The EU’s decision to simplify its Deforestation Regulation is good news, says Lucy Blake at Jenner & Block – the due diligence requirements were stringent and onerous, particularly for businesses with complex global supply chains.
The European Commission announced on 14 April that it will introduce “further simplifications” and reductions of the administrative burden to facilitate the implementation of the EU Deforestation Regulation (EUDR).
This came as little surprise: initially due to come into effect in December 2024, the regulation was postponed by a year, with the commission saying in a 2 October press release that in response to calls from “global partners” it would propose a delay until December 2025 for large businesses and June 2026 for micro and small companies.
The EUDR is a ground-breaking regulation that aims to prevent certain goods from entering the EU market if they contribute to deforestation or forest degradation in the EU or elsewhere around the world. It covers seven commodities – cattle, wood, cocoa, soy, palm oil, coffee and rubber – and some of their derived products, such as leather, chocolate, tyres and furniture.
But the regulations were viewed by many businesses as overly burdensome – as Lucy Blake, partner at Jenner & Block in London, explained to Forward Law Review:
“The EUDR imposes stringent and onerous requirements on global businesses, especially those navigating complex global supply chains,” she said. “For many businesses, particularly those with complex global supply chains and who worked with small producers, complying with the requirements posed logistical challenges, especially the due diligence and traceability obligations.”
Additionally, she noted, the absence of guidance on some of the more technical aspects of the legislation and details as to how third countries would be risk-ranked for due diligence purposes made compliance especially cumbersome as businesses were effectively operating in the dark.
Due diligence is the key issue for many. Companies will be banned from placing in-scope products on the EU market, or exporting them from the EU, unless they are covered by a due diligence statement indicating no more than a negligible risk of non-compliance.
The updated guidance introduces a number of measures aimed at clarifying and simplifying the compliance burden, whilst still ensuring businesses take steps to prevent deforestation in their supply chains. The EU claims that it will result in administrative cost savings of around 30% for businesses.
Blake summarised the key changes: “Businesses may now re-use existing due diligence statements when re-importing goods previously available on the EU market; appoint a single authorised representative to submit due diligence statements on behalf of a group; submit an annual due diligence statement rather than one for each shipment or batch; and ascertain that due diligence has been completed upstream in the supply chain by collecting due diligence reference numbers from direct suppliers.”
The EU has published an updated guidance document and FAQ to help companies navigate the simplifications, as well as a draft delegated act for public consultation. In March the commission also published guidance, ‘Understanding your company position in beef, cocoa, coffee, palm oil, rubber, soy and wood supply chains’, which aims to further assist with implementation of the EUDR.
Blake said that, on the whole, businesses welcome both the clarification and the changes, which reflect input from EU member states, partner countries, businesses and industry. “Companies that got ahead of the curve may now need to make some adjustments to processes already in place,” she said, “but, over time, these changes should reduce the administrative burden.”
She noted, however, that the EUDR is part of an evolving package of EU legislation that is shaping how companies think about supply chain responsibility.
“The updated guidance explicitly references the Corporate Sustainability Due Diligence Directive (CSDDD), emphasising that these frameworks are complementary and should be applied coherently to support meaningful due diligence,” she said. “From the EUDR itself, to wider proposals such as the Omnibus package, companies are facing interconnected due diligence and compliance demands.”
Blake emphasised that the measures to simplify the EUDR do not indicate a shift towards de-regulation and that businesses remain subject to significant due diligence and compliance obligations.
She said: “Whilst the changes may reduce the red tape, businesses remain on the hook to prevent deforestation in their supply chains, on pain of fines, confiscation of goods, and exclusion from procurement processes.”
Meanwhile, the UK government has been taking steps to tackle illegal forestation in UK supply chains. In 2021, the UK introduced framework legislation under the Environment Act for a Forest Risk Commodities regulation. The regulations will set up a due diligence system and entities with a global annual turnover of £50 million or more will need to be compliant.
The government says that initial legislation will focus on four commodities identified as key drivers of deforestation: cattle products (excluding dairy), cocoa, palm oil and soy. It says that these commodities are estimated to account for 64% of the UK’s tropical deforestation footprint, with as much as 93% of this deforestation likely to be in violation of local laws.
“Once the regulations come into force, regulated businesses will be required to establish a due diligence system for each regulated commodity and required to report annually on their due diligence exercise,” said Blake.
Blake noted, however, that the secondary legislation required to translate this legal framework into rules for companies has been subject to delays and is still to be finalised by government.
She said: “With the WWF’s recent poll and the implementation of the EU legislation, there may be growing calls on the UK government to complete the process of introducing UK legislation. In any event, UK businesses trading with the EU will need to comply with the EUDR regardless of UK domestic law.”