EUDR Global Impacts on Producing Countries

What must producers and farmers actually do?

The European Union has issued the EU Deforestation-free Regulation (EUDR) with the objective to reduce its impact on deforestation and forest degradation. The EU market accounts for 10% of global deforestation, with palm oil and soya being the most impactful commodities. Together, they are responsible for 66,8% of EU-caused deforestation worldwide:

  • oil palm 34,0 %
  • soya 32,8 %
  • wood 8,6 %
  • cocoa 7,5 %
  • coffee 7,0 %
  • cattle 5,0 %
  • rubber 3,4 %

EUDR came into force on 29th June 2023 and will come into effect from 30th December 2024. It is part of a broader initiative, called the European Green Deal, which consists in a set of proposals to cut emissions by at least 55% before the end of 2030 and to reach net-zero emissions by 2050. EUDR has being acclaimed as a break-through legislation that is expected to have a strong positive influence on the environment and to be the forerunner for other similar initiatives in the rest of the world.

However, it has obtained some criticism from producing countries, international industry groups and lobbies, as it has also brought several complications to global trade, which is already by itself a vast and intricate web connecting economies and cultures around the world. It consists of a complex network of transactions involving the exchange of goods, services, and capital across international borders.

The introduction of EUDR implies more administrative and operational activities that will need to be sustained by the global supply chains and in its aftermath will generate related costs that are expected to be covered by decreasing producers’ or operators’ margins or increasing consumer prices.

The EUDR official text has been written with operators and traders in mind. As operators and traders have not enough knowledge nor reach to comply with EUDR alone, upstream suppliers need to be involved, but EUDR does not explicitly state what is required from them. This guide aims at explaining as in depth as possible the impacts of the EU Deforestation-free Regulation on the producers of the relevant commodities, providing some more clarity.

What is EUDR all about?

The EU Deforestation-free Regulation sets out clear obligations for companies that want to import to, export from, place or make available in the European market specific goods (Article 3). The obligations are:

  • Deforestation-free: The production of goods did not cause deforestation or forest degradation after 30th Dec 2020, regardless of whether the deforestation or forest degradation was legal according to the applicable legislation in the country of production.
  • Legally produced: The goods are produced in accordance with the relevant legislation of the country where the production took place.
  • Due Diligence: The goods are covered by a due diligence statement, that is based on a due diligence risk assessment, to be shared with authorities prior to the shipment of the concerned goods to the European market.

But what does this mean for producers?

To answer this question, we need to get a clear understanding of the terms used in the legislation.

According to EUDR official text, the term “deforestation” refers to the conversion of the forested land to agricultural fields, whether this transformation is caused by human activities or occurs naturally. In addition, “forest degradation” consists of fundamental changes to the forested land, either through the conversion of primary forests or naturally regenerating forests into plantation forests or other wooded land, or through the conversion of primary forests into planted forests.

Producers that converted their land after 30th Dec 2020 into agricultural fields, planted forests or plantation forests are considered to have caused deforestation and forest degradation. It follows that relevant commodities cultivated in such plot lands are not compliant with EUDR and therefore cannot enter the European market.

definitions of EUDR-related terms concerning deforestation, forest degradation and types of forests

Who are the most impacted producing countries?

EUDR mainly affects international countries producing palm oil, soya, wood, cocoa, coffee, beef and rubber. The palm oil market, which was worth 79.5 million metric tons in the marketing year 2023/2024, is dominated by Indonesia with 59% share of total production. Malaysia is following, with a share of 24%. Other producers such as Thailand, Colombia and Nigeria account for 4%, 2% and 2% respectively.

Soy beans are mostly produced in Brazil, which generates 39% of the global production in the marketing year 2023/2024. Second place goes to United States with 29% and third place goes to Argentina with 13%. In the same period, the total production of soybeans has been 396.7 million metric tons.

Cocoa market is led by Ivory Coast, with 1,800k metric tons, chased by Ghana with 580k metric tons, Ecuador with 430k metric tons, Cameroon with 300k metric tons, Nigeria with 270k metric tons, Brazil with 220k metric tons, Indonesia with 160k metric tons, and Papua New Guinea with 42k metric tons, for an estimated total production in the crop year 2023/2024 between 3.8 million metric tons to 4.45 million metric tons.

