EU adopts deforestation-free products regulation

By Peter Fitch, CEO of IOI Palm Wood

Palm wood is affected by the new EU Timber Regulation

A new EU law preventing the import of commodities linked to deforestation might risk side-lining timber producers, small furniture makers, or community farmers who are unable to meet the burdensome cost of compliance of these new standards.

Days before the UN Biodiversity Conference (COP15) in December 2022, the European Parliament and the European Council reached an agreement on the terms of a new regulation on deforestation-free products. First initiated in 2021 within the Green Deal framework, this regulation is part of a wider effort from the European legislator to regulate international supply chains.

The EU agreed on a new deforestation regulation that requires companies to produce a due diligence statement showing when and where their commodities were produced and provide verifiable information that they were not grown on land deforested after 2020, or they will risk hefty fines.

The scope of regulation

The scope of the regulation on deforestation-free products fills gaps in the EU Timber Regulation and follows a similar pattern to the EU’s Corporate Sustainability Reporting Directive:

High impact sectors targeted: Palm oil, beef, timber, coffee, cocoa, soy and rubber are subject to mandatory due diligence rules. These relevant commodities and their products (RC&P) — for instance, most furniture are timber products — therefore are prohibited from being imported in or exported from the EU market if they are not deforestation-free. Deforestation-free means they were produced on land that has not been subject to deforestation, and the wood has been harvested from the forest without inducing forest degradation. They must also have been produced in accordance with the relevant legislation of the country of production and must be covered by a due diligence statement.

Human rights protection: As deforestation is often linked to human rights violations, the scope of the regulation has been broadened to include human rights obligations. Thus, RC&P must also have been produced in compliance with the relevant legislation of the country of production regarding human rights and the rights of indigenous peoples.

Key definitions enshrined: For the first time, the European legislator defines what constitutes deforestation, which is considered to be “the conversion of forest to agricultural use, whether human-induced or not”. Forest degradation, which is a new notion, encompasses “harvesting operations that are not sustainable and cause a reduction or loss of the biological or economic productivity and complexity of forest ecosystems, resulting in the long-term reduction of the overall supply of benefits from forest, which includes wood, biodiversity and other products or services”.

Larger groups responsible: For operators and non-SME traders, the obligations laid down by the regulation are the same. The scope has indeed been widened compared to the EU Timber Regulation, and large traders’ obligations are no longer limited to traceability.

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