Stakeholder Concerns with EU Deforestation Regulation

The EU Deforestation Regulation will, as it stands, begin to apply from 30 December 2024. However, key stakeholders are pushing for this date to be moved back to give more time to comply with the Regulation’s key provisions. Our ESG team discusses the concerns.

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The EU’s Deforestation Regulation[1] (the Regulation) aims to tackle global deforestation by requiring certain commodities and products to be “deforestation free” and lawfully produced before they can be sold in the EU or exported. To ensure compliance, economic operators will have to carry out strict due diligence on products traded on the EU market. See our previous article for more information on the key provisions of the Regulation.

The Regulation will, as it stands, begin to apply from 30 December 2024, and six months later for SMEs. However, key stakeholders are pushing for this date to be moved back to give more time for operators and traders to comply with the Regulation’s key provisions.

Some of the concerns with the Regulation include the following:

Lack of clarity

Owing to a lack of clarity around certain provisions of the Regulation, stakeholders are concerned that companies are not market-ready to comply with the provisions. The European Commission has started to address some of these concerns through several FAQ and guidance documents.[2] However stakeholders, including most recently US Government Representatives[3] as well as the European People’s Party[4], argue there is still a lack of guidance. This is particularly so regarding due diligence requirements, which we have discussed in our previous article.

Geolocation mapping

A key part of the Regulation is that, during the due diligence process, an operator or trader must pinpoint the geolocation of all plots of land from which the relevant commodities were produced. This is required to demonstrate that there is no deforestation occurring at a specific location after 31 December 2020. However, there has been recent criticism from Australia and Brazil in particular[5], who have argued that there are key differences between, for example, Australia’s own 2023 Forests of Australia map and a 2020 map from the EU Observatory on deforestation and forest degradation. This is because they use different definitions of forested areas. The EU map has classified many areas in companies’ supply chains as forested areas. This classification effectively bans goods from being sold in the EU. This situation would not be the case had the Australian map and its corresponding definition of forests been used. However, the Commission maintains that the use of the EU’s satellite maps is not compulsory, and that using the maps does not guarantee compliance with the EUDR. It advises companies must carry out their own due diligence.[6]

Technological failures

Article 33 of the Regulation provides that due diligence information should be registered into an IT system to be established by the Commission before 30 December 2024. There are several reports suggesting that the EU is encountering technical issues with the online reporting systems.[7] Stakeholders argue this is impacting their ability to take action to comply with the Regulation.

Stakeholders call for delay to implementation

These concerns have led to calls for the EU to push back the 30 December 2024 deadline. To date, the Commission has resisted. However, two recent developments are notable.

First, the EU delayed the classification of countries as having either “low”, “standard”, or “high” deforestation risks. This classification which will ultimately determine the amount of due diligence checks required. In this sense, countries marked as “low-risk” for deforestation will require a lower level of due diligence than countries with a higher risk, with the result that every country is treated as “medium” risk. This benchmarking system is now unlikely to apply until six months after the Regulation comes into force.

Secondly, proceedings have been issued by the German cocoa company, Albrecht & Dill Trading, against the German Federal Office for Agriculture and Food. The proceedings have been brought before the Cologne Administrative Court. The company seeks to have certain elements of the Regulation declared null and void. It argues that certain provisions of the Regulation are overly burdensome and impossible to meet.

Conclusion

Although stakeholders have raised legitimate concerns with the implementation of the Regulation, given that the 30 December deadline is fast approaching, we recommend operators take action now to ensure they will comply with the Regulation. In particular, operators should analyse their supply chains to identify any areas that need to be addressed to achieve compliance.

People also ask

What is the EU regulation for deforestation?

The EU Deforestation Regulation is a new law aimed at tackling global deforestation by prohibiting certain products containing coffee, cocoa, soya, cattle, oil palm, rubber, and wood which were produced on land subject to deforestation or degraded forest after 31 December 2020.

When will the EU Deforestation Regulation start to apply?

It will apply from 30 December 2024, except for SMEs which will have to comply from 20 June 2025.

Who will the EU Deforestation Regulation apply to?

The Regulation applies to: Any economic operators importing and exporting Relevant Commodities or Relevant Products to and from the EU market, and Any traders that otherwise make Relevant Commodities or Relevant Products available on the EU market

For more information and helpful advice about the EU Deforestation Regulation, contact a member of our Planning and Environment team

The content of this article is provided for information purposes only and does not constitute legal or other advice.

[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.

[2] See European Commission webpage, Deforestation Regulation implementation.

[3] United States asks EU to delay deforestation law, letter shows (Reuters, 20 June 2024)

[4] EPP draft plan seeks to place anti-deforestation law on back-burner (EurActiv, 3 July 2024)

[5] EU’s use of incorrect deforestation data ‘risks blocking imports’ (Financial Times, 16 July 2024)

[6] See Q.84, Frequently Asked Questions: Implementation of the EU Deforestation Regulation (European Commission, 22 December 2023)

[7] The Challenges Faced in the Implementation of the EU Deforestation Regulation (Jones Day, June 2024)