EU deforestation regulation forces companies to act

Anyone who trades in or uses the raw materials soy, oil palm, cattle, coffee, cocoa, rubber and wood and certain products made from them should take action as soon as possible. This is because the EU’s Deforestation Regulation imposes a number of new due diligence obligations on companies. According to the current legal situation, the regulation will apply from December 30, 2025. On November 26, 2025, the EU Parliament, like the Council before it, voted to postpone the start date to December 30, 2026. Small and micro-enterprises will not even be covered by the regulation until June 30, 2027. The postponement and any adjustments to the content still have to be negotiated and a final resolution adopted. The Deforestation Ordinance regulates: Anyone placing the aforementioned raw materials or relevant products on the market within the EU must be able to guarantee that no areas have been deforested for this purpose since December 31, 2020 and that they have been produced in accordance with the legislation of the country of production. Companies whose own products are not on the list but which use affected raw materials or products should also take action. This is because the products concerned could become scarce.

The EU regulation on deforestation-free supply chains (EU Deforestation Regulation, EUDR) came into force in June 2023. Since then, it has already been postponed once. On October 21, 2025, the EU Commission published a comprehensive proposal for a simplification of the EUDR, which, however, did not yet include a further general postponement.

Raw materials and products concerned must be deforestation-free

The EU deforestation regulation applies to the following commodities: cattle, cocoa, coffee, oil palm, rubber, soy and wood. Not all products made from it are covered, but only those listed in Annex I of the Deforestation Regulation. Chocolate and pure cocoa powder, for example, are included, but not cookies baked with cocoa butter. Tires and inner tubes are also affected as rubber products. However, the regulation does not currently apply to the car or bicycle end product itself.

However, the list in Annex I is subject to regular review and expansion.

These companies are obliged to

Market participants and traders are subject to due diligence obligations under the Regulation.

Market participants are companies that place relevant raw materials or products on the EU market, i.e. make them available on the EU market for the first time or export them from the EU. Traders are companies that do not make the goods available on the EU market for the first time. An estimated 370,000 market participants alone are covered.

The individual duties of care also depend on the role and size of the company. The regulation distinguishes here between SMEs and non-SMEs.

Relevant raw materials and products must meet these requirements

Market participants may only market or export the relevant raw materials and products in the EU if three cumulative requirements are met: The relevant raw materials and products must

• be deforestation-free,
• be produced in accordance with the relevant legislation of the country of production and
• a declaration of due diligence must be available for them.

The same obligations also apply to non-SME traders.

The burden of proof for the fulfillment of these requirements lies with the market participants or traders. Conversely, this means that if even one of the three conditions cannot be proven or is simply not verifiable, the raw material or product concerned may neither be placed on the market in the EU nor exported.

What does “deforestation-free” mean?

According to the ordinance, a raw material is deforestation-free if it was not produced on land that was deforested after December 31, 2020. Deforestation is defined as the conversion of forests into agricultural land.

Timber products are deforestation-free if no forest degradation has been caused on the affected areas as of this date.

The following applies to relevant products: These are deforestation-free if they contain, were fed with or were produced using relevant raw materials that were themselves produced completely deforestation-free.

Legality according to the legislation of the country of production

Relevant raw materials and products must also comply with the relevant legislation of the country of production. Art. 2 No. 40 of the Deforestation Regulation defines which regulations are involved here. This includes legislation relating to land use rights, environmental protection and forestry-related regulations, as well as human rights protected under international law, labor rights, tax regulations, anti-corruption, trade and customs regulations. Local suppliers must comply with these requirements so that the raw materials and products are marketable in the EU. For timber products covered by the FLEGT Regulation, a valid license in accordance with this Regulation is sufficient.

The due diligence declaration confirms conformity with the Deforestation Ordinance

The third prerequisite for the marketability of the relevant raw materials and products is the due diligence declaration. The information required in the declaration is listed in Annex II of the Deforestation Regulation. The declaration must be submitted electronically to the competent authorities before being placed on the market, exported or made available on the market. Market participants and traders confirmed with the submission that there is no or only a negligible risk of a violation of the Deforestation Ordinance with regard to the raw materials or products to be specifically designated.

The three-stage due diligence process

Market participants and non-SME traders must comply with the Art 8 of the Deforestation Regulation: Collect information, carry out a risk assessment and – where necessary – implement risk minimization measures. Companies must also anchor their due diligence process in the company’s organization. In contrast to some of the provisions of the Supply Chain Due Diligence Act, merely making the best possible efforts to collect information, assess risks and minimize risks is not sufficient.

What information is required? First of all, the names and product composition, but also the geolocation data of all properties from which relevant raw materials of the product originate. Satellite images can be used to check deforestation and forest degradation after the relevant cut-off date of December 31, 2020. All contact details of the companies involved in the production process must be collected. For legality with local legislation, affected companies must obtain “reasonably conclusive and verifiable information”.

The risk must be assessed on the basis of the information collected. Art. 10 of the Deforestation Regulation lists a number of criteria for this. The evaluation process must be documented and reviewed annually. If the risk assessment indicates a violation of the Deforestation Ordinance, risk minimization measures must be implemented. This can be an independent audit or the procurement of further information that dispels the suspicion of deforestation.

Other obligations under the EUDR

According to the regulation, the entire risk minimization process must be anchored in an appropriate governance structure. A compliance officer must be appointed for non-SMEs. It must be independent, be able to review the strategies and carry out internal controls and procedures. Documentation requirements must also be observed here.

Significant sanctions are imminent

The EUDR does not impose sanctions itself, but leaves this to the member states. However, it does set requirements: Fines must amount to at least 4 percent of annual turnover. EU states can also confiscate goods that violate the regulation. Income generated with them can also be confiscated. The fact that non-compliant relevant raw materials and products are neither marketable in the EU nor can they be exported from the EU is particularly serious.

Quick action is now required

With the vote in the EU Parliament, a further postponement of the start of the EUDR has become very likely. However, the trilogue negotiations are still to come. And now that the Parliament has deviated from the Commission’s proposal, there could well still be changes.

Nevertheless, there is a need for action. Many companies will be directly affected by the Deforestation Regulation, as they must fulfill due diligence obligations as market participants or traders of relevant raw materials or products. The group of indirectly affected companies is much larger: on the one hand, this includes suppliers outside the EU who must cooperate in the clarification and transmission of relevant information and data as well as evidence if they wish to continue selling their goods in the EU. On the other hand, the downstream supply chain is also indirectly affected. Even if a company may not be subject to due diligence itself, it should still take precautions with regard to relevant raw materials and products. In view of the very strict requirements of the new regulation, companies must expect supply chains to break down because legally compliant raw materials or products are no longer available or are not available in sufficient quantities. The simplifications currently under discussion do not affect the import of relevant raw materials and products in particular, so that the operational explosiveness of the regulation remains here and therefore no time should be lost.

The complete implementation must have taken place by the start of application. Supply chains can be very long and opaque in individual cases. Raw materials such as cocoa, soy and palm oil in particular are mixed very quickly and are therefore more difficult to trace. It is therefore necessary to act very quickly, as the players in the upstream supply chain must also be sensitized and instructed. Companies should keep an eye on order lead times and also bear in mind that contracts may need to be adjusted in order to maintain the flow of goods.

Companies should also examine overlaps with existing due diligence processes in their own company in order to utilize synergy effects and establish technological solutions.

You can also find out which questions companies should address in our checklist.