Search

Detangling the EU Deforestation Regulation

We are an online community created around a smart and easy to access information hub which is focused on providing proven global and local insights about sustainability

20 Jun, 2024

This post was originally published on WBCSD

Practical examples for companies to understand EUDR regulations & how to navigate the new legislative requirements.

Deforestation remains a major global issue, impacting climate, biodiversity, water quality, and cultural heritage. For developed world governments and consumers, it can be difficult to fight deforestation, which often occurs deep in supply chains in the developing world. This new regulation from the European Union (EU) aims to address that issue. 

The EU Deforestation Regulation (EUDR) came into force on 29 June 2023 and aims to guarantee that selected products EU citizens consume do not contribute to deforestation or forest degradation. It covers seven commodities and their derivatives or embedded products and affects all corporate stakeholders in the EU involved in the commercialization of those products.

In our previous article, we have summarized the key requirements of the EUDR. All companies placing products on the EU market, including goods produced in the EU containing one of the seven commodities, must comply with the EUDR. You can find more on EUDR requirements here. 

In this piece, we will lay out how you can navigate these new legislative requirements, using five realistic cases to detangle how companies across the supply chain must comply with the EUDR and how they need to provide due diligence.

Requirements for Companies

The EU company, or operator, who is the first to make a product or commodity available in the European market, i.e., places it on the market, must perform full due diligence, including the provision of geographic coordinates of land where commodities are produced. Companies further handling the relevant commodity, or any product related to relevant commodities, can refer to due diligence statements provided by their suppliers.

Small- and medium-sized traders will also be required to collect information on trading partners of the relevant commodities but are not required to ensure their trading partners are deforestation-free and, hence, do not need to collect geographic data on product commodity origins. 

Companies and traders overseas may not be required to provide due diligence, but should prepare to be able to make required information available to their business partners in the EU (because these can only import if they have the information). 

Understanding the EUDR – Examples

What will be required of affected companies?

Company A wishes to import cocoa to the European market from Ghana. The company is required to perform proper due diligence to guarantee that the imported cocoa is not linked to land deforested or forest degraded after 31 December 2020, and that the sourcing and production of the cocoa comply with relevant local regulations. This is valid both when Company A directly imports or via third parties.

This means Company A is required to collect the geolocation of all plots of land and date/time range of production, among other information, to perform due diligence. Companies such as Company A will need an in-depth understanding of their supply chains. 

Key takeaways:

  • The submission of the due diligence statement to an authority in a given Member State is a requirement for a European company importing or using relevant products in the EU the first time.
  • Companies need to trace every relevant commodity back to its plot of land before placing it on the market or before exporting it to the EU.
  • Cut-off date: Companies cannot import goods linked to one of the 7 commodities if the land linked to that commodity was deforested or forest degraded after 31 December 2020. If deforestation happened before that cut-off date, then the product is considered compliant with the EUDR and can be imported.

How will the EUDR affect due diligence along value chains?

Company B buys the cocoa imported by Company A and uses it to produce chocolate, which is then sold worldwide. Company B might assume it does not need to comply with the EUDR as the commodity has already been imported into the EU and accordingly due diligence has been demonstrated. However, the EUDR covers seven main commodities and products that originate from or are part of these commodities. Therefore, Company B must also demonstrate that the cocoa did not contribute to deforestation past the cut-off date.

Key takeaways:

  • Downstream companies are obliged to ascertain that due diligence was carried out by companies upstream and retain legal responsibility if upstream companies breach the requirements set out by the EUDR. 
  • Companies further down the supply chain can refer to the due diligence performed by predecessors by including the relevant reference number for the parts of their relevant products that were already subject to a due diligence. 

What happens if a part of the goods is discovered to be non-compliant? 

Company C sources soy in bulk from many different Brazilian suppliers and uses it for a product sold in the EU. Company C will need to ensure that all plots of land involved in the production of the soy imported to the EU are not linked to deforestation. If Company C does identify that some of the imported soy is non-compliant with the EUDR, it has two options:

  1. The non-compliant soy must be physically separated from the compliant, and only the compliant portion can be imported.
  2. If separation cannot be achieved, the entire bulk is considered non-compliant and cannot be imported. 

Key takeaway:

  • If a single plot of land used to produce a commodity is found to be deforested after 31 December 2020, the entire bulk is regarded as non-compliant with the EUDR.

How does the EUDR affect export and goods produced in the EU?