Brazil is also the top coffee producer with 39% of the total share of production. Vietnam ranks second with 16% share of total production, while other countries like Colombia, Indonesia and Ethiopia are responsible for 7%, 6% and 5% of total production respectively. In the marketing year 2023/2024, global coffee production accounted for 171.4 million of 60-kilos bags.

Concerning beef, US enjoys 20% share of total production, followed closely by Brazil (18%) and a bit further down by China (13%) and Europe (11%). The total production for the marketing year 2023/2024 is worth almost 60 million metric tons.

With a production ranging from 4.5 million to 5 million metric tons, Thailand is the first producer of natural rubber in the world. Indonesia is the second largest producer, worth 3.12 million metric tons, while Vietnam comes in third position with 1.2 million metric tons. Other important producers are India (749k metric tons), China (749k metric tons), Ivory Coast (730k metric tons),  Malaysia (470k metric tons), Philippines (430k metric tons), Cambodia (374k metric tons) and Myanmar (260k metric tons). Other countries produce 1,5k tons of natural rubber all combined, reaching a total production of 12,8 million metric tons in 2021.

FAOSTAT 2022 statistics on wood production confirm that the top producer is China, followed by the United States, Brazil, India and Russia. The data refer to the whole range of wood products, which can be either measured in cubic metres or in tonnes. The table shows the amounts produced by the industry leaders, with the total production in cubic metres and the total production in tonnes. The last column combines the two totals merely for ranking purposes. The wood products measured in cubic metres and in tonnes are the following:

  • Wood products measured in cubic metres: wood fuel, sawnwood, veneer sheets, plywood, sawlogs and veneer logs, pulpwood, particle board, hardboard, wood chips and particles, wood residues, other industrial roundwood, OSB, MDF/HDF, other fiberboard.
  • Wood products measured in tonnes: chemical, semi-chemical and mechanical wood pulp, wood charcoal, wood pellets, briquettes and other agglomerates, recovered post-consumer wood and paper, printing and writing papers, household and sanitary papers, newsprint, case materials, wrapping papers, cartonboard, other paper and paperboard.
Table with total production of wood-related products and ranking of top producers

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What are the requirements for companies in producing countries?

Although both operators and traders in European countries are highly impacted by EUDR, the legislation affects the entire supply chain, as it requires that any components of the goods entering and being traded in the European market – from the raw materials to the final products – are deforestation-free.

We discussed the generality of EUDR compliance here. In this other blog post, you can find the detailed description of the EUDR obligations provided to operators and traders.

Suppliers in producing countries are impacted due to the fact that they supply relevant commodities to the operators. On one hand, companies subject to EUDR must provide a due diligence statement, based on a due diligence system, to authorities upon request. The due diligence system comprises three steps:

  • Data Collection: Gather information regarding the supply chain of your products, including details on geolocations and the timeframe of primary agricultural or forestry production.
  • Risk Assessment: Evaluate the collected information to gauge the risk associated with your products concerning deforestation, forest degradation, or illegality, including human rights considerations. Risks may vary from non-negligible to negligible or no risk. In cases of non-negligible risk, the company must address identified risks before introducing the goods to the market. Conversely, if negligible or no risk is determined, the goods comply with EUDR standards and can be marketed.
  • Risk Mitigation: Implement comprehensive measures aimed at reducing non-negligible risks to negligible or no risk levels. These measures may encompass acquiring additional information, conducting independent surveys, laboratory analyses, field audits, supplier training, and interventions within the supply chain.

On the other hand, companies do not have direct access to this kind of information. If they did not make efforts towards transparency over the years, or put in place a system that enabled them to control and monitor the entire supply chain, they are unlikely to be able to accomplish due diligence on their own. This is where the upstream suppliers and producers come in help. Let’s understand in more details how they are impacted and their specific requirements.

Data Collection: how are producers affected?

According to EUDR, the type of information that companies must collect and examine is the following.

  • Information on the product, such as description, trade name, product type, country of production, quantity (in kilograms of net mass, net mass, volume or number of items). Same information must be provided for all other relevant commodities or products contained or used in their production.
  • Geolocation data of all production plots for the commodities used in the product, along with production dates or time ranges.
  • Contact details of all suppliers and recipients, including in both cases the name, the postal address, and the email address.
  • Assurance that the products are deforestation-free, backed up by conclusive and verifiable evidence, as well as evidence of compliance with relevant legislation in the country of production, including rights to land use, is required for all relevant commodities.

