EUDR and the Butterfly Effect; EU’s challenge

By Rosemarie Szostak, Ph.D., Senior Analyst

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The European Union’s Regulation on Deforestation-Free Products (EUDR) is expected to impact many consumer products across the global supply chain.

To address the environmental impact of target agricultural goods (cattle, cocoa, coffee, palm oil, rubber, soy, timber, wood, and products made from these materials), EUDR prevents companies doing business in the EU from importing these products if they are linked to illegal deforestation and forest degradation. The law requires companies that sell products that contain these materials to obtain and maintain reliable data, including geospatial, on the sources of these materials to verify they have been sourced in compliance with the regulations.

This regulation aims to reduce greenhouse gas emissions due to deforestation, preserve the biodiversity of many critical species that inhabit these forests, and promote more sustainable practices.

In flits the butterfly.

The complexity of the EUDR becomes evident when we consider the use of soy for livestock feed. This is a prime example of how regulation can pose significant challenges. Many international livestock feed producers also deal with soy trading, making it a complex task to track the numerous small soy producers, aggregators, and processing mills in the deforestation areas of concern and verify their compliance with the EUDR. Obtaining geolocation/polygon to plot data of millions of these entities is no small feat. Land ownership is also essential to ensure that the soy was not produced on recently reclaimed forest land since the producer may not be the landowner. A Catch-22 is that some producing countries consider land ownership data sensitive and prohibit sharing that information. The supply chain does not end with the production of livestock feed. Producers of beef cattle in the EU must monitor their supply chain to ensure that the beef products that they sell on the EU market also comply with EUDR. Large corporations can absorb these costly regulatory requirements. However, small to mid-size producers along the entire supply chain may find them onerous and cost prohibitive.

The cost of compliance could force a shift away from sourcing from countries that fall under the deforestation concern umbrella to countries that do not. This can impact the livelihoods of third-world providers (farmers, agglomerators, mills) who are now under the regulatory umbrella, not of their government, but of foreign entities.

Some countries that will be targeted are now considering options since they consider the EU directive to be another example of colonialism. Some of those options include no longer selling their products to suppliers who are associated with the EU but to countries such as China and Africa that do not have strict greenhouse gas emissions restrictions like the EU.

This is one of the many butterfly effects associated with EUDR that need to be ironed out soon, as EUDR is set to go into effect in December 2024. Nerac can help your company monitor and track EUDR to ensure that you stay ahead of the game.

How Nerac Can Help

Nerac is a research and advisory firm dedicated to helping clients understand the complex world of regulations that may impact their businesses and keeping clients up-to-date with the latest innovations in their business segments. Nerac has been helping corporate clients for over 60 years and has a long track record of success. Though we do not have a crystal ball, we have a plethora of database platforms that our analysts are trained to use. We track, monitor, and evaluate the latest advancements of our client's competitors and regulatory landscape worldwide and provide Intellectual Property assessments, including prior art, invalidity, and freedom to operate.

References

About the Analyst

Rosemarie Szostak, Ph.D.

Rosemarie Szostak, Ph.D., advises companies on technology, patents, innovation and disruptive technology. She has 20 plus years of experience as a thought leader and analyst with broad technical knowledge in chemistry, materials and chemical engineering.

Academic Credentials

  • Post Doctoral Fellow, Chemical Engineering Department, Worcester Polytechnic Institute
  • Ph.D., Chemistry, University of California Los Angeles
  • M.S., Chemistry/Physics, Georgetown University

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