What the EU deforestation directive means for procurement

Will Green is news editor of Supply Management
posted by Will Green
7 December 2022

Companies aiming to sell products from certain categories in the European Union will have to comply with deforestation due diligence checks under a provisional deal.

The European Council and Parliament have reached a provisional agreement on a directive that puts obligations on firms that use six commodities – wood, cattle, soy, palm oil, cocoa and coffee.

The rules would also apply to certain products derived from these commodities including chocolate, furniture, printed paper and “selected palm-oil based derivates”, such as those used in personal care products.

Marian Jurečka, Czech minister of the environment, said: “The EU is a large consumer and trader of commodities that play a substantial part in deforestation – like beef, cocoa, soy and timber. 

“The new rules aim to ensure that when consumers buy these products, they don’t contribute to further degrading forest ecosystems. Protecting the environment around the world, including forests and rainforests, is a common goal for all countries and the EU is ready to take its responsibility.”

In a report the Council said without action deforestation connected to EU consumption of the six commodities would rise to around 248,000 hectares annually by 2030.

Palm oil accounts for most EU-linked deforestation (33.95%), followed by soy (32.83%), wood (8.62%), cocoa (7.54%), coffee (7.01%) and beef (5.01%).

Due diligence requirements in the directive involve three elements:

Information gathering;

Risk asssessment; and

Risk mitigation measures.

This work includes tracing a product “back to the plot of land where it was produced”.

“The due diligence procedures should be designed to provide access to information about the sources and suppliers of the commodities and products being placed on the Union market, including information demonstrating that the absence of deforestation and forest degradation and legality requirements are fulfilled,” said the report.

“Operators should formally assume responsibility for the compliance of the relevant products that they intend to place on the Union market or to export by making available due diligence statements.”

Sourcing countries will be classified in terms of risk – high, standard, and low – and authorities in member states will be tasked with carrying out checks to ensure compliance.

The report said companies within the scope of the other EU laws, such as the directive on due diligence in the supply chain, could comply with the deforestation directive by providing the same information.

Fines will be “proportionate to the environmental damage and the value of the relevant commodities or products concerned” but will be at least 4% of a company’s turnover in the EU and include temporary exclusion from public procurement tenders.

The agreement must now be formally adopted by the Council and the Parliament.

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