Introduction

The new EU Deforestation Regulation (EUDR) aims to reduce greenhouse gas emissions and help curb biodiversity loss by influencing global action on climate change, targeting commodities linked to deforestation. This has an effect on protecting indigenous and local communities that depend on forest ecosystems.

Under the EUDR, companies (both EU and non-EU that supply and sell within the EU) trading certain commodities such as wood and leather will need to demonstrate that their products and value chains are free from deforestation.

The EUDR will come into force at the end of December 2024, banning materials linked to deforestation and applying to the entire value chain.

Key Points of the EUDR Regulation:

The EU Regulation 2023/1115 is a legislative measure to combat deforestation and forest degradation globally caused by production and consumption in the European Union.

The regulation aims to ensure that certain products placed on the EU market are free from deforestation (“deforestation-free”). It applies to companies exporting or selling in the EU products such as cattle, cocoa, coffee, palm oil, rubber, soy, and wood, along with their derivatives.

By adopting a risk-based approach, the regulation imposes due diligence obligations on companies. By December 30, 2024, the European Commission will create an information system for due diligence declarations. Additionally, the regulation introduces a “country benchmarking system” that categorizes countries based on their deforestation risk into three categories: “high risk,” “low risk,” and “standard risk.”

Companies will have 18 months to comply with the new rules, while micro and small enterprises will benefit from a longer adjustment period and other specific provisions.

Useful Links: Regulation on Deforestation-free productsGreen Deal

How is the clothing industry affected?

The EUDR anti-deforestation law will have a significant impact on the leather segment, not directly on the brand but on the tanneries.

Brands and retailers of footwear, leather goods, and accessories that produce, purchase, or retail finished products containing leather (not processed by the brand or retailer) are not directly affected.

However, since the entire supply chain is impacted, disruptions in their supplies are likely to occur. Brands will not be affected initially, but they will be later because, from 2025, brands will need to measure and collect information on the environmental and social compliance of their supply chains:

Under this regulation, companies must prove that none of the components, ingredients, or production processes of their products have contributed to deforestation. The burden will be on companies to demonstrate that not only their product but also the product’s value chain is deforestation-free.

What do brands need?

The answer lies in granular data. To demonstrate that products are not linked to illegal deforestation, fashion companies will need to collect granular data that reaches back to the beginning of the supply chain.

This could include geospatial analysis of relevant farms in the supply chain to prove that no deforestation occurred after December 2020. This level of information can only be achieved through product-level traceability, which also gathers information on volume reconciliation and product segregation.

Three key elements:

1- Traceability back to where the animal was born
2- Evidence that there was no deforestation within the farm perimeter after 2020
3- Requires historical photos

It might seem like a law that does not concern the brand, but in reality, it falls within the brand’s area of responsibility under three other directives/regulations, and for this reason, it falls within the brand’s remit:

1- Corporate Sustainability Reporting Directive (CSRD) DISCOVER MORE
2- Corporate Sustainability Due Diligence Directive (CSDDD)DISCOVER MORE
3- Ecodesign for Sustainable Products Regulation (ESPR)DISCOVER MORE

Opportunities

The EUDR is a catalyst for significant change and, along with other circular economy regulations and the EPR, is motivating companies to invest in transparent, traceable, and low-carbon sourcing and to support smallholders in transitioning to sustainable methods.

The apparel sector is at the forefront of this movement with the potential to redefine industry practices and significantly contribute to global climate goals. EUDR compliance is a powerful opportunity for brands to support low-impact sourcing, enhance their competitive advantage, and contribute to the preservation of our planet’s forests and biodiversity.

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