the submission date.

4. Monitoring and updates

• Since products are rarely one-offs, regular monitoring and data collection are likely required to ensure continual compliance.

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Mapular’s Role

Mapular provides key services to help companies comply with the EUDR efficiently and effectively. Our expertise and solutions are designed to simplify the due diligence process, ensuring compliance while minimizing risks. We offer comprehensive services that include geolocation verification, remote-sensing analysis, and risk assessments. Through the use of high-resolution satellite and drone imagery, we can accurately locate production sites and monitor land-use changes to ensure that no deforestation has occurred since 31st December, 2020. Our advanced analytics, including the use of optical imagery, SAR, and LiDAR, help verify land use and forest health. In addition, our machine-learning algorithms assess compliance risks and create detailed due diligence reports that can be submitted to the EUDR information system. With mapular, companies gain access to accurate, efficient, and user-friendly solutions tailored to meet EUDR requirements. For more information and to arrange a consultation, visit our website or contact our sales team. Ensure your business is compliant and contributing to global sustainability efforts with mapular’s expert services.

TL;DR: Common Questions

What is the EUDR and why was it introduced?
The EU Deforestation Regulation (EUDR) is a set of rules to ensure products consumed or exported by the EU do not contribute to deforestation, greenhouse gas emissions, or biodiversity loss. It was introduced to combat global deforestation and support the EU’s environmental goals.

Which companies are required to comply with EUDR?
Any person or company that places relevant products on the European market or exports them, regardless of quantity or value, must comply with EUDR. This includes companies transforming one relevant product into another.

How can companies prove they don’t contribute to deforestation?
Companies must collect and maintain information on their products, including geolocation data of where raw materials were produced. They must perform risk assessments and implement mitigation measures to ensure products are deforestation-free.

What are the penalties for non-compliance with EUDR?
Penalties can include fines proportional to the environmental damage and the value of the products, confiscation of products and revenues, and temporary bans from public procurement processes and market access.

What information must companies collect under EUDR?
Companies must gather data including product descriptions, quantities, production country, geolocation of production plots, supplier and buyer details, and evidence that the products are deforestation-free and comply with local laws.

Any tips for leveraging technology to meet compliance needs?
Utilize remote sensing technologies like satellite and drone imagery to monitor production areas. Implement GIS for managing geolocation data and AI for analyzing patterns of deforestation. Partnering with experienced organizations can streamline the compliance process.

Conclusion

The EUDR represents a significant effort to reduce global deforestation, preserve biodiversity, and mitigate climate change. Compliance with EUDR is mandatory for any company placing relevant products on the European market or exporting them from there. Using advanced technologies such as remote sensing, GIS, and AI, companies can effectively monitor and verify their supply chains to ensure they are deforestation-free.

To move towards compliance, companies should start by assessing their supply chains, collecting necessary data, and implementing robust monitoring systems. Establishing clear procedures for ongoing monitoring and data collection is also vital to ensure continued adherence to EUDR requirements.

Do not let the complexities of EUDR compliance overwhelm you. Mapular offers comprehensive services to support this process, including geolocation verification, remote-sensing analysis, and risk assessments. Visit our website or contact our team for a consultation. Together, we can ensure your business remains compliant and contributes to global sustainability. For more information and resources, follow the provided links and contact us today.

Resources and References

Official Documentation

• Legal text of the EUDR
• European Commission’s support site on EUDR
• Due Diligence Registry and Information System

Some Sources on Carbon Stock and Biodiversity

• Baker, J. C. A., Lang, P. L., Richards, K. R., Webb, A. A., Mills, R. J., Krishnamoorthy, L., & Pendleton, L. (2022). Deforestation-induced climate change reduces carbon storage in remaining tropical forests. Nature Communications, 13, 2916. https://doi.org/10.1038/s41467-022-29601-0
• Chazdon, R. L. (2008). Beyond deforestation: Restoring forests and ecosystem services on degraded lands. Science, 320(5882), 1458–1460. https://doi.org/10.1126/science.1155365
• Goldstein, A., Turner, W. R., Spawn, S. A., et al. (2020). Protecting irrecoverable carbon in Earth’s ecosystems. Nature Climate Change, 10, 287–295. https://doi.org/10.1038/s41558-020-0738-8
• Palviainen, M., Laurén, A., Pumpanen, J., Bergeron, Y., Bond-Lamberty, B., Larjavaara, M., et al. (2020). Decadal-scale recovery of carbon stocks after wildfires throughout the boreal forests. Global Biogeochemical Cycles, 34, e2020GB006612. https://doi.org/10.1029/2020GB006612
• FAO. (2019). The state of the world’s biodiversity for food and agriculture. Food and Agriculture Organization of the United Nations. https://www.fao.org/state-of-biodiversity-for-food-agriculture/en/
• Ortiz, A. M. D., Outhwaite, C. L., Dalin, C., & Newbold, T. (2021). A review of the interactions between biodiversity, agriculture, climate change, and international trade: Research and policy priorities. One Earth, 4(1), 88–101. https://doi.org/10.1016/j.oneear.2020.12.008