Risky Business: Exploring What the EU Deforestation Regulation & Evolving Disclosure Requirements Mean for Your Company
Insights
The recently adopted European Union’s Deforestation Regulation (EUDR) prohibits relevant commodities and products from being placed on the EU market unless they are deforestation-free. As of 30 December 2024, companies will be required to exercise detailed due diligence and verification to prove compliance for products and related commodities.
Healthy forests are integral sources of both ecosystem services –such as carbon sequestration—and livelihoods for countless communities across the world. However, unsustainable agricultural practices, illegal logging, and rapid development are driving deforestation. The consequences of which are not just felt locally but have global ramifications.
Deforestation is one of the largest sources of global annual emissions and leading contributors to biodiversity loss. The risk of human rights violations and land use conflict are often linked with deforestation. Whether you’re a clothing brand sourcing cellulosic fibers or a coffee roaster filling morning cups, addressing deforestation within your supply chain is one of the most significant measures you can take to reduce your emissions footprint and promote ethical supply chains.
Evolving Regulatory Landscape Puts Value on Forests
Growing legislation such as the European Union Deforestation Free Products Regulation (EUDR) has sent a resounding signal to companies that the global economy is inextricably linked and dependent upon nature and that the EU is serious about tackling the risk deforestation poses to the twin crises of climate change and nature loss. The cost of inaction from not addressing deforestation is evident in this legislation, too. The EU requires member states to establish penalties, including fines up to 4% of annual turnover to account for the damage done from deforestation-linked commodities entering the EU. This equates to a €2 million fine for a company with an annual turnover of €50 million – a significant financial loss that would raise concerns from investors and chief risk officers alike.
There have also been major shifts within the landscape of voluntary requirements as well. Setting a zero-deforestation commitment is now a prerequisite for Science Based Targets for climate for companies with forest, land use, and agriculture (FLAG) emissions. The Science Based Targets Network similarly requires companies to include a No Conversion of Natural Ecosystems target within their requirements for SBTs for Nature. This push will require companies to examine their supply chains and sourcing practices, expand their responsible sourcing commitments to tackle all key deforestation-linked commodities, and continuously monitor and engage with their supply chain to ensure conformance.
Ensuring Your Deforestation Policy Aligns with Best Practice
Supply chains are complex, and tackling deforestation can be equally complicated. Anthesis Group’s Forest Positive team offers advice and technical support to our clients on their journeys to create deforestation- and conversion-free supply chains. In doing so, we utilize The Accountability Framework, a consensus-based guide for achieving ethical supply chains in agriculture and forestry. It offers clear guidance on implementation, monitoring, verification, and reporting on company progress toward addressing key environmental and social risks. Its accessibility and robust guidance are now integrated into leading initiatives such as the Science Based Target initiative (SBTi) and CDP.
The Accountability Framework was launched in 2019 by a global coalition of environmental and human rights organizations, otherwise referred to as AFi Coalition. The Framework is based on international norms, good practices, and broad consensus. It represents the consensus of the AFi Coalition, as well as the expectations from leading companies, financial institutions, and international norms.
Your Partner in Accelerating a Forest Positive Journey
Anthesis is pleased to announce that we are now recognized by the AFi as a Delivery Partner, signaling our close collaboration with leading experts in the conservation community. Our Forest Positive experts utilize AFi’s Core Principles as a guide to support companies across a variety of sectors in assessing, prioritizing, and addressing deforestation-related risk, through services such as:
- Benchmarking: Benchmarking responsible sourcing policies and practices, targets, commitments, and procedures against the Accountability Framework to identify gaps and improvement opportunities.
- Target Setting & Road-Mapping: Setting strategic, context/science-based goals and targets that will drive corporate action to meet no-deforestation goals. Developing accompanying roadmaps with clear milestones to guide activities and assess progress towards targets.
- Policy Development & Implementation: Establishing/revising responsible sourcing policies. Creating training resources and developing supplier data collection systems to action responsible sourcing policies and evaluate sourcing activities. Embedding deforestation commitments into company’s internal business activities and investment strategies.
- Supplier Engagement: Engaging with suppliers through training, data collection, and policy alignment activities.
- Monitoring & Verification: Developing and/or utilizing monitoring and verification systems to detect deforestation risk and analyze resulting data.
- Communication & Progress Reporting: Providing internal and external communication support to highlight progress and performance. Transparently communicating an organization’s deforestation-free strategy, key metrics, initiatives, and progress towards targets.
- Human Rights/Social Impact: Conducting human rights impact assessments, investigation, and due diligence, assisting clients with developing ESG and human rights strategy and tools.
- Promoting Collaboration: Identifying opportunities to engage in multistakeholder partnerships that promote change at all levels-from local communities to restoring landscapes to transforming sectors.
We are the world’s leading purpose driven, digitally enabled, science-based activator. And always welcome inquiries and partnerships to drive positive change together.