The information listed above is quite straightforward, but it can still become demanding if the level of fragmentation and dynamism of the supply chain is elevated. For instance, companies in the coffee industries usually source the coffee beans from producing countries and then they roast them in Europe, creating brand-specific blends. A big coffee company can easily expect around 2,500 shipments per year of coffee beans, sourced from thousands of producers, all coordinated by more than one ‘collector’. Of course, not every producer will contribute to every shipment, but this certainly gives an idea on the degree of complexity operators and traders have to deal with.

The collection of such information implies deep collaboration from the producer side. The same applies with data regarding the evidence that products are deforestation-free and legally compliant. In this case, proof is gathered normally through legal permits – in the case of the wood sector they could consist in harvest permits, logging permits, or timber extraction permits. On top of that, producers must provide also land use and ownership rights, proof of product taxes and additional licenses, as well as  exemptions based on the forestry legislations of the country of production.

Producing countries may be home to indigenous people still living in the natural areas. EUDR aims to prevent the mistreatment of such communities and requires also additional documentation concerning their social welfare that producers must submit.

Geolocation data

Another aspect that might require significant effort is the collection of geolocation data. Geolocation data refers to information that identifies the geographical location of the land plots. It must be provided in a shapefile or as point coordinates for plots smaller than 4ha, and can be collected through various means, including GPS (Global Positioning System).

There are mainly two ways to collect geolocation data , i.e. on the land plots. The first one consists of using mobile apps or professional GPS devices. Both work similarly, but mobile phones use location data supplied by a radio chip that allows them to receive signals from satellite navigation systems and determine their location. The second way takes advantage of GIS (Geographic Information System) applications, which are software programs that enable users to capture, store, analyse, manage, and present spatial or geographic data. Most common GIS applications are ESRI, Google Maps, Google Earth and geoJSON.io.

Risk Assessment: how are producers affected?

Once the information is collected, there must be an IT system in place or a designated person that makes sense of all the data. The result must be either that no or negligible risk exists, or that non-negligible risk has been detected. There are different ways to approach this step, from human-driven verifications to AI-powered procedures.

In Global Traceability Solutions, for instance, we mix automation with human expertise. We believe that AI is not yet qualified to identify with confidence the possible risks, which can expose the company to compliance failure. Our team, instead, has been working on similar documents while providing services in EU Timber Regulation compliance and has a well-structured process in place to ensure that data is thoroughly verified, although still taking advantage of smart automations.

It can occur that documents are lacking clarity, accuracy, and coherence. It is at this point that suppliers are contacted for further clarification and for submitting additional information. The higher is the quality of data provided, the more efficient is the risk assessment. Collaboration is once again key to save time and effort for all stakeholders involved.

Risk Mitigation: how are producers affected?

The third and last step that affects companies in producing countries is risk mitigation. If the risk assessment finds non-negligible risk, the operator or trader must intervene in the supply chain to reverse such result. Plenty of options are available, such as gathering additional information, conducting independent surveys, performing laboratory analyses, and carrying out on-site audits. These measures also include training suppliers and making adjustments to the supply chain, including selecting alternative suppliers or enhancing capacity through investments and development initiatives in the case of serious deforestation risk.

Suppliers should try to anticipate EUDR implementation and start working to ensure that their production does not generate deforestation or forest degradation. This could imply a shift of the production processes towards more sustainable practices, improving efficiency and productivity without the need to clear more land to satisfy growing demand. Smallholders can see a real opportunity to get ahead of competitors.

https://rspo.org/For instance, palm oil is already the most productive crop among the vegetable oils, offering greater yields for lower cost of production. By applying best practices of sustainable planting divulged by non-profit organisations such as the Roundtable on Sustainable Palm Oil (RSPO), producers can advance their plantation management practices and increase the performance of the plantings, while helping protect the environment and accessing a better income and livelihood.

RADIX Tree is an intuitive, flexible solution for EUDR compliance

At Global Traceability Solutions, we solve regulatory and supply chain complexity with a simple yet effective solution, RADIX Tree.

RADIX Tree is a digital platform that combines flexibility with smart automation, while being able to manage simultaneously multi-compliance frameworks. It allows you to map your entire supply chain, offering you full control of your order pipelines and traceability data. If you want to learn more about how RADIX Tree can help you navigate EUDR compliance, reach out to us for a free Demo.

Dashboard in RADIX Tree and extra windows with examples of platform