The European Union’s Deforestation Regulation (EUDR), which came into force in June 2023, aims to curb deforestation linked to products consumed in the EU. This regulation requires companies to ensure that products such as palm oil, cattle, soy, coffee, cocoa, timber, and rubber are not produced on land that has been deforested.
This includes conducting rigorous due diligence, including verifying supply chain transparency and compliance with local laws and human rights standards.
For the textiles industry, particularly those dealing with viscose and lyocell, the regulation will necessitate detailed supply chain analysis. Companies will need to gather geographic information, assess non-compliance risks, and mitigate these risks to negligible levels.
This involves using satellite imagery and geolocation data to trace the origins of raw materials and ensure they comply with the EUDR requirements.
Compliance costs for companies are expected to increase, with the European Commission estimating these costs to range from 0 million to .
5 billion annually. These costs could either reduce profits or be passed on to consumers. Non-European companies, especially those in high-risk areas like the Amazon, Indonesia, and parts of Africa, may face higher costs and stricter due diligence requirements, which could impact their ability to export to the EU.
The regulation has faced some pushback, with calls for its delay due to concerns about the readiness of supply chains to meet these new requirements and the potential impact on small and medium-sized enterprises (SMEs) in producing countries. However, the EU plans to support these countries through technical and financial assistance to facilitate compliance.
Overall, while the EUDR presents significant challenges, it also offers an opportunity for companies to lead in sustainable practices and improve global trade in deforestation-free products.
