Healthy, biodiverse forests provide a variety of ecosystem services such as improving air quality, helping to regulate global rainfall patterns, and mitigating the risks of climate change, as they can store large amounts of carbon.

Deforestation and forest degradation not only release the stored carbon into the atmosphere but also lead to a major loss of biodiversity, desertification, soil erosion and disruptions of water cycles. Hence, forest preservation is one of the top priorities to keep our planet healthy.

The main driver of deforestation is agriculture – beef production alone is responsible for a sheer amount of 41% of deforestation, whereas cropland expansion for soy and palm oil accounts for nearly one-fifth of all clearings. Due to the high demand for agricultural commodities, strong regulations have been long overdue as relying solely on market mechanisms will not effectively address the deforestation problem. Recognising this imperative, the EU has recently enacted a Deforestation Regulation (“EUDR”), applicable as of 31 December 2024, to reduce the EU’s impact on global deforestation and forest degradation. The EUDR covers the main agricultural drivers of deforestation (cattle, cocoa, coffee, palm oil, rubber, soy and wood), as well as many derived products.

Companies trading these commodities must ensure that these are free from deforestation and forest degradation, being produced in accordance with the relevant legislation of the country of production and covered by a due diligence statement. The EUDR states that goods placed on the European market shall not result from recent deforestation, meaning that the land has not been cleared or degraded after 31 December 2020.

One of the key components of the EUDR is the due diligence obligation, mandating that every company ensures traceability back to the specific plots of land. This requires the collection of the exact geographic coordinates for each plot involved. Meeting this requirement might present a great challenge for companies importing or exporting affected goods to the EU markets, especially when suppliers frequently change. One option to comply with the regulation could be the establishment of own control systems. This might involve the deployment of designated personnel at the points of origin to ensure traceability back to the specific plots of land. Instituting own control systems comes with a substantial investment of both human capital and financial resources and can be susceptible to errors.

Because of that, third-party certification such as ISCC (International Sustainability and Carbon Certification) is a solution for companies to mitigate risks related to environmental and human rights criteria, as well as to ensure the accuracy of deforestation analyses. An ISCC certification in combination with the EUDR add-on not only incorporates a deforestation analysis run by the EUDRx tool from GRAS (Global Risk Assessment Services) but also legality checks during the onsite audit and a consolidated reporting for due diligence statements. Moreover, ISCC will provide a digital traceability platform, facilitating seamless transmission of relevant supply chain information, and enabling the export of data for due diligence statements.

But even without certification, advanced remote sensing technology such as the EUDRx tool from GRAS can be used to verify that the geolocation has not been subject to recent deforestation or forest degradation. GRAS runs algorithms that use farm locations (points or polygons), to effectively monitor and manage deforestation risks. It precisely evaluates all pertinent environmental and human rights criteria outlined in the EUDR. Even independent smallholders can collect accurate geographical data through a mapping app provided by GRAS. Without such tools, independent smallholders may struggle to meet EUDR requirements due to a lack of resources and technical know-how.

For companies, the combination of advanced remote sensing technologies with robust certification systems is an excellent tool for effectively implementing the EUDR. However, as third-party certification is not mandatory, establishing own control systems with additional staff and resources might be the only solution for companies aiming for an inhouse solution. Either way, companies need to act now to be able to meet the new requirements when the deadline of the EUDR approaches.