The European Union is the latest global government to walk back aggressive climate regulations. The extremely divisive “European Union Deforestation Regulation” (EUDR) was supposed to go into effect in December but after pushback from trading partners as well as its own members, the European Commission has proposed delaying it by one year.
The EUDR aims to prevent goods connected to deforestation from being allowed to enter EU countries. According to some research, approximately 90% of global deforestation is blamed on agricultural practices in South America and Southeast Asia. Importantly, the EUDR targets deforestation that is legal in accordance with the laws of many production countries. But failure to comply can result in financial penalties and restricted access to the EU market.
A wide range of goods are covered under the law. Seven core commodities – cattle, cocoa, coffee, palm oil, rubber, soybeans, and wood – as well as derived products, such as leather, chocolate, coffee, palm oil derivatives, soybean oil, and even printed books.
Criticism of the EUDR is not so much about the end goal as it is the burdensome and confusing compliance obligations. Any company that wants to put products on the EU market will need to produce a due diligence statement that they comply with the EUDR. That means companies will need to collect information showing detailed origin information for every input used to make a product. The rules also call for carrying out risk assessments and mitigating those risks by conducting out independent audits or gathering additional information.
For all the reporting rules the EU has established, companies have complained that a lot of it is still extremely vague and confusing. Even the World Trade Organization has said the compliance guidelines are unclear. Officials from exporting countries say the law also acts as a trade barrier and will negatively impact smaller farmers and developing economies.
The EU has now given itself a little more than a year to firm up the rules, which could include some shifts that make them a little more palatable to its trading partners. While it’s possible that a changing political landscape in the EU may prevent the EUDR from being implemented, experts advise companies against making that bet, especially those that depend on the EU for a significant portion of their business. If you’d like more details about the EUDR and its legal requirements, international law firm White & Case has a good summary HERE.