The European Union Deforestation Regulation (EUDR), which is scheduled for implementation at the end of 2024, represents a significant effort toward combating global deforestation. The regulation will impose stringent regulatory mandates on the import and export of wood products within the EU jurisdiction, as well as spillover requirements for supply chains around the world. While implementation may be delayed by several months or more, strong pressure from the environmentalist community makes ultimate implementation highly probable.
It is crucial for companies in the wood floor industry to understand the new regulations, assess their exposure to the changing requirements, and prepare their supply chains and internal procedures. As the EUDR impacts virtually all industries, from food to textiles to cosmetics, many tools are being developed to facilitate compliance.
Understanding EUDR and its implications
The EUDR is the successor to the EU Timber Regulation (EUTR). Where the EUTR was focused on the legality of the wood trade, the EUDR aims to reduce deforestation and forest degradation by ensuring that wood products entering and exiting the EU market are sourced both sustainably and legally. The regulation requires companies to:
1) Conduct due diligence: Importers must perform thorough checks to confirm that their wood products do not contribute to deforestation. This involves gathering detailed information about the supply chain and ensuring legal sourcing. Many of the requirements and outcomes of this phase of EUDR are similar to those of its predecessor, EUTR, as well as the U.S. Lacey Act, United Kingdom Timber Regulation, and similar international laws.
2) Assess and mitigate risks: Importers need to evaluate the risk of deforestation associated with their supply chain and implement measures to mitigate these risks, along with any others identified in the due diligence phase. This assessment and mitigation must be accomplished for each forest asset.
3) Ensure traceability: This requirement is perhaps the greatest challenge—and most controversial change—presented by EUDR. In fact, a number of countries (the largest being China) have stated they will refuse to comply with this demand. The United States has pushed back against this requirement as well, with formal protests by the U.S. government as well as industry representatives. Companies must be able to trace the origins of their wood products back to the forest of origin to ensure they are not linked to deforestation. Crucially, this requires obtaining geographic information on all production forest assets, including map polygons (for assets over 4 hectares) and points (for assets under 4 hectares).
Compliance with EUDR will be essential to avoid penalties and maintain access to the EU market. Without a conforming Due Diligence Statement, shipments into the EU stream of commerce will likely be denied entry, leading to market access restrictions and supply chain disruptions.
Recognizing the challenges of EUDR compliance
EUDR compliance poses several challenges for companies in the wood floor industry. One complicating factor is that supply chains tend to become exponentially more complex with each value-adding stage, given the typically additive nature of forest products manufacturing. Engineered flooring, for example, may have multiple source forests for each wood veneer ply, as well as multiple species, each with its own multiple forests, for any composite wood layer. EUDR requires that all of this complex supply chain be geographically mapped and disclosed to European Customs prior to entry.
Another dimension, beyond simply mapping the supply chains and materiality of products sold into the European market, is the ongoing (and increasing) necessity for risk assessment. As with EUTR, Lacey Act, and other supply chain legality regulations around the world, EUDR requires regulated entities to perform due diligence and risk mitigation on potential risks arising from source jurisdictions, supply chain companies and other risk vectors. EUDR also, however, requires assessing the risk of deforestation and forest degradation in each source forest plot, a task likely to be delegated in some fashion to even those vendors not directly regulated by the law.
Considering compliance solutions
The challenges of EUDR are real—and are likely to be disruptive. Nevertheless, tools are available to help companies selling into the European market lighten the workload, avoid disruption, and ensure compliance for themselves and their customers:
1) Supply chain intelligence: Communication with upstream value chain partners is critical, given the requirement to map originating forest areas. Unfortunately, technologies like blockchain and artificial intelligence have serious drawbacks. Blockchain platforms typically require buy-in from the entire supply chain. They also tend to increase operational complexity and require extensive supplier training. AI, while useful in some applications, can also add to the risk of false positives as well as so-called “hallucinations,” creating unnecessary liability. And both technologies have serious environmental sustainability drawbacks due to their resource-intensive infrastructure needs.
On the other hand, digital vendor portals are viable tools in highly integrated supply chain scenarios. In more diversified sourcing contexts, good old-fashioned digital forms can also be excellent options, especially if designed with thoughtful survey logic and connected to cutting-edge workflow automation.
2) Risk assessment: While satellite imagery will often play a crucial role in EUDR compliance because of the requirement to risk assess exact harvest locations, it should be noted that the regulation does not actually mandate it. The resource infrastructure necessary to drive useful insights from satellite data also has an environmental impact that should be considered, as well as costs that can add up quickly. Furthermore, satellite imagery should not be the sole data point for risk. It can help flag potential problem areas or demonstrate risk mitigation measures, but current technologies are prone to false positives.
However, by designing protocols that take a risk-targeted approach to deploying satellite-based analysis, companies can reap the benefits of these incredible technologies while minimizing the drawbacks. A comprehensive approach to risk assessment is more necessary now than ever before.
3) Reporting and auditing: For directly regulated companies under EUDR, automating the new Customs entry declaration requirements is a practical necessity. Even for those not required to make such declarations, strong reporting competencies and an auditable compliance process will keep market access open through EUDR implementation.
Additionally, operating compliance activities in a digital environment can lead to other benefits, like better team visibility, opportunities to delegate aspects of the compliance workflow, and even gains in overall business intelligence. Any organizational change made necessary by EUDR can also be an opportunity to drive new organizational value.
[A quick commercial here: My company, 11Foundry, can help with each stage of EUDR compliance. Our team has extensive experience managing compliance with forest product regulations around the world, and we bring that experience to our software products. For example, Accelerator by 11Foundry offers a low-cost, fast time-to-value toolset for gathering supply chain intelligence and integrating it into broader compliance workflows. Highly adaptable and with minimal training requirements, Accelerator can be deployed in a matter of days to help collect and manage supplier information, testing and certification documents, forest unit boundaries, QC imaging, or any other data that may be needed. And our Command Center can help companies build on best practices in existing Lacey Act and EUTR compliance to implement cutting-edge EUDR risk analysis, including satellite-based analysis and many other tools and resources, in an integrated and result-oriented manner.]
Start your work now
EUDR represents a critical development in the effort to promote sustainable forestry practices. For companies in the wood floor industry, understanding and complying with these regulations is essential to ensure market access and promote environmental sustainability. Some technologies that purport to solve the challenges of the new regulations instead add unnecessary complexity and counterproductive environmental costs.
To truly solve for EUDR’s potential problems, companies need to be thoughtful and proactive, leveraging industry expertise along with new and existing technologies in order to stay competitive in an increasingly complicated field. Embracing digital enablement with industry best practices can not only aid in compliance, but can also support broader sustainability goals that benefit both the environment and the business.
Staying informed and leveraging the right tools are key to thriving under the new regulatory landscape imposed by EUDR.
Recommended resources
There are many excellent resources available to help in preparing for EUDR. A few favorites are listed below.
Global Forest Watch Pro, from the World Resources Institute, is the enterprise version of the organization’s popular Global Forest Watch satellite data tool. Its “freemium” model provides grant-funded free access to advanced geospatial analysis tools (including the European Forest Observatory, the primary data source for EUDR enforcement) for many companies.
The International Wood Products Association currently offers free courses—under a grant from US APHIS—in due diligence concepts and forest products biology. While not directly targeted toward EUDR scenarios, these fundamentals can help improve any company’s readiness for the new regulations.
Preferred by Nature is a leading voice in the environmental NGO sector, providing risk assessment resources, impact self-assessment tools, and consensus-building forums in addition to certification and auditing services.