Company D produces furniture made from EU-grown wood and exports its products globally.

According to the EUDR, Company D must perform due diligence on all its sold products, whether they are exported or sold within the EU. The EUDR applies both to exports and imports, and to products produced inside the EU. 

The company must include the reference number of their due diligence statement in their export declaration. The wood used for the furniture that is not exported outside the EU is also subject to the same requirements as the exported furniture.

Key takeaways:

  • The EUDR applies to products listed in Annex I [1] of the regulation, whether they are produced in or imported to the EU. 
  • Companies producing commodities in the EU are subject to the same due diligence requirements as companies abroad and, hence, must submit a due diligence statement for their produced commodities.

To what extent does the EUDR reach upstream in a value chain?

Company E, a European company, sources beef from the USA, which was fed with soy from Brazil. Similarly, to Company A, the European company is required to submit a due diligence statement guaranteeing its sourced products are deforestation-free. In this case, it needs to guarantee the imported beef, and soy used to produce it, are deforestation-free.

However, Company E does not need to provide proof of due diligence for soy to the same extent it does for beef, i.e., it is not required to provide geolocation information for the soy feed. An EU authority can request information on soy origin if it becomes aware the sourced feed is not compliant with the EUDR. In that case, it can request detailed documentation to prove the feed is deforestation-free.

Key takeaways:

  • The EUDR defines products to be deforestation free as products that contain, have been fed with (referring to cattle) or have been made using relevant commodities that were produced on land that has not been subject to deforestation after 31 December 2020.
  • Due diligence is still required for cattle feed of operations in third countries if beef products are placed on the EU market.

How You Can Prepare

The EUDR marks a pivotal step toward fighting deforestation on a global scale, affecting multiple companies across the value chain. By requiring companies to collect and transparently disclose detailed data on their supply chains, the EUDR works to ensure companies fight the negative impact on social and nature factors related to their products and drive positive change within their supply chains. 

3 concrete steps companies should take to ensure they are compliant by December 2024:

  1. Identify commodity exposure to EUDR compliance.
  2. Conduct a risk assessment on the origin of the product against 14 risk criteria. Any identified risk needs to be mitigated before goods can be imported to the EU.
  3. Map supply chains and commit to a product traceability and data collection system. Engage with suppliers, as they will be key in obtaining the required information.

Guidehouse can support your company with all of these steps, as well as helping you prepare for the risk assessment for medium- and high-risk countries and support you in developing a risk mitigation strategy. We can help leverage the synergies present between your ongoing data collection efforts for greenhouse gas accounting, forest, land, and agriculture targets, abatement roadmaps, Science Based Targets Network, and risk assessments in preparation for the Corporate Sustainability Reporting Directive or Taskforce on Nature-related Financial Disclosures.

Contributing Authors

Michèle Koper, Director

Madalena Martins, Consultant

Nicola Meyer, Consultant

This article first appeared on Guidehouse website on 3 June 2024.

[1] “REGULATION (EU) 2023/1115 of the EUROPEAN PARLIAMENT and of the COUNCIL of 31 May 2023 on the Making Available on the Union Market and the Export from the Union of Certain Commodities and Products Associated with Deforestation and Forest Degradation and Repealing Regulation (EU) No 995/2010 (Text with EEA Relevance).” n.d. https://eur-lex.europa.eu/legal-content/EN/TXT/PDF/?uri=CELEX:32023R1115.

The post Detangling the EU Deforestation Regulation first appeared on WBCSD.

Pass over the stars to rate this post. Your opinion is always welcome.
[Total: 0 Average: 0]

You may also like…

Insurance sector digs into impact of mandatory climate reporting

Insurance sector digs into impact of mandatory climate reporting

Businesses are being encouraged to prepare for the impact of mandatory climate disclosure in Australia.

Earlier this year, the federal government passed amendments to the Corporations Act 2001 (Cth) and the Australian Securities and Investments Commission Act 2001 (Cth), resulting in mandatory climate reporting for larger businesses in Australia.

The issue was examined during a recent address to members of the Underwriting Agencies Council, with particular attention paid to how the new legislation will affect the insurance sector.

Speaking at the event, Prateek Vijayvergia, Xceedance Business Leader – Key Accounts, Australia and New Zealand, said that while 75% of ASX 200 companies were committed to or already performing climate reporting, the number fell to 10.5% for broader ASX companies.

