Diginomica quotes Kerry Stares on the EU Deforestation Regulations

Changes to and delays in the implementation of the European Union’s Deforestation Regulation (EUDR) are reportedly causing confusion amongst organisations around what is already extremely complex legislation.

The legislation includes the forthcoming Packaging and Packaging Waste Regulation, which is due to be applied from mid-2026, with the aim of creating a sustainable circular economy for waste across EU markets. Another is the Forced Labour Regulation, which bans the sale, import, and export of products made with forced labor from EU markets as of 14 December 2027.

The EUDR, meanwhile, bans either the import or export from EU markets of any goods produced using land that was deforested after 31 December 2020. These goods include coffee, cocoa, palm oil, rubber and cattle, and derivatives, such as leather or tyres.

Any organization - no matter where they are based in the world - found to be in contravention could face fines of up to four percent of their total annual EU-wide turnover. Other sanctions include having their products confiscated.

Diginomica explores the EUDR in an article and explains there are steps that organisations' IT leaders to approach the legislation and to manage and mitigate risk, explaining that the key is to take a high level strategic approach to compliance across a wider range of European legislation.

Kerry Stares, Partner & Director of Responsible Business is quoted in the article, and believes it is no surprise that changing the goal posts in this way has angered organisations that have invested heavily in preparing for it - particularly given the Regulation’s complexity and the high stakes involved in non-compliance:

The EUDR say that unless you comply, you can’t bring goods into the EU, so it’s an existential situation…If you’re a stationery company and you have one regulated product ie paper, just keeping that in line with the Regulation will be a significant enough undertaking. But if you have multiple, different regulated commodities and it’s necessary to do due diligence for each supply chain, it’s eye-watering."

Operators may also have to invest in new tech, upskilling, and third-party consultants to ensure they can get over the line themselves. But none of this is either cheap or easy. Kerry continues:

Compliance will entail significant costs, and much of it will have to be in new technology for data collection verification and reporting. It’s a much broader exercise than that, but technology will be key. There are no easy get-outs and doing this properly will cost money, part of which will be investing in supplier relations.

For IT leaders who are only just beginning to tackle the issue, there is no simple step-by-step approach due to the numerous aspects required to ensure compliance happens. As a starting point though, Kerry advises ensuring that the EUDR, along with other supply chain legislation, is on the board’s agenda. This is necessary, she points out, due to the cross-functional nature of the work to be undertaken, which requires that teams from IT and legal to finance all work together effectively.

Step back from pure compliance. If it’s in scope, compliance is important, but you can end up getting a bit lost if the goal posts keep changing. So, explore whether there’s a strategic way to deal with this and to meet other regulatory requirements at the same time. For example, the EU Forced Labour Regulation will prevent companies from selling any goods tainted with forced labor. It doesn’t specify you have to do due diligence, but you’ll need to do it anyway, which means evaluating policies, processes, supplier information etc to ensure you’re spotting and mitigating risk.

This means that designing a specific solution to cope with EUDR without ensuring it is fit-for-purpose elsewhere does not make sense. Kerry continues:

You want it to respond to as many business needs as possible because you don’t want to have to re-invent processes every couple of years. There’ll be some upfront costs now, but that’s better than constantly having to spend more on each Regulation. So, deal with the high-level strategic need rather than narrowing it down to just compliance.

Read the full article in Diginomica here.