Manual Compliance 'Impossible' for New EU Anti-Deforestation Rules, Panelists Say

Although some industries may initially have an easier time complying with the EU’s new anti-deforestation rules when they take effect at the start of next year, others may face a learning curve trying to ramp up their due diligence efforts, supply chain sustainability lawyers and advisers said this week. They also warned that EU companies that trade in large volumes of goods subject to the new law likely won’t be able to comply using only a manual due diligence process.

The law, which starts to take effect for certain companies Dec. 30, sets mandatory due diligence rules for traders who import or export palm oil, beef, timber, coffee, cocoa, rubber and soy to or from the EU market (see 2307270041).

The cocoa and coffee industries may at first have a smoother compliance transition than other industries, Marissa Brock, senior director of policy and government affairs at supply chain tracing firm Sourcemap, said during a webinar this week hosted by her firm and Ernst & Young. She said this is “something that they've been thinking about for a while,” so they may have a “little bit of a head start.”

But she also said it likely won’t take long for companies in other sectors to catch up. She pointed to similar due diligence laws introduced in the U.S. for imports suspected of being made with forced labor, which initially focused on industries such as apparel and textiles, but has since expanded.

“Those of us who worked in mapping for a long period of time know that apparel and textiles have dealt with issues around forced labor and child labor in their supply chains for quite a long time, and so they were a little bit more prepared than some of the other industries,” Brock said. But since the Uyghur Forced Labor Prevention Act took effect, she said, other sectors got “up to speed very, very quickly, because they have had to.”

Starting Dec. 30, certain EU businesses will need to begin submitting due diligence statements to the bloc that certify their products didn’t contribute to deforestation. Companies that import or export large quantities of goods may need to craft an “incredibly high number of due diligence statements that would need to be generated very, very, very quickly,” Brock said.

Jeroen Truin of Ernst & Young said some large companies won’t be able to keep up if they’re manually submitting those statements. “This cannot be a manual exercise,” he said. “This needs to be automated, because otherwise it's impossible to actually be compliant.”

While Truin said he’s not expecting the EU to immediately “stop every single good” on Jan. 1 for a compliance check, “if you’re not able to at least make the submission of that statement, you may actually see that supply chain disruption.”

Truin also stressed the importance of companies making sure all the information included on their due diligence statement is accurate, and that they can trace their products through their supply chains. “You need to be able, in every single step of the supply chain, to eventually track and trace,” he said, adding that the process is likely more difficult for “really long and complex” supply chains such as wood, paper and cocoa.

Stephan Geiger of Ernst & Young said the new law also is causing uncertainty for companies located in countries that aren’t part of the EU customs union but that still do much of their business in Europe. He said he has multiple clients in Switzerland who are “quite nervous” about losing business as a distributor if they can’t prove their compliance with the new rules.

He said those clients are asking their EU business partners: “How much pushback is there going to be?”