“There’s a lot more awareness and commitment and urgency that we see in the Australian market now and this is not limited only to the insurance business, but for all larger Australian businesses,” he said.

“Although this is all good, there is a gap in climate-related reporting among ASX-listed entities, and the depth and the quantification.”

Joining Vijayvergia in the discussion was Sharanjit Paddam, Principal – Climate Analytics at Finity Consulting, who said that from 31 December 2025, in addition to an Annual Report, large companies will need to submit a Sustainability Report — what Paddam referred to as “the home for ESG disclosures”.

Four pillars underpin the disclosure standards — governance, strategy, risk management, and metrics and targets. Paddam emphasised that the devil is in the detail.

“You not only have to disclose the financial impacts on your balance sheet today and your income statement today, but also in the short-, medium- and long-term future,” he said.

“They (ASIC and APRA) want hard numbers to be put in the accounts about how climate change is financially going to affect the operations of the company.”

Paddam explained: “At the heart of the disclosure is really what are the financial impacts of climate change on your company, investors, customers and shareholders; to understand that and to allocate capital and make investment decisions informed by how climate change might affect your business.”

Paddam added that companies need to consider their own impact on climate change.

“The world is changing in disclosures in a very big way over the next few years, and companies are going to have to think about not just accounting for their financial outcomes, but also their climate outcomes,” he said.

“These are mandatory standards — this is locked in, and it will be required to happen over the next few years, and it is intended that these standards will change the economy and they will drive changes throughout the way we do business.”

A particular challenge will be the reporting of Scope 3 emissions — those indirectly generated by the activities of an organisation — due to lack of data, methodology and resources.

“What’s really helping all of us is the advancement in technology so there are better ways of collecting information and data around emissions,” Vijayvergia said.

“And also, to then slice and dice that information so it can be used to make a plan around climate risk.

“It’s becoming more comprehensive and almost integral to the overall reporting that’s happening for an organisation.”

Organisations impacted by these legislative changes include those that produce accounts under the Corporations Act and meet any two of the following criteria: consolidated assets more than $25m; consolidated revenue more than $50m; or 100 or more employees.

Paddam said the new requirements would capture some of the larger underwriting agencies and brokers.

“It’s an opportunity to look at the services that you are providing and how good a partner you are for your insurance provider, or as a distributor of insurance products, to see where you could uplift your services in this respect,” he advised.

“The things we insure, the things we invest in, are all intended to change as a result of these disclosures, and getting your heads around that quicker and faster than your competition is very important.”

Image credit: iStock.com/pcess609

Accessible Data Makes Renewable Energy Projects Possible Worldwide

Accessible Data Makes Renewable Energy Projects Possible Worldwide

Accessible Data Makes Renewable Energy Projects Possible Worldwide
jschoshinski
Thu, 11/14/2024 – 18:52

High fidelity, publicly available data is essential for mobilizing clean energy investment and informing renewable energy policy and deployment decisions, but access to this data is a critical barrier for many countries aiming to develop and optimize their clean energy resources. Recognizing the importance of tools that offer accessible data to inform renewable energy planning and deployment, the USAID-National Renewable Energy Laboratory (NREL) Partnership developed the Renewable Energy (RE) Data Explorer. RE Data Explorer is a publicly available geospatial analysis tool that provides free global renewable energy resource data to inform policy, investment, and deployment decisions for solar, wind, and other energy resources. 
Two of the thematic days at COP29 are focused on energy and science, technology, innovation, and digitalization. RE Data Explorer is a great example of how digital technologies can play a role in promoting clean energy and addressing the climate crisis. The tool also delivers on the commitment USAID made at COP28 to make investments that will “support technical assistance programs and partnerships to strengthen subnational climate preparedness.”
The use of USAID-NREL public data in Tanzania, available on RE Data Explorer, offers a direct example of the impact of accessible data on the implementation of renewable energy projects. Tanzania is working to accelerate the deployment of renewable energy and decarbonize its grid, aiming for 30-35 percent emissions reduction by 2030. A major challenge to pursuing this goal is the lack of reliable, long-term renewable energy resource data for project planning.
NextGen Solar, a private sector partner of USAID Power Africa, used USAID-NREL data specific to Tanzania to support the development of its renewable energy projects in the country. The company, which specializes in building and operating utility-scale solar photovoltaic (PV) power plants in sub-Saharan Africa and small island nations, utilized USAID-NREL public data to develop the world’s largest PV-hybrid solar mini grid in rural Kigoma, Tanzania. USAID-NREL public data enabled NextGen Solar to perform technical feasibility studies to forecast electricity generation in an area previously lacking reliable, affordable power. Thanks to this reliable data and analysis, NextGen Solar was able to mobilize $6 million in investment to build the plant. This 5-megawatt (MW) plant has now been in commercial operation for over 3.5 years and supplies electricity to over 65,000 homes, the region’s largest hospital, and three schools. It has also helped the Government of Tanzania save an estimated $2.2 million annually while reducing carbon emissions and demonstrating the viability of utility-scale solar power to sub-Saharan Africa.
The application of USAID-NREL public data in Ukraine is  another example of how open data can drive the mobilization of clean energy projects. Planners and developers in Ukraine are looking to incorporate more renewable energy, particularly wind and solar, as the country rebuilds its grid and searches for new means to become less dependent on foreign resources. Like Tanzania, a barrier for Ukraine was the lack of accessible, high-quality data on its wind and solar output capabilities. USAID-NREL is helping Ukraine overcome this barrier through new high-resolution solar time series data accessible on RE Data Explorer, which will help Ukraine meet the needs of stakeholders in the energy sector across the national government, academia, and private industry.
“[USAID-NREL public data] really helps with planning and understanding where the resources are—where it is most cost effective to build distributed resources that will help to decentralize the grid.”
NREL’s Ukraine program lead, Ilya Chernyakhovskiy

