New EU Deforestation Regulation: Overview and Key Considerations for Companies
The European Union has adopted the new EU Deforestation Regulation, whereby applicable companies must implement a rigorous due diligence process to ensure that certain products and commodities sold in or out of the EU are not the result of, or have led to, deforestation or forest degradation. The commodities subject to the Regulation are cattle, cocoa, coffee, palm-oil, soya and wood, as well as any products that contain, have been fed with or made using these commodities (e.g., leather, chocolate and beef). Once it enters into force, large companies will have 18 months to comply, while small and medium-sized companies will have 24 months. Failure to do so may result in a fine of at least 4% of total annual EU-wide turnover or the seizing revenue made from the sale of the commodities or products.
Companies should review whether (and how) they are caught by the new law and review existing processes, governance frameworks and supply chain risks to ensure that new obligations (e.g., with respect to due diligence) are adhered to.