Impacts, Risks, and Opportunities (IRO) for CSRD Reporting
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What is the Regulation on Deforestation-Free Products (EUDR)?
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By Kara Anderson, UK Copywriter, on 09/10/2024
Updated by Kara Anderson, on 29/05/2026
The EU Deforestation-Free Products Regulation (EUDR) fundamentally changes how companies source raw materials for the European market. To combat global forest loss, the EU now requires businesses to legally verify that their core commodities do not originate from recently deforested land or contribute to forest degradation.
For companies handling palm oil, soy, cocoa, coffee, cattle, rubber, or wood, compliance is now a core operational requirement.
Following extensive negotiations and adjustments to ensure market readiness, the final deadlines are now locked in. Large and medium-sized enterprises must fully comply by December 30, 2026, while micro and small enterprises (SMEs) have until June 30, 2027, to meet the requirements.
With enforcement deadlines landing at the end of this year, the time to prepare is shrinking. The technical demands of the regulation - particularly tracing products back to their exact plot of land - mean procurement and compliance teams are already restructuring their data collection to avoid supply chain disruptions.
What is the EUDR, and why was it introduced?
The EUDR is the European Union’s strategy to eliminate deforestation from its commercial footprint. It addresses a major global issue: EU consumption accounts for roughly 10% of global deforestation driven by commercial agriculture.
The regulation introduces a strict market ban. You cannot sell or export specific high-risk commodities within the EU market unless you can verify they did not originate from land deforested or degraded after December 31, 2020.
Key Structural Shifts for Businesses:
Legal Deforestation is No Longer a Defense:
Previous laws, like the EU Timber Regulation (EUTR), only targeted illegal logging. The EUDR goes much further. Even if a supplier legally clears a forest under their local country’s laws to plant coffee or soy, that product is barred from the EU if the land was cleared after the 2020 cut-off date.
Broader Material Scope:
Unlike older regulations that focused strictly on wood and timber, the EUDR targets agricultural sectors that traditionally operate with complex, multi-tiered global supply chains.
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The regulation serves as a core pillar of the European Green Deal and the EU Biodiversity Strategy for 2030, aiming to drastically cut global carbon emissions and halt habitat loss in critical agricultural hubs.
Objectives of the EUDR:
The policy focuses on three main commercial and environmental metrics:
Eliminating deforestation via EU procurement
Ensuring that raw materials entering or leaving the European market are sourced without causing further forest clearing.
Cutting carbon emissions
By enforcing these standards, the EU aims to reduce global carbon emissions by at least 32 million metric tonnes annually.
Protecting critical habitats
Preventing the expansion of commercial agriculture into endangered ecosystems, particularly in South America, West Africa, and Southeast Asia.
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What are the key commodities covered by the EUDR?
The EUDR does not apply universally to all agricultural goods. Instead, it targets seven specific raw commodities identified as the primary drivers of global deforestation, alongside their derived products.
If your business imports, processes, or exports any of the following items, they must be verified as deforestation-free:
Palm Oil
Raw oil, extracts, and derivatives commonly used in cosmetics, food processing, and cleaning products.
Soy
Raw beans, meal, and oil primarily utilised in animal feed and processed foods.
Wood
Timber, pulp, paper, and downstream finished goods like furniture and packaging material.
Cocoa
Beans, paste, butter, and chocolate products.
Coffee
Raw, roasted, or ground coffee products.
Rubber
Raw rubber, sheets, and derived components such as commercial tires and footwear.
Cattle
Live animals, beef products, and derived leather goods.
Beyond raw materials, the regulation covers complex downstream products. For example, importing bulk chocolate or a shipment of leather car seats triggers the exact same compliance and tracing obligations as importing raw cocoa beans or cattle hides.
Global deforestation footprint by commodity:
To understand why these specific goods were chosen, the European Commission analysed which imports historically contributed most to deforestation. The table below outlines that breakdown.
| Product | Share of EU Deforestation Import Footprint | Primary sourcing hotspots | Common derived commercial products |
|---|---|---|---|
| Palm Oil | 34.0% | Southeast Asia (Indonesia, Malaysia) | Processed foods, cosmetics, biodiesel, surfactants |
| Soy | 32.8% | South America (Brazil, Argentina) | Commercial animal feed, vegetable oils, food additives |
| Wood | 8.6% | Global (Tropical, Temperate & Boreal zones) | Timber, paper packaging, wood pulp, furniture |
| Cocoa | 7.5% | West Africa (Côte d'Ivoire, Ghana) | Chocolate, confectionery ingredients, cosmetics |
| Coffee | 7.0% | Central & South America, East Africa | Roasted, ground, and instant commercial coffee |
| Cattle (Beef & Leather) | Major Driver | South America (Amazon & Cerrado biomes) | Commercial beef, raw hides, finished leather goods |
| Rubber | 3.4% | Southeast Asia (Thailand, Vietnam) | Industrial tires, footwear, latex manufacturing |
Who does the EUDR apply to?
