From Forest to Market: Understanding and Preparing for the EU Deforestation Regulation (EUDR)

The European Union has taken a decisive step towards ensuring global sustainability in trade through the adoption of the EU Deforestation Regulation (EUDR). This regulation aims to prevent products linked to deforestation or forest degradation from entering or leaving the EU market. Its purpose is not only environmental but also economic: to drive sustainable global production,  strengthen legal trade frameworks, and promote corporate accountability in supply chains. 

The regulation reflects the EU’s acknowledgment that its consumption patterns have a significant impact on global forests. Agricultural expansion for commodities such as soy, palm oil, coffee,  and cattle accounts for a large share of deforestation worldwide. The EUDR, therefore, represents a shift from voluntary sustainability initiatives to a binding legal requirement. 

From 30 December 2025, large EU companies will be required to prove that their goods are deforestation-free, legally produced, and fully traceable. Micro and small enterprises will have until 30 June 2026 to comply. While these dates may appear distant, compliance will require significant operational restructuring, technological investment, and data transparency. For businesses, the EUDR is both a compliance challenge and a strategic opportunity to strengthen trust, integrity, and resilience within their global supply chains. 

Scope and Who is Affected 

The EUDR applies to any operator or trader that places, makes available, or exports covered products on or from the EU market. This includes EU-based companies, importers, exporters, and equally, non-EU companies that wish to sell into the European market. Compliance obligations are therefore not limited to EU producers: a company in Brazil exporting soybeans, a furniture manufacturer in Vietnam, or a coffee cooperative in Ethiopia – all must meet EUDR standards if their products are destined for Europe. 

The regulation covers seven core commodities that are identified as key drivers of deforestation:  cattle, cocoa, coffee, oil palm, rubber, soy, and wood. Its scope extends further to derived products – items that contain, have been produced from, or include components of these commodities. These include chocolate, leather goods, furniture, paper, pulp, tyres, and even  cosmetic products that use palm oil derivatives. The inclusion of derived products means that  even companies not directly handling raw materials must ensure traceability through their entire  supply chain. 

The regulation has global reach: it applies regardless of where the goods are produced, so long as they are placed on the EU market. This means that international companies trading with EU  partners will need to prove deforestation-free sourcing and legality, even if they themselves are  based outside the EU. The regulation will therefore reshape international supply chains and procurement practices, as compliance will become a precondition for market access. 

Core Obligations Under the EUDR 

At the heart of the regulation lies a comprehensive due diligence system built on three interdependent pillars: deforestation-free sourcing, legality, and traceability. Each of these must be demonstrated and documented before a product can enter the EU market. Deforestation-free sourcing means that the products must not originate from land that has been deforested or degraded after the cut-off date of 31 December 2020. 

The definition of  “deforestation” under the EUDR is broad, encompassing both the conversion of forest to agricultural land and forest degradation caused by unsustainable logging or land-use change. Legality requires that the commodities and products comply with all relevant laws of the country of production, including those relating to land tenure, environmental protection, labor, human rights, and tax compliance. 

This element reinforces respect for national legal frameworks, ensuring that international trade supports legitimate production systems. Traceability is perhaps the most technically challenging pillar. Companies must be able to trace every product back to its exact point of origin. This means collecting geolocation coordinates of every plot of land where the commodities were produced. The data must be accurate and verifiable, enabling authorities to cross-check whether deforestation or forest degradation occurred in that location after 2020. 

In addition to these three obligations, the EUDR imposes a risk-based due diligence system.  Before placing a product on the market, companies must conduct a detailed risk assessment to determine whether there is any risk of non-compliance. This involves assessing factors such as the region of origin, the governance situation in that country, the reliability of suppliers, and the use of certification or satellite data. 

If a company identifies any risk, it must apply risk mitigation measures before marketing the product. Such measures may include seeking additional documentation, commissioning independent audits, implementing supplier training, or switching to verified alternative sources. Once the due diligence process is complete, the company must submit a due diligence statement through a central EU information system confirming compliance. All evidence must be stored for at least five years and made available for inspection. 

Timelines and Implementation Phases 

The EUDR introduces a phased approach to compliance to allow businesses time to adapt. For large enterprises, compliance will become mandatory from 30 December 2025. For micro and small enterprises, the obligations apply from 30 June 2026. 

