A new environmental regulation from the European Union (EU) will require companies involved in the trade of certain goods to provide more detailed information about their supply chains. The EU Deforestation Regulation (EUDR), adopted in 2023 and set to take effect in 2025, mandates that businesses selling or trading specific commodities in the EU must ensure that their supply chains are free from deforestation and environmental degradation.
Under the EUDR, which covers commodities such as cattle, cocoa, coffee, palm oil, rubber, soy, and wood, companies will be required to collect geographic coordinates of the plots of land where these products are produced. This is part of a broader effort to reduce the environmental impact of these commodities, which contribute significantly to global deforestation.
The regulation applies to all businesses selling or trading these commodities in the EU and requires them to perform due diligence to confirm that their suppliers are not linked to deforestation or other environmental abuses. The mandate also stipulates that companies ensure their products comply with local environmental protections and labor laws.
Companies that fail to comply with the new regulations may face penalties, including fines of up to 4% of their EU turnover or temporary restrictions on trading in the EU market.
To meet these requirements, many companies are turning to geographic information system (GIS) technology to map and monitor their supply chains. GIS tools allow companies to track the location of mills, factories, and farms, helping them assess risks related to deforestation and environmental sustainability.
The EU Deforestation Regulation is part of the broader European Green Deal, which aims to reduce the bloc’s environmental footprint and curb global deforestation linked to its consumption. According to the European Commission, products consumed in the EU are responsible for around 10% of global deforestation.
In addition to the EUDR, the EU is preparing for the implementation of the Digital Product Passport (DPP) regulation, which will require products sold in the EU to include virtual labels containing details about their origin, materials, and manufacturing processes. While the specifics of the DPP enforcement are still being finalized, businesses are encouraged to start preparing for both the DPP and EUDR mandates by centralizing supply chain data and adopting traceability technologies.
With increased scrutiny of global trade practices and growing demands for transparency, companies are investing in systems to improve visibility into their supply chains, helping ensure compliance with new regulations while addressing environmental and social challenges.
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