As the concept of sustainable development continues to deepen, ESG (Environmental, Social, and Governance) factors are evolving from mere data indicators into key drivers of growth for global companies and even countries. According to data from the United Nations Food and Agriculture Organization (FAO), between 1990 and 2020, the world lost approximately 420 million hectares of forest—an area equivalent to the size of the European Union. Forests are not only the habitat for most of Earth’s terrestrial organisms, but they also play a critical role in human production and development, providing a livelihood for nearly one-third of the global population.
In response to these challenges, the EU introduced the EU Zero Deforestation Regulation (EUDR) under Regulation (EU) 2023/1115. The EUDR, which took effect on June 29, 2023, will be fully implemented by December 31, 2024. Its goal is to restrict and prohibit the sale of products linked to deforestation or forest degradation, promote trade in “zero-deforestation” products, and protect ecosystems as part of the broader green transformation of the global supply chain.
While the regulation primarily holds EU operators responsible, non-EU suppliers must also comply by providing no-deforestation certifications to ensure their products can continue entering the EU market. Failure to comply could result in significant consequences, such as the need to immediately rectify, recall, destroy, or donate products. Companies may also face severe penalties, including fines of up to 4% of annual turnover, loss of access to simplified due diligence procedures, and an outright ban from the EU market.
This means companies must invest substantial resources, both financially and in terms of manpower, to trace their supply chains, collect and organize data, and assess and mitigate risks. Companies that fail to adapt their production and operational models in a timely manner risk losing their market share in the EU altogether.
EUDR Certification Process & Key Considerations
Applying for European Union Deforestation Regulation (EUDR) certification requires companies to follow a series of detailed steps to ensure their products comply with the regulation and actively prevent deforestation and forest degradation. Below is an overview of the certification process:
01. Understand Regulatory Requirements
- Objective: Familiarize yourself with the specific regulatory requirements of the EUDR, including:
- Goods regulated under the EUDR
- Due diligence obligations
- Risk assessment criteria and compliance thresholds
02. Information Collection
Companies must gather and document comprehensive data to demonstrate product compliance. Required information includes, but is not limited to:
- Geographic location data: Latitude and longitude coordinates of the production area
- Production quantity and country of origin: Detailed information on production levels and product origin
- Compliance documentation: Certificates such as land use rights, environmental protection compliance, and more
03. Conduct Due Diligence
- Information Collection: Record detailed data regarding the production process and supply chain.
- Risk Assessment: Evaluate non-compliance risks for each product based on the specific circumstances in the production region and the supply chain.
- Risk Mitigation: Address risks through actions such as independent investigations, obtaining additional compliance documents, or enhancing supplier partnerships.
04. Submit Due Diligence Statement (DDS)
Companies must electronically submit a Due Diligence Statement (DDS) to the registry established by the European Commission. This involves:
- Submitting all collected compliance information
- Conducting a self-assessment
- Receiving a reference number and security token for validation
05. Establish a Compliance Management System
- Objective: Develop a central data collection and management system to effectively monitor and manage supply chain compliance.
- Ensure regular updates and reviews of compliance documents
- Include functions for data storage, monitoring, and reporting
06. Supplier Training and Cooperation
- Collaboration: Work closely with suppliers to ensure they understand and adhere to EUDR requirements.
- Training: Provide training programs to help suppliers enhance their compliance capabilities.
- Audits: Conduct regular compliance checks and audits with suppliers to monitor progress.
07. Prepare for Inspections
- Be Inspection-Ready: National authorities will conduct unannounced checks on operators and traders to verify compliance. Ensure that all compliance data and documents are up-to-date and readily accessible for inspectors.
08. Regular Updates and Reviews
- Continuous Compliance: Regularly review and update compliance procedures and documentation to meet EUDR standards. This includes internal and external audits to assess the accuracy and effectiveness of processes.
List of products covered by EUDR
- Cattle – live cattle, beef and hides
- Cocoa – cocoa beans, cocoa paste, cocoa powder and chocolate products
- Coffee – roasted, unroasted and decaffeinated coffee, and coffee substitutes containing coffee in any proportion
- Oil palm – nuts, kernels, palm oil, glycerine and palm oil-derived fatty acids
- Rubber–natural rubber, gum and all articles of vulcanized rubber, whether hard or not, including tires and clothing
- Soybeans – soybeans, soybean oil and residues, including soybean cake
- Wood – logs, processed wood, wooden furniture, paper and packaging materials
Common Misunderstandings and Solutions for EUDR Compliance
Myth 1: Limited Understanding of EUDR’s Scope
Many companies mistakenly believe that the EU Deforestation Regulation (EUDR) only applies to directly forest-related products, such as timber and paper. In reality, the EUDR encompasses a broad range of goods tied to deforestation, including items like furniture, rubber, and chocolate. If deforestation occurs anywhere along the supply chain for these products, they too fall under EUDR’s jurisdiction.
