The EUDR is one of the most impactful sustainability rules to hit supply chains in years. It tackles a loophole that made it easy to ignore deforestation risks and illegal logging - shifting the responsibility from just the forest to every company that touches the product, all the way to the retailer.

ThIn this post we will dissect the regulation, explaining what EUDR means in practice.

Why this regulation?

Let’s put this into perspective: imagine a chair made of oak. The oak logs were sourced from a Latvian forest, processed in Latvia, shipped through France, further processed in Spain, and finally end up sold in an Italian shop.

Previously, only the forest operator in Latvia needed to follow local laws and ensure the oak comes from non-deforested areas. Every other player in the supply chain - trader, manufacturer, retailer - weren’t required to guarantee that the oak was sustainably sourced, and could rely on certifications if they wanted to - without any legal obligation. In fact, simply claiming “I didn’t know” was often enough to avoid penalties: the opacity of the industry makes sustainable sourcing particularly challenging.

This lack of transparency has long made responsible sourcing a huge challenge. The European Union Deforestation Regulation (EUDR) aims to change this for good by making every supplier in the chain accountable for the origin of their materials. This is the heart of the regulation: From the Latvian forest to the Italian store, each supplier must declare to the authorities that the raw material was legally harvested and doesn’t come from illegal sources.

Right now, this level of traceability is almost impossible. Suppliers aren’t required to share details about where raw materials come from. For example, a Latvian sawmill might check its forest operator, but beyond that, the source often becomes unclear. Certifications can help, but not all sawmills are certified, as it’s costly and complex.

The EUDR changes this: every supplier must now share key information - like geolocation data - with their customers. This way, everyone in the chain can check the risk of deforestation or illegal harvesting. So, the forest operator gives the data to the sawmill, who passes it to the trader, then to the manufacturer, and finally to the retailer. Each company must use this information to assess the risk and can only sell the product if the risk is low and properly declared to the authorities.

Example

Imagine a chair made of oak. The logs were sourced from a Latvian forest, processed in Latvia, shipped through France, further processed in Spain, and finally sold in Italy. For example, after EUDR, the Latvian forest operator must share the geolocation of the logs with the sawmill, which passes it to the trader in France, and so on, down to the retailer in Italy. Each company must conduct its own due diligence, assessing the risk of illegality or deforestation. Based on this, they’ll decide whether to sell the product and submit a due diligence statement to the authority, or, if the risk is too high, withdraw the product from the market.

Before EUDR

After EUDR

Forest expoitant

Accountable

Must follow locals laws regarding on deforestation, indigenous populations, working condition etc.

Sawmill

Not accountable

Must follow locals laws regarding on deforestation, indigenous populations, working condition etc.

Trader

Not accountable

Must follow locals laws regarding on deforestation, indigenous populations, working condition etc.

Manufacturer

Not accountable

Must follow locals laws regarding on deforestation, indigenous populations, working condition etc.

Retailer

Not accountable

Must follow locals laws regarding on deforestation, indigenous populations, working condition etc.

For which products?

The EUDR applies to cocoa, timber, coffee, rubber, and their derivatives, within limits. The EU has published a list of HS codes for products covered by the regulation.

For example: chocolate is included, but cookies aren’t. Wooden furniture is included, but packaging, if used as packaging, isn’t. A pallet manufacturer must comply as pallets are their core products, but a car manufacturer buying pallets for packaging doesn’t.

How does it work?

The EUDR relies on three main pillars:

• Due diligence system:
  Companies dealing with products under the regulation must have a due diligence system in place at least once a year. Think of this as a process that allows you to assess, for each supplier and product purchased, whether these products would be made legally sourced, or not coming from deforested areas.
  
  For example, the manufacturer in Spain must review their entire product catalogue annually. For each supplier, they check geolocation data of the logs. If the risk is low, the product can be sold. If the risk is high, they must gather more information or even stop selling the product.
  
• Due diligence statement:
  Before any product reaches the market, companies must submit a due diligence statement to the EU. This document includes:
  • - Raw materials geolocation data
  • - The assessed risk of deforestation and illegality
  • - Company information
  • - A declaration that the product complies with EUDR
  
  Once submitted, the company receives a due diligence statement number to prove compliance.
  
• Information sharing:
  Companies must share relevant information to their customers - geolocation data, country of origin, and the due diligence statement number.
  
  When buying from an EU supplier who has already submitted a due diligence statement, a company can rely on that statement and only submit its number. However, the company is still accountable if the supplier's statement is faulty. For this reason, trust and verification remain crucial.

Exceptions

The EU understands that these requirements can be heavy, especially for smaller companies. The law places most of the regulatory burden on companies with the biggest impact on the supply chain, while smaller companies are exempt from some obligations.

• SMEs: Small and medium-sized enterprises (SMEs) that buy timber from EU suppliers only need to submit their supplier's due diligence statement number. They don't have to verify the information. For example, if the Latvian sawmill is an SME, they only need to submit the forest operator's due diligence statement number. If the oak is illegal, the sawmill won't be held accountable. However, SMEs still need a due diligence system in place.
• SME traders: SMEs traders (meaning that don't process or import material from outside the EU) only need to share relevant information with their customers. They don't need to submit a due diligence statement or have a due diligence system. The french trader of hardwood from our example only needs to share to the manufacturer in Spain the information shared by their sawmill supplier in Latvia. However, SME traders exporting outside the EU must fully comply.