To better understand the broad impact of RE Data Explorer, a 2024 NREL survey gathered insights from respondents on how they applied this data in real-world scenarios. Overall, respondents reported evaluating and planning over 111,000 MWs of solar and wind projects, with a potential investment of over $6.5 billion. End-users also reported over 1,600 MWs of solar and wind energy with over $1 billion  in investment that has been approved and financed. For context, according to the Solar Energy Industries Association (SEIA), 1,600 MWs would power approximately 275,200 average U.S. homes and 111,000 MWs would power approximately 19.1 million.
One particular real-world example provided by the survey came from a respondent from climate tech startup Ureca who shared that their company pursued a .3MW solar project in Mongolia that was approved and financed. Ureca’s project “focuses on small PV systems for households in Mongolia that currently use raw coal for heating.” This initiative, called Coal-to-Solar, is now helping low-income families transition from coal to renewable energy in Ulaanbaatar, Mongolia—the coldest capital in the world—as part of a Just Energy Transition pilot aimed at reducing reliance on coal.
The outcomes of these projects also highlight how USAID and NREL are working together to implement USAID’s 2022-2030 Climate Strategy. In accordance with the plan’s strategic objective, “Targeted Direct Action: Accelerate and scale targeted climate actions,” projects informed by USAID-NREL public data in Tanzania, Ukraine, and Mongolia employed context-sensitive approaches to “support climate change mitigation and adaptation efforts in critical geographies, [and] mobilize increased finance.” Furthermore, USAID and NREL’s work focused on accessible data supported Intermediate Result 1.1 in the plan, which aims to “catalyze urgent mitigation (emissions reductions and sequestration) from energy, land use, and other key sources.” 
From accelerating Tanzania’s clean energy transition, to aiding Ukraine’s rebuilding efforts, to enabling clean energy projects across the world, USAID-NREL public data is helping users and local communities reduce greenhouse gas emissions, promote sustainable development, and pave the way for a cleaner, more resilient future. 
For more information about RE Data Explorer, watch this video. To learn more about how high-resolution solar data is enabling energy expansion across two continents, read this NREL article.

Teaser Text
USAID-NREL’s RE Data Explorer is a great example of how digital technologies can play a role in promoting clean energy and addressing the climate crisis.

Publish Date
Thu, 11/14/2024 – 12:00

Author(s)

Emily Kolm

Hero Image
South View of Solar Plant.jpg

Blog Type
Blog Post

Strategic Objective

Mitigation

Region

Global

Topic

Emissions
Low Emission Development
Climate Policy
Climate Strategy
Climate Strategy Implementation
Digital technology
Energy
Clean or Renewable Energy
Grid Integration
Geospatial
Locally-Led Development
Mitigation
Partnership
Rural

Country

Tanzania
Ukraine

Sectors

Energy

Projects

USAID-NREL Partnership

Show Download Link
Off

0 Comments