HQTS Recommends: Companies must thoroughly understand the scope of the EUDR and carefully analyze their entire supply chain. This includes assessing risks not only with direct raw material suppliers but also with second- and third-tier suppliers. Businesses should collaborate closely with suppliers, requiring them to provide evidence of sustainable sourcing to ensure compliance throughout the entire supply chain.
Myth 2: Overlooking Supply Chain Complexity
A product’s supply chain can involve numerous suppliers from different countries and regions, each introducing potential deforestation risks. However, many companies focus only on first-tier suppliers and neglect second- and third-tier suppliers, where risks might be hidden.
HQTS Recommends: Companies should establish a comprehensive traceability system that tracks raw materials back to their origin. It’s essential to maintain open communication with all suppliers and demand transparency about the source and sustainability of materials. In addition, using third-party audits and certifications can help ensure that the supply chain remains both transparent and sustainable.
Myth 3: Absence of an Effective Risk Assessment Framework
Some businesses lack a robust risk assessment mechanism for EUDR compliance, making it difficult to accurately identify deforestation risks in their supply chains. This oversight can result in unintentional non-compliance, exposing companies to legal liabilities and reputational damage.
HQTS Recommends: Businesses should develop a well-structured risk assessment system to thoroughly evaluate all stages of the supply chain. This assessment should factor in elements such as the geographical location of suppliers, procurement policies, and environmental management practices. Based on the findings, companies can create tailored risk management plans and implement targeted measures to mitigate risks.
Myth 4: Abandoning Compliance Due to High Costs
Some companies believe that complying with the EUDR requires excessive resources—manpower, materials, and finances—leading them to abandon compliance efforts altogether. This approach not only exposes businesses to legal risks but also diminishes their competitive edge in the market.
HQTS Recommends: While EUDR compliance does come with certain costs, businesses should recognize the benefits, including enhanced brand reputation, increased consumer trust, and access to new markets. Companies can manage costs by optimizing their supply chains and sharing expenses with suppliers. Additionally, governments and industry groups often provide support and incentives to encourage active compliance with EUDR regulations.
Myth 5: Relying on a Single Compliance Measure
Some businesses rely solely on one method to achieve EUDR compliance, such as signing sustainable procurement agreements or obtaining certifications. However, a single approach is rarely sufficient to guarantee full compliance.
HQTS Recommends: To ensure robust compliance, companies should adopt a multi-faceted strategy. In addition to signing agreements and obtaining certifications, they should invest in employee training, establish monitoring mechanisms, and engage with key stakeholders. By combining various compliance measures, businesses can significantly enhance their EUDR compliance levels.
HQTS EUDR Consulting Services
HQTS provides comprehensive consulting services to help companies establish an effective traceability system in compliance with the EU Deforestation Regulation (EUDR). Our approach includes the following key steps:
Data Collection and Organization
We assist companies in gathering all relevant data from raw material procurement to product sales, including:
- Supplier information
- Raw material sources
- Production and processing records
- Quality inspection reports
- Transportation details
Once collected, we organize and analyze the data to ensure it is both accurate and complete.
Technology Selection and Application
Based on the company’s specific circumstances, we help select the appropriate traceability technology—whether it’s barcodes, QR codes, RFID, or other tools. We also assist in setting up databases or information management systems to store and manage the traceability data efficiently.
Process Development and Optimization
We create detailed traceability processes and standard operating procedures, clearly defining the responsibilities and operational requirements for each step. Additionally, we help optimize existing company processes to ensure the traceability system runs smoothly and efficiently.
Training and Support
Our team provides thorough training for company staff to help them understand the importance of the traceability system, how to operate it, and the precautions to take. We also offer ongoing technical support and consulting services to address any challenges that arise during implementation.
Testing and Verification
We test the traceability system to verify its ability to accurately track the source and movement of products. Based on the test results, we adjust and fine-tune the system to improve its performance.
Additional HQTS Services
Our services extend beyond traceability system setup and include:
- EUDR Regulation Training: Offering in-depth training to help businesses understand the EUDR, including due diligence methods and compliance procedures.
- EUDR Gap Analysis: We identify gaps between your current processes and EUDR requirements, providing actionable recommendations for improvement.
- Due Diligence System Setup: Assisting with the establishment of a due diligence system, including templates for procedural documentation and ongoing support to meet EUDR standards.