Example

Imagine a chair made of oak. The logs were sourced from a Latvian forest, processed in Latvia, shipped through France, further processed in Spain, and finally sold in Italy. For example, after EUDR, the Latvian forest operator must share the geolocation of the logs with the sawmill, which passes it to the trader in France, and so on, down to the retailer in Italy. Each company must conduct its own due diligence, assessing the risk of illegality or deforestation. Based on this, they'll decide whether to use/sell the product and submit a due diligence statement to the authority, or, if the risk is too high, withdraw the product from the market.

Forest expoitant

SME

Must not harvest deforested areas and must follow local laws regarding on deforestation, indigenous populations, working condition etc.

Must submit a due diligence statement per batch of logs sold

Must share relevant EUDR information with their customers

In spite of being a SME, the forest exploitant is at the beginning of the supply chain and has all EUDR obligations.

Sawmill

SME

Must have a due diligence system in place and conduct due diligence at least once per year.

Must submit a due diligence statement per batch of logs sold

Does not need to verify the information when reusing the due diligence statement number of their supplier

Must share relevant EUDR information with their customers

Trader

SME

Is not required to have a due diligence system in place

Is not required to submit a due diligence statement per batch of logs sold, unless it is an export

Is not accountable for the veracity of the information when reusing the due diligence statement number of their supplier

Must share relevant EUDR information with their customers

Must collect and keep record specific information for the supply chain for at least 5 years

Manufacturer

Large entreprise

Must have a due diligence system in place and conduct due diligence at least once per year.

Must submit a due diligence statement per batch of logs sold

Is accountable for the veracity of the information when reusing the due diligence statement number of their supplier

Must share relevant EUDR information with their customers

Retailer

Large entreprise

Must have a due diligence system in place and conduct due diligence at least once per year.

Must submit a due diligence statement per batch of logs sold

Is accountable for the veracity of the information when reusing the due diligence statement number of their supplier

Must share relevant EUDR information with their customers

What happens in the case of an illegal batch?

If a company discovers that a product is illegal before it's sold, they must inform the authorities and remove the product from the market. The commission, with its data on the entire supply chain, can easily investigate every previous supplier. If a supplier—especially a larger company—failed to perform proper due diligence, they could face a fine of up to 4% of their revenue.

Example: in case of fraud

The Latvian forest exploitant harvested oak logs from a deforested area. Let's break down how it can impact the entire supply chain in regards with EUDR.

Frauds

Forest expoitant

SME

Harvests from deforested area and sells anyway

The forest operator chooses to fraud and submits a due diligence statement to the commission, claiming the logs are low risk. They sell the logs to the small Latvian sawmill and share the required geolocation data and the due diligence statement number.

Sawmill

SME

Doesn't conduct deforestation & legality checks

The sawmill, being an SME, doesn't need to verify the information from the forest operator. When they sell the processed timber to the French trader, they simply submit a due diligence statement that includes the previous statement's number—unintentionally passing along the false information.

Trader

SME

Doesn't conduct deforestation & legality checks

The French trader, also a small business, sells the timber to a Spanish furniture manufacturer. As a small trader, they only need to share the geolocation data and the due diligence statement number from the sawmill. They are not required to submit a due diligence statement nor to conduct due diligence.

Manufacturer

Large entreprise

Doesn't spot the issue

Even though the manufacturer is a large company and fully accountable for the origin of the logs, they fail to perform thorough due diligence, don't properly check the geolocation data, and submit their due diligence statement with the same faulty information passed down from the forest exploitant.

Authorities

Retailer

Large entreprise

Spots the issue and alerts the authorities

As they have caught the issue, withdrown the product from the market and notified the authorities, they operated according to the regulation and are fully compliant.

Example: in case of control

Since each due diligence statement points to the previous one, authorities can trace the entire supply chain and investigate each supplier. Let's break down what happens in case of controls.

Controlled

Forest expoitant

SME

Fined

The Latvian forest operator cannot prove they conducted proper due diligence since they knowingly provided geolocation data from a deforested area. They will almost certainly be fined.

Controlled

Sawmill

SME

Not fined

Being a SME, the sawmill could reuse the due diligence statement number of the forest exploitant without verifying the information. They will not be held accountable—they just need to show they have a due diligence system in place, even if they missed the issue in this case.

Controlled

Trader

SME

Not fined

Being a trader SME, their obligations in regards to EUDR are minimal. They only need to share the relevant information to their customers and are not accountable if it is a faulty one.

Controlled

Manufacturer

Large entreprise

Most probably fined

As a large company, they are fully responsible for conducting thorough due diligence for every batch from every supplier. However, if they can prove they have a strong due diligence system and that this particular batch was an exception, they might avoid a fine — the law leaves some discretion to the authorities in these cases. But the risk is high.

Controlled

Retailer

Large entreprise

Not fined

As they have caught the issue, withdrown the product from the market and notified the authorities, they operated according to the regulation and are fully compliant.

In a Nutshell

The EUDR means no more excuses. Every company in the supply chain must:

• Know where their raw materials come from
• Prove they come from legal and deforestation-free sources
• Keep the information flowing down the line

Need Help?

Get in touch with us to learn how we can support you every step of the way!

Start building a robust due diligence system today and make sure your suppliers do the same. The sooner you act, the smoother your compliance will be — and the more trust you’ll earn from customers who care about sustainability.