However, this apparent grace period for smaller businesses may be misleading. Many smaller suppliers serve as vendors to larger companies, which must already demonstrate compliance by  2025. Consequently, suppliers and intermediaries across the value chain will feel the pressure to align well before their own deadline. 

Enforcement will be carried out by national competent authorities in each EU member state.  These authorities will be responsible for conducting inspections, verifying documentation, and performing both random and risk-based checks. They will also oversee corrective measures and sanctions. Penalties for non-compliance are severe, including the confiscation of goods, the suspension of market access, financial penalties of up to 4% of annual EU turnover, and public listing as a non-compliant operator. 

The European Commission will maintain a central information system that records all due diligence statements and facilitates cooperation between national authorities. The Commission will also monitor global deforestation data, maintain a benchmarking system to identify high-,  standard-, and low-risk countries, and update the regulation as needed. Businesses sourcing from high-risk countries can expect heightened scrutiny and more stringent due diligence obligations. 

How Businesses will be Affected and What They Need to do to Prepare 

The EUDR will reshape how companies manage procurement, compliance, and risk across their global operations. To meet its requirements, businesses must begin with a comprehensive mapping of their supply chains, identifying every supplier, intermediary, and country of origin. This mapping must extend beyond first-tier suppliers to include farms, plantations, and forests from which the relevant commodities are sourced. 

Once supply-chain visibility is established, companies must develop an internal due diligence framework that integrates EUDR compliance into procurement and risk management processes.  This includes establishing protocols for geolocation data collection, implementing contractual clauses requiring suppliers to provide verifiable data, and ensuring data accuracy through satellite or GIS verification.

From a strategic perspective, the EUDR provides an opportunity to integrate environmental due diligence into broader corporate sustainability frameworks. Aligning EUDR systems with ESG, CSRD, and CSDDD requirements allows businesses to streamline reporting, reduce duplication, and position themselves as transparent, sustainable market leaders.  

Practical Challenges and Risks 

Implementing the EUDR will be complex. The requirement for detailed geolocation data and complete supply-chain traceability presents logistical and technological challenges, especially for companies operating across multiple jurisdictions. In many producing countries, reliable mapping data may not exist, and smallholder farmers may lack the capacity to provide geolocation coordinates or legal proof of land use. 

Data validation and accuracy present further complications. Companies must ensure that geolocation coordinates correspond to actual production areas and that satellite imagery or mapping tools confirm no deforestation occurred after the cut-off date. This requires investment in new digital systems, potentially including blockchain-based traceability, remote-sensing technologies, and supplier verification platforms.

There are also legal and commercial risks. Suppliers unable or unwilling to provide the necessary data may lose access to EU buyers, causing supply disruptions and increased costs. Smaller suppliers in developing countries are particularly vulnerable to exclusion, which could have socioeconomic consequences that ripple across global markets. 

On the enforcement side, authorities are expected to apply rigorous oversight, especially for commodities sourced from high-risk regions. Companies found to be non-compliant could face product seizures, financial penalties, reputational damage, and loss of market access. Given the EU’s emphasis on transparency, enforcement actions may also be made public, amplifying reputational risk. 

Conclusion: The Road to 2025–2026 

The EUDR is not merely an environmental regulation – it is a fundamental restructuring of global trade ethics and accountability. By requiring proof of deforestation-free, legal, and traceable sourcing, the EU has set a new global standard for responsible commerce. The implications extend far beyond the European market. For companies worldwide, compliance will soon become a condition for access to the EU’s vast consumer base. Businesses that act early – mapping their supply chains, gathering data, revising contracts, training staff, and establishing documentation systems – will not only avoid compliance risks but also position themselves as pioneers of transparent and sustainable trade. 

The countdown to 2025 has already begun. The road to compliance will be complex, but it also offers an opportunity: to rebuild supply chains that protect forests, respect people, and reinforce the integrity of international trade. The EUDR marks the beginning of a new era where sustainability, legality, and business success are inseparable – and where companies that lead on all three will define the future of global commerce.

Source: European Commission - Regulation on Deforestation-free Products, Regulation (EU) 2023/1115