Five steps food producers must take ahead of the EUDR deadline

The EU's new Deforestation Regulation (EUDR) is an ambitious, first of its kind regulatory development​​ aimed at preventing global deforestation and degradation.

While forerunners to this regulation have targeted the timber industry directly, the EUDR will catch a broader set of commodities with the aim of minimising greenhouse gas emissions and biodiversity loss on a global scale.

But what will be the impacts on food producers and how should they prepare? 

From 30 December 2024, it will be unlawful for all large businesses – those with 250 or more employees – to place cattle, cocoa, coffee, oil palm, rubber, soya or wood, or products made from these commodities, on the EU market, or to export them from the EU market, if they are not:

• Deforestation free
• Produced in accordance with the relevant legislation of the country of production
• Covered by a due diligence statement.  

The EUDR specifies a cut-off date of 30 December 2020 by which the commodities in scope must have been produced on 'deforestation free' land.

Each due diligence statement must include information on the product or commodity in question, evidence of a risk assessment and evidence of risk mitigation. Small and medium enterprises will be able to rely on the due diligence statements prepared by those that supplied them with the products, unlike large businesses that will have to formulate their own. Businesses that fall foul could see their shipments blocked or their products confiscated, be denied access to the EU market and be fined up to 4% of their annual EU turnover.

Since the EUDR applies to any 'operator' or 'trader' that places relevant goods on the EU market, the implications for both EU and non-EU businesses are clear. With the EU being the UK's closest trading partner (and the EUDR also applying to Northern Ireland), it is inevitable that a very significant number of UK food businesses will find themselves affected, from manufacturers of meat, confectionary, frozen food and ready meals, through to grocery, hospitality and food service providers trading in, with or via the EU.

Yet with only six months to go, recent reports suggest at least one fifth of UK businesses are still not prepared for the EUDR.

Top five tips to get you started…

1.      Scoping assessment

Identify if you are caught (and for which commodities or products), if other business partners in your value chain may be caught and what your respective obligations will be.

For UK businesses not directly in scope, you need to understand whether any of your EU customers are caught so that you can identify and engage up front on any requirements those customers might seek to pass on in order to help them comply with their own obligations.

2.      Systems and controls

You should then map out what data​​ you will need to collect to comply with the sizable due diligence requirements and assess whether you have the infrastructure in place to enable you to do that.

To comply with the EUDR, businesses must trace the commodities (and derived products) back to the plot of land on which they were grown or reared and gather evidence to show their production process was deforestation free. This could entail the use of supply chain tracking including supply chain mapping tools, satellite monitoring and on the-ground verification, all of which it is understood nearly a third of UK businesses have either not invested in or do not yet have access to via third parties. There are suggestions that complete digitisation would be the only cost-effective way to collect all this data. This raises further challenges for businesses that still largely rely on paper trails.

3.      Contractual safeguards

Do you have adequate contractual provisions to enable you to comply but also meet the demands of any business partners in your value chain that might require data from you? 

Think about audit and access rights, a right to inspect documents and records that will be needed to verify compliance under the EUDR and where contractual liability rests if things go wrong.

4.      Supplier screening

Are your suppliers willing and able to give you what you need?  You will need to be able to conduct spot checks of existing suppliers and screen new suppliers using the systems and controls you have in place. 

Deforestation​​ includes not only the removal of trees but also structural changes to the make-up of forests, meaning that to prove your products are deforestation free you will have to monitor forests relevant to your supply chain. Yet reports suggest only a minority of companies have the ability to trace the deforestation programmes of direct and third-party suppliers. This makes supplier screening even more important.

5.      Stock forecasting

There are fears that the EUDR's strict requirements could potentially lead to market segregation and impact on investment flows into Europe, as suppliers that struggle to produce the evidence required by their European buyers may be forced to shift their products to markets where demand is increasing and sustainability is less of a priority.

For businesses trading in the EU, this could mean potential cost increases of 40-50% on base prices of in-scope commodities, signifying a need to build up stock levels ahead of the EUDR deadline.  

UK to follow suit?

Turning to the UK, regulatory proposals are less advanced. The current UK Government has proposed to legislate (although the recent election announcement has the potential to impact this) a ban on companies using regulated commodities if they have a global turnover of more than £50m, use more than 500 tonnes of the commodities per year and they are sourced from land used illegally. The due diligence and reporting requirements will be similar to the EUDR, but the UK regime will exclude coffee and rubber from the list of regulated commodities.

Wherever the UK ends up, it is clear that even under the imminent EUDR, the jurisdictional complexities at play give this regulation an international flavour. All food businesses trading the affected commodities in the EU will be impacted to varying degrees by the tightening of due diligence on their supply chains and the shift towards full supply chain transparency.