The EUDR applies to any commercial entity importing, processing, or exporting the regulated commodities within the EU market. However, a major legislative update restructured how responsibilities are distributed down the supply chain, moving away from a one-size-fits-all model to prevent double-reporting.
1
Primary Operators (First Placement)
An operator is the company that first places a regulated commodity on the EU market, or exports it from the EU.
The obligation
The full burden of proof lies here. Primary operators must execute the complete three-step due diligence process (gathering geolocation data, conducting risk assessments, and mitigating risk) and submit a Due Diligence Statement into the EU's central IT Information System to get a unique reference number.
2
Micro and Small Primary Operators
A distinct category was established for smallholders and small businesses operating in low-risk countries who obtain or grow the materials themselves.
The obligation
Rather than running full risk assessments, they are eligible to submit a single, simplified declaration into the system, drastically cutting their administrative overhead.
3
Downstream Operators and Traders
If you handle a product after it has already been legally placed on the EU market by a primary operator (eg. you are a processor, manufacturer, or distributor buying raw materials within the EU), you are classified as a downstream operator.
The obligation
You do not need to file a separate, redundant due diligence statement. Instead, you are legally required to collect, verify, and retain the unique reference number generated by the initial primary operator for five years. Your job is to maintain the digital chain of custody.
The enterprise timeline
Company size no longer dictates whether you comply, but it does dictate when your reporting systems must be fully operational:
December 30, 2026
Full compliance deadline for all Large and Medium-sized enterprises, alongside downstream operators and traders of all sizes.
June 30, 2027
Extended deadline for Micro and Small enterprises (SMEs), giving smaller business owners additional time to integrate their data tracking.
The regulation applies globally. Non-EU suppliers are not exempt; if they export to Europe, they must feed the required geolocation and legality data directly to their EU-based partners to keep the trade lane open.
Due diligence requirements under the EUDR
At its core, the EUDR operates on a reversed burden of proof. The regulator does not have to prove your products caused deforestation; you must prove they didn't before they can enter or leave the EU market.
To achieve this, companies must implement a structured, three-step due diligence process. If you miss a single step, the entire shipment is locked out of the market.
Step 1
Data collection & information gathering
- Precise geolocation data
- Proof of local legality
- Basic supply chain metrics
↓
Step 2
Risk assessment
- EU Country Benchmarking Tier
- Supply chain complexity
↓
💡 Low-risk country shortcut
If materials are sourced exclusively from an officially designated Low-Risk Country, businesses must still complete Step 1 and file a baseline statement, but are exempt from completing formal risk assessments (Step 2) and risk mitigation measures (Step 3).
↓
Step 3
Risk mitigation
- Independent third-party audits
- Satellite monitoring and GIS tracking
- Supplier capacity-building programmes
↓
Submit Due Diligence Statement
The Due Diligence Statement (DDS)
Once the three steps are complete and risk is verified as negligible, the operator must upload the data into EU Traces, the central digital registry. The system generates a unique reference number for that specific batch.
Without this reference number, a shipment cannot clear EU customs, and downstream buyers cannot legally purchase your product.
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What are the penalties and enforcement mechanisms?
The EUDR relies on strict enforcement to ensure the market takes its requirements seriously. Oversight falls on the competent authorities within individual EU member states, who are tasked with auditing compliance, verifying data, and penalising non-compliant commercial entities.
For commercial teams, a compliance failure carries heavy financial risk, with penalties scaling based on the severity of the violation.
Penalties for non-compliance
Failing to file a valid Due Diligence Statement or submitting falsified geolocation data triggers a baseline set of penalties across all member states:
%
Turnover-Based Fines
Competent authorities can issue fines of up to 4% of a company’s total annual EU turnover. For multinational enterprises, this transforms a compliance error into a material financial threat.
€
Confiscation of Materials and Revenue
Authorities have the power to seize both the non-compliant physical goods and any revenue generated from the transaction.
×
Market Exclusion
Serious or repeated violations can result in a temporary ban (up to 12 months) from participating in public procurement processes or accessing public funding within the EU.
