October 18, 2024 – The European Union continues to reinforce its efforts to combat global deforestation and environmental degradation through the EU Deforestation Regulation (EUDR) and requirements under the ESRS standards. The EUDR places strict obligations on businesses to ensure their products, such as soy, palm oil, coffee, and wood, are not linked to deforestation. This regulation aligns with ESRS E4 (Biodiversity and Ecosystems) and other key environmental standards. For example, deforestation leads to significant carbon emissions, and worsening climate change, a key focus of ESRS E1. It also supports ESRS E2 (Pollution), as forests naturally reduce pollution by protecting water and soil quality. Preventing deforestation helps control these environmental risks, making the regulation integral to addressing climate, pollution, water, biodiversity, and ecosystem impacts comprehensively.
Importance of EUDR and ESRS in the Context of Planetary Boundaries
Planetary boundaries define the safe limits within which human activities can occur without causing irreversible environmental damage. To date, six of nine planetary boundaries have been exceeded, including those related to climate change, biodiversity loss, and land use. Deforestation significantly contributes to these breaches. The new regulation aims to reduce carbon emissions in the EU by at least 32 million tonnes annually, supporting global efforts to reduce emissions and conserve biodiversity.
Business Risks and the Need for Compliance
Failure to comply with the EUDR and ESRS standards can lead to not only fines and market access restrictions but also severe reputational and environmental risks. Companies that do not implement traceability systems may face supply chain instability and lose access to vital resources. These risks are addressed across all ESRS standards, which encourage responsible management of business impacts on the environment and society.
Key Role of the Deforestation Due Diligence Registry
A crucial component of the EUDR is the Deforestation Due Diligence Registry, where businesses must submit declarations confirming that their products are deforestation-free. The registry was originally set to become operational in December 2024, but the European Commission has proposed a 12-month extension, meaning the regulation may now be enforced from 30 December 2025 for large companies and 30 June 2026 for small and micro-enterprises.
Solutions through ESRS E4 and Related Standards
ESRS E4 and related ESRS standards help companies transparently manage risks associated with biodiversity, greenhouse gas emissions, and pollution. Companies will be required under the EU Deforestation Regulation (EUDR) to conduct extensive due diligence on their supply chains, including collecting geolocation data for parcels where raw materials are cultivated. They must prove that their products have not contributed to deforestation after December 31, 2020.
This requirement aligns closely with our long-standing area of expertise, as we specialize in monitoring environmental impacts, including the use of advanced technologies for traceability and managing biodiversity and sustainable supply chains. Our expertise in this field allows companies to adapt to these new regulatory requirements and implement solutions that ensure compliance with the EUDR, while also minimizing environmental impacts.
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