There’s a buzz around traceability right now and with good reason.
The EU’s incoming Deforestation Regulation (EUDR) means supply chain traceability is growing in importance. A company’s ability to accurately trace and track their (and their suppliers’) products is now vital.
From December 30th 2024, companies with 250 employees or more cannot lawfully place cattle, cocoa, coffee, palm oil, rubber, soya or wood (or products made from these raw materials) on the EU market if they are not from a deforestation-free area and a due diligence statement has not been submitted to the EU online platform.
Failure to comply with EUDR requirements carries some hefty penalties. Fines of up to 4% of the company’s EU revenue have been (understandably) grabbing headlines, but there are other considerations, too—not least that a company’s reputation could be badly tarnished through non-compliance.
Aside from the negative consequences of not enabling traceability, in a data-driven world, traceability becomes an organisation’s superpower. It can address deforestation by ensuring products can be traced back to their source, and it can be used to foster accountability and authenticity to end challenges like the exploitation of human rights or the rise in counterfeit goods.
This isn’t just an abstract vision; it’s a tangible way to positively impact the world and build trust with stakeholders, businesses, governments, and society. With less than six months to go until the EUDR will be enforced on products in the EU marketplace, how does a business implement full traceability? Here are five steps to take now to make this happen.
Step 1: Embrace change
Existing approaches to sharing information via emails and spreadsheets are no longer fit for purpose given the scale of data and complexities associated with tracing back to demonstrate EUDR compliance. Robust, enhanced traceability is now non-negotiable, and all businesses, regardless of size, need to adapt to this new reality.
EUDR is unlike anything we have seen before and will require a fresh approach to due diligence and traceability. All commodities now need to be traced back to the forest sources where they were produced.
Step 2: Technology is going to become critical.
Supply chain information can still be surprisingly low tech, particularly when the countries involved at different points are less technologically advanced, with poor infrastructure, erratic internet, and sometimes even unreliable electricity supply. It’s not uncommon for critical documentation provided to an importer to still be in hand-written format, including transport documentation, forest management plans, harvesting approvals and proof of payment of tax.
All of which are vital for assessing EUDR compliance.The importer, however, will still need to assess the documentation, even when it’s not provided in a digital format. All this hardcopy documentation will need to somehow be transcribed onto a digital platform which is every bit as onerous and time consuming as it sounds.
As with so many things, technology makes the seemingly impossible possible. In the near future it is highly likely that we’ll see AI deployed to digitise handwritten documents, making EUDR compliance easier. We’re already seeing technology solutions coming to market which simplify traceability and compliance with EUDR. Even for those of us who do not consider themselves tech savvy, tech solutions could solve many of the headaches associated with EUDR compliance and now is the time to embed these within businesses.
Step 3: Rethink your people strategy.
It’s true that technology will make a huge difference to meeting the many challenges associated with EUDR, but navigating these changes will not be resolved by technology alone. Every company impacted by EUDR will need to take a look at its people strategy to ensure it has the right people in the right roles to implement the changes as seamlessly as possible.
Larger companies tend to already have people in place to handle compliance, legal and due diligence, but, with that said, EUDR implementation is going to require a particularly agile mindset, as well as the appropriate skillset to make sure all organisations are fulfilling their obligations under the new regulations.
Smaller companies are very likely to find themselves even more exposed than their larger counterparts due to limited time and resources, but non-compliance is not an option and the right people to help navigate through the rigours of EUDR will be essential.
Step 4: EUDR is about more than just avoiding deforestation.
Yes, as the name suggests, EUDR is being put into place to combat deforestation and forest degradation, but its scope is so much wider than that. It also addresses broader issues such as workers’ rights and social conditions. Its objectives are about making the production of commodities not only more sustainable, but socially equitable.
Unsurprisingly, any due diligence system implemented will need to cover ALL aspects of the legislation which means everyone impacted by EUDR needs to understand everything it governs. Only by realising the full extent of the legislation can you appreciate exactly what is going to be involved in complying.
Step 5: Prepare your suppliers.
The many and varied ways supply chains interconnect is going to come under scrutiny from EUDR. Even if a business gets its act together and puts systems, processes, people, and technology in place to manage the changes, its suppliers need to play their part if they are not to be exposed to additional risk.
A business’ suppliers need to be fully aware of how all the requirements and obligations throughout the supply chain are going to change when EUDR comes into force. It’s vital that suppliers meet their obligations in a timely manner, so companies can demonstrate compliance. Timescales are going to change significantly (for example, for the delivery of due diligence documentation, which must be provided to enable the Importer (Operator) to submit the ‘Due Diligence Statement’ to the EU online platform).
Traceability is not just a tool for compliance but a critical element of today’s business strategy, driving operational efficiency, market competitiveness, and sustainable practices. This broader perspective on traceability sets the stage for a new era of business where transparency is not just valued—it’s vital.
- For more information about iov42 and how tech is being used to help meet compliance requirements, contact Hollie Bridgland and Anna Roberts.