What Is a Due Diligence System and How Do You Implement One?

Complying with the EU Deforestation Regulation can feel overwhelming. One key requirement is implementing a Due Diligence System (DDS). This guide breaks down why you need it, what it is, how it works, and how to implement it without getting lost in complexity.

Why Do You Need a Due Diligence System?

Under EUDR, companies must submit statements for every product batch confirming minimal deforestation and illegal sourcing risk. A Due Diligence System is the process that allows you to assess this risk. For operators, implementation is mandatory , not optional. It is the foundation of compliance.

What Does Risk Assessment Mean in Practice?

Risk assessment sits at the EUDR's heart. Many timber businesses have not needed formal systems due to stable, low-risk supplier relationships , but EUDR changes that. Consider purchasing oak from a German sawmill sourcing from Romania, a country with known corruption and deforestation issues. The sawmill's reputation alone is not enough. Required questions:

• Is the supplier certified?
• Can you verify the forest location using open-source deforestation data?
• If data shows risk, can you request additional evidence , forest operator documents, external audits?

A Due Diligence System applies this process to all regulated products, assessing both deforestation and illegal sourcing risks.

How to Implement a Due Diligence System

Step 1: Collect Detailed Information

Trace materials from suppliers to origin, including geolocation data in JSON format. This often requires going beyond direct suppliers to the forest exploitants. Reliable suppliers already need this information , it flows efficiently through well-structured supply chains.

Step 2: Assess Deforestation Risk

Using geolocation data and country-level deforestation status, verify whether locations fall within protected areas or previously forested zones using online open-source tools.

Step 3: Assess Illegality Risk

More complex than deforestation assessment. Ensure logs were not harvested in violation of laws , including indigenous rights and labour standards. Survey forest exploitants about their practices and collect supporting documentation. Suppliers must follow the same process and share information with you (EUDR Article 10).

Step 4: Risk Mitigation

For high-risk cases, develop action plans to mitigate risk before continuing supplier relationships. Only after reducing risk to negligible levels can you issue required statements.

Staying Compliant Over Time

• Check supply chains at least annually , or more frequently if suppliers or sourcing areas change
• Retain all information and risk assessments for a minimum of five years
• Documentation must be accessible and structured for audits or inspections