Mastering EUDR compliance (2)

In our previous blog post, we introduced the EU Deforestation Regulation (EUDR) and provided ten questions to help you gain a preliminary understanding of what EUDR entails. Today, we want to dive deeper and outline essential steps businesses need to take to prepare for these new regulations.

The EUDR puts businesses trading in forest-risk commodities like wood, palm oil, and soy under the spotlight, demanding rigorous measures to ensure their supply chains are deforestation-free. This regulation affects a wide range of sectors, requiring them to align with stringent EU standards. Below, we offer a detailed guide on how businesses can effectively prepare for EUDR compliance.

When reading about the EUDR is important to have in mind that while we outline general steps to prepare for EUDR compliance, each business must consider specific rules applicable to their operations and industry. Always tailor your compliance strategy to reflect the unique aspects of your business and the specific requirements of the EUDR.

Step 1: Inventory and Scope Determination

To ensure compliance with the EU Deforestation Regulation (EUDR), begin by conducting a comprehensive inventory of all the commodities and products your business handles that are within the scope of the EUDR. This regulation impacts a variety of forest-risk commodities including wood, rubber, palm oil, soy, beef, coffee, cacao, and their derivatives.

Key Points to Consider:

- Compliance Requirements: It’s crucial to remember that certain commodities, such as wood, must adhere to specific standards beyond legal and deforestation-free status; they must also be degradation-free.

- Scope Verification: Refer to Annex I of the EUDR to verify whether your products are covered. This annex will detail which products, including derived products like wood pulp, paper, and new pneumatic tires (in the case of rubber), fall under the regulation.

Product Evaluation:

To determine whether a specific product is within the scope, assess whether:

1. The product is made from one of the covered commodities.

2. The product uses one of the HS codes specified in Annex I.

If both criteria are met, the product is subject to EUDR regulations. If only one, or neither criterion is met, then the product is not covered by the EUDR.

Step 2: Due Diligence

To comply with the EU Deforestation Regulation (EUDR), it's critical to establish a robust due diligence to meet the specific requirements set by the regulation.

Key Components of an Effective Due Diligence:

- Information Collection: Develop a process to gather detailed data on the origin of all commodities within the scope of the EUDR. This includes collecting geolocation details and the exact times of production. Such precise information helps trace the commodity back to its source, ensuring transparency and verifiability.

-Risk Assessment: Utilize the collected data to conduct thorough risk assessments. Analyze this information to identify any potential risks related to deforestation and legal non-compliance. This step is crucial for understanding the specific risks associated with each segment of your supply chain and preparing for any necessary interventions.

- Risk Mitigation: Based on the outcomes of your risk assessments, implement targeted strategies to mitigate these risks to negligible levels. This could involve adjusting supply chain practices, engaging more closely with suppliers, or introducing new compliance measures within your operations.

- Regulatory Requirements: The EUDR imposes stringent due diligence obligations on businesses to prevent deforestation. Companies must demonstrate that their products are sourced from land that has not been subject to deforestation after December 31, 2020. Additionally, all products must comply with the legal frameworks applicable in their country of production. This dual requirement of legality and deforestation-free verification underscores the need for a due diligence system that is both rigorous and adaptable to ongoing legal and environmental challenges.

Step 3: Collaborate with Your Supply Chain Partners

Engaging your supply chain is a vital step toward ensuring compliance with the EU Deforestation Regulation (EUDR). Effective collaboration with your suppliers helps establish a clear and unified approach for meeting the stringent EUDR standards.

Key Areas of Focus in Supplier Collaboration:

- Early Communication: Initiate discussions early with your suppliers to clarify the specific types of information you will need under the new regulations. This proactive approach helps flag any potential data or information gaps and sets expectations clearly from the start.

- Detailed Information Sharing: Ensure that all parties agree on transaction details such as the volume of products, their origins, the timing of harvests, and the species involved. This information should be as precise as possible to comply with EUDR traceability requirements.

- Supplier Engagement and Support: Engage suppliers at all levels, from multinational corporations to smallholder farmers, to ensure they understand the implications of EUDR and the value it brings to their business. This includes helping them to source missing information, supporting them in adopting sustainable practices, and preparing them for any necessary risk mitigation measures.

- Supply Chain Mapping and Risk Assessment: Conduct thorough supply chain mapping to identify all sources of raw materials. This process not only helps in pinpointing the origins of commodities but also in assessing associated risks, thereby aiding in the identification and mitigation of potential deforestation and human rights violations.

- Continuous Improvement and Compliance: Use the insights gained from traceability data to continuously improve your supply chain's efficiency and sustainability performance. Regularly update your risk assessment and mitigation strategies based on the latest traceability data and evolving EUDR requirements.

Step 4: Effective Monitoring and Regular Reporting

Under the European Union's Deforestation Regulation (EUDR), stringent monitoring and reporting requirements are established to ensure that businesses not only comply with the regulations but also maintain transparency about their efforts to mitigate deforestation risks. Regularly assessing and reporting on your compliance efforts are vital components of adhering to EUDR requirements.

Key Aspects of Effective Monitoring and Reporting

- Continuous Monitoring: Implement technologies to continuously monitor your supply chains. These technologies should be capable of tracking the origin of commodities and ensuring that all products meet the deforestation-free requirements set forth by the EUDR, such as satellite data technologies. Monitoring should be proactive and capable of identifying potential risks before they become compliance issues.

- Regular Reporting: The EUDR expects businesses to produce detailed reports that document their compliance efforts. These reports should be comprehensive, covering all aspects of your due diligence processes, including how risks are assessed and mitigated. Regular reporting not only demonstrates compliance but also helps in maintaining corporate transparency and building trust with stakeholders.

Step 5: Implement Satallite technologies for EUDR compliance

The EU Deforestation Regulation (EUDR) serves as more than just regulatory compliance—it's a directive towards a sustainable future. Implementing accurate and robust monitoring systems is essential for navigating this complex landscape effectively. Utilizing advanced technologies like satellite imagery can significantly enhance these systems, ensuring EUDR compliance while fostering sustainability.

Role of Satellite Data in Enhancing EUDR Compliance:

- Enhanced Traceability: Satellite imagery provides precise geolocation data essential for verifying the deforestation-free status of supply chain sources. This capability is crucial for ensuring that all materials comply with EUDR standards.

- Near-Real-Time Monitoring: The ability to monitor landscapes in near-real-time allows for immediate detection of changes or unauthorized activities, such as deforestation or land degradation, enabling quicker responses.

- Historical Data Analysis: Access to historical satellite data allows businesses to assess past land use changes and ensure compliance with the EUDR’s cut-off date for deforestation-free commodities.

-Scalability and Flexibility: Satellite monitoring systems can be scaled up or adapted with minimal physical intrusion, making them ideal for monitoring extensive areas across multiple geographical locations.

At Orbify, we are dedicated to helping you stay compliant with our comprehensive EUDR template. Our solution is designed to streamline your compliance processes with key features such as:

1. Country Benchmarking System Risk
2. Dedicated Maps to monitor and manage your environmental impact effectively

3. EUDR Compliance Assessment

4. Commodities Detection in Plots

5. Compliance with Local Laws

6. EUDR Non-compliance Risk Assessment

And there's even more!

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