Beyond formal legal penalties, the most immediate operational bottleneck is customs clearance delays. If a shipment lacks a verified digital reference number, it will be locked out at the border, disrupting downstream manufacturing timelines.
Targeted inspections and country risk tiers
Enforcement is not random. National authorities allocate their inspection resources using a risk-based matrix tied directly to the EU’s country benchmarking system.
The law mandates strict minimum inspection rates for operators sourcing from different regions:
9%
High-Risk Countries
National authorities must check at least 9% of operators sourcing from these regions annually. Shipments from high-risk zones face intensive, proactive documentation audits and satellite verification checks.
3%
Standard-Risk Countries
A minimum inspection rate of 3% of operators applies to these supply chains.
1%
Low-Risk Countries
Sourcing from low-risk zones drops the mandatory inspection rate to just 1% of operators.
The role of private stakeholders
The enforcement mechanism also includes a framework for third-party scrutiny. Non-governmental organisations (NGOs), industry competitors, and private individuals can submit formal, substantiated concerns to national authorities if they suspect a company is bypassing the regulations.
Authorities are legally required to investigate these external submissions, meaning companies face reputational exposure if their public environmental claims do not match their underlying supply chain data.
The impact of the EUDR on global supply chains
The EU Deforestation-Free Products Regulation (EUDR) is expected to have a significant impact on global trade, especially in countries that are major producers of commodities linked to deforestation. Countries such as Brazil, Indonesia, and Malaysia, which are key exporters of palm oil, soy, and beef, are likely to feel the effects the most.
Strategic sourcing shift
Divergence in Sourcing Priorities
Because the compliance burden drops significantly when sourcing from officially designated 'Low-Risk Countries', purchasing teams are factoring regional risk tiers directly into their long-term supply strategies. This is driving localised shifts toward regions with robust digital land registries and stable forest cover, such as North America and Europe.
While this protects buyers from intense regulatory audits, a side effect is that it risks sidelining smallholder farmers in standard- or high-risk developing nations who do not have the technological infrastructure to feed automated data into the EU's tracking registry.
Administrative impact
Operational Costs and the Simplification Framework
Implementing polygon geolocation tracking, establishing verification data loops, and conducting third-party risk assessments represent a clear operational expense. To address concerns about supply chain friction, the European Commission introduced a Simplification Package in May 2026.
75%
This update provides critical administrative relief, explicitly confirming that downstream buyers can pass through the unique reference numbers generated by initial upstream suppliers. This eliminates the need for redundant, multi-tiered reporting and is projected to reduce cumulative annual administrative costs for businesses by roughly 75%.
Product scope revisions and sector-specific updates
The scope of the EUDR is not entirely static. As the implementation deadlines approach, the European Commission has introduced specific updates to fine-tune exactly which products require tracking, balancing operational feasibility against environmental goals.
The status of leather and specific exclusions
As part of recent regulatory updates, the Commission introduced a draft delegated act proposing to exclude leather, hides, and skins from the regulation's active compliance scope.
The idea was to align raw material rules with finished downstream products - such as footwear or automotive upholstery - which were already omitted from the framework due to the extreme difficulty of tracing processed leather back to a specific plot of land.
While this proposal has seen pushback from environmental policy groups during public consultations, it represents a significant shift for the car sector and fashion supply chains.
On the other hand, the EU has moved to close other loopholes, integrating specific processed items like soluble coffee blends into the text to ensure a level playing field across entire product categories.
Benchmarking tiers and traceability requirements
The structural framework for the EU’s country benchmarking system has also seen pushback from international trade partners seeking exemptions.
While there was significant external diplomatic pressure - particularly from the U.S. - to introduce an entirely exempt "No-Risk" category that would bypass reporting altogether, the EU has maintained its strict three-tier matrix (Low, Standard, High).
This means that regardless of a country's classification, the core requirement remains unchanged: all importing operators must still collect and provide basic traceability data, ensuring a universal minimum standard across the market.
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Looking ahead: Operational timelines
While the nuances of product scopes and administrative adjustments continue to be refined, the legal timeline for business operations is locked in. The European Commission plans to conduct its next comprehensive structural review by June 2030, where it will evaluate expanding definitions to other vulnerable ecosystems, such as savannahs and wetlands.
For procurement and compliance professionals, the immediate priority is data readiness. With full enforcement applying to Large and Medium enterprises on December 30, 2026, followed by Micro and Small businesses on June 30, 2027, companies have a clear window to verify their supplier data pipelines, map coordinates, and ensure compliant entry into the EU market.
