• Deforestation-free requirements for supply chains are popping up left and right, causing global companies to look for solutions.
• Supply chain documentation, data, and reporting will all be required for in-scope companies to avoid costly fines and reputational damage.
• Supply chain traceability solutions present the best way forward for companies to get a handle on their supply chains while proving deforestation- and forced labor-free requirements.

“30 percent of emissions from industry and fossil fuels are soaked up by forests and woodlands. Yet every year the world loses 10 million hectares of forest. Deforestation and forest degradation accounts for 11 percent of carbon emissions.” — UN Environment Programme

Protecting forests is often seen as key to protecting the future of both people and planet. Global forests are home to 80% of the world’s biodiversity and support the livelihoods of 1.6 billion people. Estimates show that protecting and restoring forests could help us mitigate 37% of greenhouse gas emissions required to stabilize global warming.

In an effort to help curb rampant deforestation, governments around the globe have begun to adopt standards and requirements that companies sourcing commodities typically linked to deforestation must follow. 

In this guide, we cover the latest deforestation-free regulations and how companies can achieve regulatory compliance to do their part in forest preservation throughout their operations.

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What is a deforestation-free supply chain?

A deforestation-free supply chain means a supply chain whose sourcing doesn’t contribute to harming or removing forests. For example, a coffee or cocoa company whose farmers use regenerative practices and farm on lands without significantly altering the tree coverage.

A deforestation-free supply chain means a supply chain whose sourcing doesn’t contribute to harming or removing forests. Now that can be difficult to ascertain: who decides what is the definition of forest? Is harvesting coffee from a plot with shade trees considered to harm ‘forests’?

While the concept and definition of a deforestation-free supply chain isn’t new, strict and wide-reaching regulatory requirements and legal implications for companies are.

The latest regulations require companies to get a handle on their supply chain operations and gather the data points necessary to publish yearly reports that prove deforestation-free sourcing.

Top deforestation-free regulations in 2024 and beyond: EU Deforestation-free and UK Deforestation Due Diligence.

EU Deforestation-free Regulation (EUDR) 

“[EUDR prohibits placing] relevant products on the EU market, or [exporting] them from the EU, unless they are: 'deforestation-free'; produced in accordance with the relevant legislation of the country of production; and covered by a due diligence statement indicating no more than a negligible risk of non-compliance.” - White & Case

The EU Deforestation-free Regulation (EUDR) is a groundbreaking policy that aims to reduce carbon emissions by ensuring that products sold and consumed in the EU have not been produced in a way that degrades forests.

The regulation affects seven commodities (i.e., cattle, cocoa, coffee, oil palm, rubber, soya, and wood) as well as many of their derived products (e.g., meat products, leather, chocolate, coffee, palm nuts, palm oil derivatives, glycerol, natural rubber products, soybeans, soy-bean flour and oil, fuel wood, wood products, pulp and paper, printed books).

The EUDR applies to goods produced on or after June 29th, 2023, and goes into full effect for mid- to large-sized businesses from December 30th 2024, and June 30th 2025 for micro or small businesses.

Central to the EUDR is gathering the data and documentation necessary to power yearly reports that prove compliance, and prepare companies for potential random due diligence checks.

Initially, the EUDR appeared to require batch-by-batch transaction-level data from the farm location onward. More recent information about how the regulation will be interpreted allows for reporting in 'excess' - i.e., more polygons than actually contributed to the shipment. For example, you know there are 500 polygons at this coop, so you just  assume that what's in this one container could have come from any and all of these 500, so you report them all.This reduces the amount of traceability data needed, but still requires you to go all the way back to the source. 

A valid concern regarding the EUDR is the massive amounts of data that will have to be handled and reported via the due diligence statement. Traceability tools (such as BanQu, but we’ll dive into this topic later) can help you gather the essential data points and structure them to enable easier reporting for the due diligence statement.

