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October 9, 2024 EU Deforestation Regulation; Insights into 12-month delay and recent updates
After extensive international dialogue, scrutiny and input from various stakeholders regarding the complexities and global implications of the EU Deforestation Regulation (EUDR), the EU Commission unveiled a suite of documents on 2 October 2024. These documents, pending approval by the European Parliament and the EU Council, are designed to streamline the adoption and execution of the new regulatory measures:
Five key takeaways from the releases
These clarifications effectively emphasize the need to continue with the preparation for becoming EUDR-compliant. This is based on the reality and complexity of the EUDR, as the objectives of the regulation remain unchanged. As a reminder, consequences of noncompliance could be severe and can include significant fines, temporary exclusion from the EU market and public procurement processes or, in certain countries, personal liability for managing directors (non-exhaustive). Insights beyond the proposed 12-month extension As mentioned above, the guidance and FAQ documents recently released clarify various scenarios and uncertainties, such as:
Despite the extensive additional guidance provided, certain questions of great practical significance (e.g., regarding the types of packaging material and their qualification as "in" or "out" of scope,) remain unanswered. A path to readiness Although the "revised" deadline of 30 December 2025 (still to be approved by the EU Parliament and EU Council) may appear distant, the past year has shown that readiness can only be achieved by taking immediate action, beginning with a comprehensive impact assessment to ascertain the extent to which the EUDR affects the existing business model. While this 12-month "phasing in" period will allow companies to put in place the right supply chain strategy, backed up by effective systems and processes to protect value, companies falling within the scope of the EUDR should consider that it could take them substantial time to achieve traceability across relevant supply chains and to onboard suppliers into a respective system. In this respect, affected companies should consider giving priority to end-to-end solutions fitting into the IT architecture of organizations within and outside the EU over "silo solutions." The recent releases also highlight the overlap between the EUDR and other due diligence legislation, particularly the forthcoming Corporate Sustainability Due Diligence Directive (CSDDD). They clarify that compliance initiatives can be streamlined, and efforts should not be unnecessarily duplicated. Given the EU's dedication to combating climate change and biodiversity loss, with deforestation and forest degradation contributing significantly to these issues, it is reasonable to anticipate that maintaining supply chains free from deforestation and compliant with legal standards will remain a fundamental expectation. Therefore, companies should consider:
For background on the EUDR, listen to the replay of EY webcast, "What EU Deforestation Regulation compliance readiness looks like." EUDR contacts are listed below for those who need additional information or support during their EUDR readiness journey.
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