EUDR FAQs
What happens to goods produced before the EUDR deadline but placed on the market after?
Products containing relevant commodities that were produced before the compliance deadlines (December 30, 2026, for large/medium enterprises) are still subject to the EUDR if they are placed on the EU market or exported after that date. The critical date to watch is the December 31, 2020 cut-off; regardless of when the final product was manufactured, you must prove the raw materials did not come from land deforested after 2020.
How does the EUDR define "Forest Degradation"?
Under the EUDR, forest degradation specifically refers to structural changes that turn primary forests or naturally regenerating forests into plantation forests or other wooded land. If your timber or wood supply chain involves harvesting operations that fundamentally alter the ecosystem from a diverse, natural forest to a monoculture plantation, it is classified as degraded and is non-compliant.
Are composite or recycled materials subject to EUDR due diligence?
It depends entirely on the material type. 100% post-consumer recycled materials (such as recycled paper or reclaimed timber furniture) are exempt from the EUDR compliance scope, as they are not considered primary drivers of new deforestation. However, if your product uses a mix of virgin and recycled fibers, the virgin component must be fully traced back to its plot of origin with complete geolocation data.
Can third-party sustainability certifications (eg. FSC, RSPO) be used for EUDR compliance?
Third-party certifications like the Forest Stewardship Council (FSC) or the Roundtable on Sustainable Palm Oil (RSPO) are valuable tools for Step 2 (Risk Assessment) and Step 3 (Risk Mitigation). However, they cannot be used as a substitute for a formal Due Diligence Statement. The EUDR requires mandatory GPS/polygon geolocation data and local legality verification; you cannot rely solely on a third-party certificate to clear EU customs.
What is the difference between a "Polygon" and a "Latitude/Longitude" coordinate in EUDR reporting?
For plots of land larger than 4 hectares, the EUDR requires a polygon - a series of geographic coordinates that map the exact boundary line of the property. For smaller plots under 4 hectares, a single point latitude and longitude coordinate is acceptable. This data must be formatted correctly to upload into the EU Traces system.
Does the EUDR apply to transit goods passing through the EU?
If a shipment enters an EU port strictly under a customs transit procedure to be moved to a non-EU country (eg. a shipment of coffee from Brazil stopping in Rotterdam en route to the UK), it is not considered placed on the EU market and does not require an EUDR Due Diligence Statement. However, if the goods are cleared for free circulation, processed, or repackaged within the EU, full compliance is triggered.
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How Greenly can help your company comply with the EUDR
Streamlined ESG Data Management & Compliance
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📥 Import qualitative & quantitative data — platform processes & flags errors
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🔗 Integrated connectivity: map & connect data points across indicators, eliminate redundancy
📂 Centralised platform for all ESG data & supporting docs
⏱️ Track collaborator progress, set reminders & deadlines for compliance
🛡️ Audit-ready traceability: instantly track every change
📊 ESG dashboards to track all key KPIs
🏢 Multi-entity task management & data ingestion at all levels
🧠 AI-powered pre-filling from documentation saves weeks of manual work
🧮 Automatic calculations handle dependencies & speed up consolidation
📈 Multi-entity data collection simplified by mirroring company structure
Strategic ESG Impact & Risk Mitigation
Greenly empowers companies to move beyond reporting to develop strategy, identify risks, and unlock opportunities.
📋 Automated Double Materiality Assessment (DMA) built with CSRD experts
🤖 AI-powered climate risk forecasting integrated into DMA with site-level detail
💰 Translate climate risk into quantified financial opportunities
📍 Location-specific financial risk breakdowns with IPCC-backed data
🔎 Data gap analysis from DMA to improve future reporting
📈 Automated Climate KPI integration
📊 Advanced Materiality Module: benchmarks & specialised add-ons (e.g., CSA)
Tailored & Future-Ready Reporting
Flexible reporting with interoperability across 15+ frameworks.
📝 Custom framework creation with tailored reports
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⚡ Accelerated report creation with AI-powered generation and pre-filling
📄 Auto-generation of complete ESG reports (qualitative & quantitative data)
🛡️ Audit-ready guaranteed reports
💻 Automated ESG report gen incl. XHTML & XBRL for CSRD
📂 Centralised audit trails & attachments per indicator
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Expert Guidance & Continuous Support
Comprehensive support & training to empower ESG teams and ensure successful, autonomous reporting.
🧑💼 Dedicated Project Managers & ESG Experts for each framework
📚 Extensive training & resources available on the platform
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