Deforestation-free supply chains: from obligations to business readiness

Regulation (EU) 2023/1115 (the “EUDR”) is intended to minimise the European Union’s contribution to deforestation and forest degradation worldwide, as well as to the associated greenhouse gas emissions and loss of biodiversity. Its principal obligations shall apply from 30 December 2026. For undertakings qualifying as micro or small undertakings within the meaning of Directive 2013/34/EU as of 31 December 2024, that date is deferred to 30 June 2027, save in respect of products listed in the Annex to Regulation (EU) No 995/2010 on timber (the “EUTR”), for which the applicable date remains 30 December 2026.

In preparing for the Regulation to take effect, undertakings must first ascertain which products are relevant, their role within the supply chain and the obligations that follow from it and then assess whether their internal procedures are adequate to meet those obligations. This exercise may raise questions of interpretation, in respect of which legal advice from practitioners experienced in this area can assist in determining the correct position.

As regards the products concerned, the Regulation applies to seven relevant commodities, namely cattle, cocoa, coffee, oil palm, rubber, soya and wood, together with the derived products expressly listed in Annex I. Accordingly, it is not sufficient to establish that a product is linked to one of those commodities to determine whether it falls within the Regulation’s scope: its inclusion in Annex I must also be verified by reference to the applicable tariff classification codes.

The applicable obligations vary according to an undertaking’s role in the supply chain and its size. The Regulation distinguishes operators from downstream operators and traders, imposing specific requirements on each category. An undertaking’s classification depends on the activities it actually carries out, which may include production, import, processing, marketing or export of relevant products.

Due diligence: what to check and how

In substantive terms, relevant products must be “deforestation-free” and must have been produced in compliance with the relevant legislation of the country of production. This encompasses, among other matters, land use rights, labour rights, and tax, anti-corruption, trade and customs rules, insofar as they bear on the legal status of the area of production.

Compliance with these requirements is verified by those subject to the obligation, through a due diligence process that addresses both environmental considerations and the legality of production. The process comprises the collection of information and, where the legislation requires, the assessment and, where necessary, the mitigation of the risk of non-compliance.

Operators subject to the due diligence obligation must complete the process before placing the relevant products on the market or exporting them and must submit a due diligence statement through the EU information system, subject to any applicable simplifications.

The requirements applicable to the statement differ according to whether the transaction concerns an import, a place on the market or an export, consistent with the Regulation’s broader aim of enhancing transparency across the product supply chain.

For products produced in countries classified as “low risk”, including Italy, simplified due diligence is available, subject to the conditions laid down in the Regulation, although the obligation to collect information continues to apply. A separate, simplified regime applies to micro or small primary operators, who submit a one-off simplified declaration rather than a full due diligence statement.

Action plan: from obligations to business procedures

Once the applicable obligations have been identified, the next step is to embed them within the undertaking’s operations.

The undertaking should verify that the documents required by reason of their role can be linked to the products it handles and relied upon to satisfy the applicable requirements. The collection of supplier declarations should accordingly be tailored to the information genuinely required.

From an organisational standpoint, it is advisable to establish clearly who is responsible for collecting and retaining information, who performs any required checks and who assesses gaps in the documentation. It is likewise useful to determine how additional information is to be requested and how to proceed where a supplier fails to respond in sufficient time to satisfy the applicable requirements. Information should remain readily retrievable throughout the prescribed retention periods and available for inspection by the competent authorities.

To test whether these arrangements operate effectively, an undertaking may trace an actual order and verify whether the relevant documents are correctly linked to the products concerned and whether any missing information is identified and addressed promptly. An internal simulation of this kind can expose weaknesses before they affect the supply chain.

Preparing an undertaking for the EUDR means embedding the applicable obligations within its business processes, supported by workable procedures and clearly assigned responsibilities. Coordination between legal expertise and operational functions can

help translate the regulatory framework into solutions tailored to the particular features of the supply chain in question.