UK Deforestation Due Diligence Regulation (UK DDD)

“This is [our] flagship measure to deliver on the commitment made by the UK and over 140 other countries at COP26 in Glasgow to halt and reverse deforestation by 2030.” - UK Parliament

The UK deforestation due diligence regulation (UK DDD) is, in essence, the UK’s version of EUDR. Similar to the EUDR, it prohibits affected UK businesses from using illegally produced forest risk commodities (i.e., cattle, cocoa, coffee, oil palm, rubber, soya, and wood) and their derivatives (e.g., meat products, leather, chocolate, coffee, palm nuts, palm oil derivatives).

In-scope companies include larger businesses with an annual turnover of 50 million+ euros. Businesses that use 500 tonnes or less of each commodity per year can apply for exemption.

The UK DDD requires in-scope companies to establish a due diligence system for each commodity, and it requires annual reports — part of which will be publicly published to enhance transparency — on due diligence efforts.

The implementation timeline will likely follow closely behind the EUDR, but a specific timeline has yet to be announced. 

Recommended steps to achieving deforestation-free supply chain compliance.

1. Familiarize yourself deeply with relevant regulatory details and - if applicable - consult your general counsel or compliance department.

Because deforestation-free regulations affect different types of companies differently (e.g., annual revenue, size, commodities, etc.), be sure to review the regulations in detail to set your company up for success. If your company has a legal, compliance, or general counsel department or partner, connect with them as soon as possible to legally confirm potential risks for your business.

2. Conduct a supply chain risk assessment to identify your highest-risk commodity or product.

Depending on the nature of your business and supply chain, you may deal with one or more high-risk commodities affected by deforestation-free regulations. Conducting a supply chain risk assessment to identify your highest-risk commodity or product can help you start small and tackle your highest risks first.

If you need support conducting a risk assessment, schedule a complimentary risk assessment with our expert team.

3. Choose a partner and/or system to help get you the data you need for required documentation.

Due diligence is all about documentation and including the right data to back up claims. Even for the largest companies, ensuring you have the right data to power your documentation can be a large lift. Choosing a traceability platform and supportive partner can help with both data required for compliance and reporting, and the implementation and tech required to reliably grab that data from your value chain, such as:

• Geo-located farm data (polygons for all farms over 4 hectares/HA);
• Deforestation-free verification (BanQu integrates with various sources, such as satellite imagery, and can help you identify the right one for your business);
• Due diligence social metrics (in line with local regulations)

4. Evaluate your compliance processes yearly (at least)

With due diligence regulations on the rise, and expected expansions in scope, evaluating your compliance processes at least once a year will ensure you're staying up-to-date on documentation and data requirements. Consistency will also help you prepare for randomized third-party audits. In line with choosing a system to get you the data you need, working with a traceability system that can adapt to requirements as you grow is crucial.

Balancing people and planet: Tackling deforestation-free and forced-labor free supply chains.

“The EUDR’s scope extends beyond deforestation. It also requires due diligence statements to include information attesting that products produced by suppliers have complied with supplying countries’ land-use, labor and human rights laws, including local Indigenous communities’ rights.” - S&P Global

Possibly one of the most intriguing and important aspects of the EUDR specifically, is the stipulation that in addition to proving deforestation-free status, companies must ensure they are complying with local labor and human rights laws. Meaning, they must also provide proof that their supply chain is free of forced labor and human rights abuses. Reliably tracking both social and environmental measures can be tricky, especially in complex value chains. But with the right traceability solution and partner, it can be much simpler.

Beyond compliance: BanQu helps you seamlessly track and prove deforestation-free supply chain compliance, regardless of regulatory shifts.

There are a lot of solutions on the market today that help with satellite imagery, social impact metric tracking, or supply chain visibility, but few are able to support you with all three. BanQu is a supply chain visibility solution that helps you go beyond compliance, gaining the visibility and data you need to the first mile, so you can stay ahead of the compliance curve while unlocking value across your entire supply chain. Additionally, BanQu’s team of experts provides complete on-site implementation and training of our system, with ongoing support to ensure your sustainability reporting is both reliable and a breeze. Schedule a consultation call with one of our deforestation-free compliance experts, today.

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