Delays to some of the EU’s new due diligence rules for sustainability, means companies – and countries – who have invested in new compliance systems have been left anxious for clarity.
The EU Deforestation Regulation (EUDR) is one such rule, having been delayed by at least a year. It will affect producers and buyers of ‘forest-risk commodities’ (soy, palm oil, coffee, cocoa, rubber, beef and leather, timber and certain derived products) whose expansion directly contributed to 9.7 million hectares of forest loss in 2024.
Some may argue that due diligence requirements are an unnecessary cost burden, but the costs of non-action are also becoming clearer.
Recent research shows how climate change impacts such as floods and heatwaves have led to spikes in food prices, and deforestation’s impact on regional rain patterns has caused significant falls in yield and farmer income.
Data systems and sustainability
A decade on from major pledges by industry to achieve deforestation-free supply chains, voluntary initiatives are giving way to mandatory regulation. In response, suppliers, traders, manufacturers and retailers have been building compliance systems, which can also help with risk management, inventory and procurement processes.
Sustainability has long been treated as an annual status report, but EUDR pushes sustainability data to become part of transactional data. This consolidates information which is usually kept separate from core business processes, linking sustainability and value in the decision-making criteria.
Changes can also be seen in new professional services for supply chain compliance data, like Tract or World Forest ID, introducing significant new capabilities in big data, geospatial analytics and chemical traceability. These are shaping a new digital ecosystem for compliance, linked to economic performance.
Investing in systems that integrate data from different sources like farm geolocation, satellite imagery, and legal records to meet EUDR does more than just flag risks of bad practice. It also highlights opportunities to boost productivity by identifying areas of responsible land management where long-term value is being created, enabling more targeted investment and helping to find opportunities for improvement.
As a result, new standards and protocols, linked to sourcing decisions, are driving cost savings and value creation.
This mirrrors the experience some companies had with carbon reporting or chemical regulation, where compliance drove operational changes. Under the EU REACH chemial regulations, many international firms found it more efficient to upgrade to EU market standards across the board, rather than maintain separate compliant and non-compliant production lines.
Similarly, some companies are adopting EUDR standards as best practice, even for non-EU markets, recognising the long-term value in responsible sourcing and streamlined operations.
In the short term, as with implementing any new process, companies must overcome uncertainty. Some firms have only recent hires responsible for EUDR compliance, facing steep learning curves. Buyers, suppliers and regulators all need to be constructive and collaborative during such an implementation phase to turn uncertainty into clarity, and compliance into opportunity.
Rather than see the EUDR as unnecessary Brussels red tape, many are seeing it as a driver for building supply chains which are better prepared for climate disruption, shifting geopolitics, and rising consumer expectations.
In the face of a lobby to delay and overturn these policies, now is a crucial time for companies who support this vision to make their voices heard.
Dr Anthony Alexander, associate professor of operations management at the University of Sussex Business School
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