Less than six months before the rollout of the European Union’s deforestation regulation (EUDR), the vast majority of companies tied to the upstream and downstream supply chains for timber, paper, pulp, coffee, beef and rubber are “alarmingly” ill-equipped and unprepared for the new regulation – leaving billions of dollars worth of EU trade at risk.
That is according to a new report by Forbes, which revealed that just 30% of upstream suppliers and 12% of downstream suppliers have established formal systems to trace deforestation. And despite zero-deforestation commitment now becoming “industry practice,” Forbes revealed that the vast majority of supply chain actors are struggling to secure consistent, reliable data from globally complex and opaque networks.
According to Koltiva, a Swiss-Indonesian tracing expert, confusion over compliant and non-compliant commodities is one of the most pressing threats to EUDR compliance, as the legislation requires a strict separation of goods. Any mixing between compliant, non-compliant, and unknown commodities is strictly prohibited, meaning that complete physical separation is necessary to ensure the shipment is EUDR compliant—a concern for smallholders involved in the coffee and rubber supply chains. “These supply chains are often intricate with many points where mixing can inadvertently happen, and there’s always a chance that some plots may not be fully mapped,” according to Andre Mawardhi, Koltiva’s senior agriculture and environment manager. “Businesses must therefore balance the need for compliance with the importance of inclusion.”
Last year, Wood Central spoke to a subject matter expert connected to EUDR discussions who stated that the EUDR had the potential to disrupt Australia’s exports of beef and wood: “The EUDR is unique because it is a B2B regulation set up by the EU, but enforced by individual EU members.” At the time, they said it was conceivable that exporters may need to run two separate supply chains—”one that is EUDR-ready, and the other which is not”—with exporters having to “make a commercial and ethical decision whether to stay in EU supply chains.”
In March, Wood Central reported that the new rules could see timber imports from high-risk deforestation countries (including Indonesia, Malaysia, and Brazil) drop by more than 25%, and even peak at 38% if definitions include agricultural conversion (dubbed EUDR+) – with the shortfall coming from Canada and the United States.
“The results indicate that high-deforestation countries, such as Brazil, Indonesia, and Malaysia, are expected to face significant reductions in roundwood production and exports, with downstream effects on sawn wood and panel prices,” according to a new report led by Craig Johnston, who simulated the impact of the EUDR on the global supply of timber-based products. “At the same time, low-deforestation countries, including Canada (1.4% increase) and the United States (0.1% increase), may experience slight increases in production to meet EU demand.”
- To learn more about the EUDR – including the country risk system (which was voted down by the EU Parliament earlier this month) – click here for Wood Central’s special feature. And to find out why timber-based supply chains are better prepared for EUDR than other forest-based commodities, click here for Wood Central’s coverage from the “Timber for Transparency” report.
