Introduction to EU Zero Deforestation Act (EUDR)

Against the backdrop of increasingly severe global environmental issues, the European Union has introduced a landmark regulation& mdash; The European Union Deforestation Regulation (EUDR). The bill aims to reduce the reduction of global forest area, promote environmental protection and sustainable development by restricting the supply and export of products related to deforestation and forest degradation in the EU market This bill officially came into effect on June 29, 2023, and was originally scheduled to be enforced on December 30, 2024. However, considering the insufficient preparation time for enterprises, the European Commission announced on October 2, 2024 that the implementation date would be postponed by 12 months. Large enterprises are required to comply with EUDR requirements before December 30, 2025, while the transition period for micro and small enterprises will be extended until June 30, 2026

1. Background and Objectives of the Bill

Over the past few decades, the global forest area has continued to decrease, with a large amount of primary forests being cut down, leading to biodiversity loss and increased greenhouse gas emissions. According to the Food and Agriculture Organization of the United Nations (FAO), between 1990 and 2020, 420 million hectares of forests were lost worldwide, accounting for 10% of existing forests. The EU is the main consumer region for commodities related to deforestation and forest degradation, which are the main drivers of climate change (accounting for 11% of greenhouse gas emissions) and biodiversity loss. The EU hopes to minimize its impact on global deforestation and forest degradation through the implementation of this bill EUDR requires products entering the EU market to comply with strict environmental standards, especially those that may be related to deforestation or degradation, such as soybeans, beef, palm oil, wood, etc. Its core objective is to ensure that goods circulating in the EU market do not involve deforestation or degradation after December 31, 2020. Through strict due diligence and supply chain traceability mechanisms, we promote companies to fulfill their social responsibilities and protect forest resources

II. Core Points of the Bill

01 Scope of application

EUDR covers a variety of products related to deforestation and degradation, including beef, cocoa, coffee, palm oil, rubber, soybeans, and wood, as well as derivatives of these products such as chocolate, car tires, and wooden furniture

02 Due diligence requirements

Enterprises must establish a due diligence system and conduct a detailed review of their supply chain to ensure that the products involved do not originate from illegally deforested land. This includes understanding the sources of suppliers and assessing their impact on the environment. Ensure that the products in its supply chain comply with EUDR requirements

03 Transparency and Traceability

Enterprises need to provide clear and verifiable data, as well as detailed information, to prove that their products have not caused forest destruction during the production process. In addition, an effective tracking system should be established to collect geographic coordinate information of the production location of goods, in order to achieve full traceability of the supply chain

04 Compliance Deadline

For existing products, enterprises need to meet new standards within the prescribed period; For new products, it is necessary to comply with EUDR regulations from the beginning

05 Punishment Measures

Enterprises that fail to comply with EUDR will face severe penalties, including but not limited to fines, product recalls, and sales bans

3. What impact does it have on Chinese companies

As the world's largest commodity trading country, China has close trade relations with the European Union. The implementation of the EUDR Act will pose significant challenges to relevant Chinese enterprises

01 Cost increase

Enterprises need to invest a significant amount of resources in supply chain traceability and due diligence, which will lead to increased costs

02 Trade obstruction

Enterprises that cannot meet EUDR requirements will have their products unable to enter the EU market, resulting in trade barriers

03 Decreased competitiveness

In the face of green trade barriers, some Chinese companies may lose their competitive advantage

4. How can Chinese companies cope with the challenges of EUDR

Faced with the challenges brought by the EUDR Act, Chinese enterprises need to actively respond and turn challenges into opportunities:

01 Strengthen supply chain management

Establish a sound supply chain traceability system to ensure transparency and traceability of the supply chain

02 Conduct due diligence

Conduct strict due diligence on suppliers to ensure they comply with the requirements of the EUDR Act

03 Seeking third-party certification

By obtaining sustainable certifications such as FSC^® RSPO and others demonstrate the sustainability of the product

04 Strengthen communication with EU customers

Proactively communicate with EU clients, understand their needs, and provide relevant supporting documents

V. Conclusion

The EU Zero Deforestation Act (EUDR) is an important legislative measure taken by the EU to address global climate change and protect biodiversity. Through rigorous due diligence and supply chain traceability mechanisms, EUDR not only promotes the green transformation of the global supply chain, but also provides strong support for global forest conservation. In the context of global sustainable development, the implementation of EUDR also provides new development opportunities for enterprises in various countries, encouraging more enterprises to fulfill their social responsibilities and jointly protect our planet