On 6 December 2022 the European Commission, Council and Parliament, concluded their Trilogue discussions, and reached agreement in principle on this innovative Regulation. This comes one year after the pledge to halt and reverse forest loss and land degradation by 2030, signed at the Glasgow Climate Change Conference (COP 26) by more than 140 countries and where EU President Ursula von der Leyen echoed the sentiments of the Commussion's Communication Stepping up EU Action to Protect and Restore the World’s Forests said: “[F]orests are the green lungs of the earth." This is a landmark due diligence regulation, which aims to prevent commodity-driven deforestation and forest degradation in selected supply chains of the EU. Specifically, it aims to curb the EU’s contribution to trade-related global deforestation by keeping products linked to illegal production and deforestation off the EU market. Further, it prohibits the placing on the EU market of certain products if they are not produced according to the local law in producing countries, or if they have led to deforestation or forest degradation. Traders and operators placing products on the EU market, including soy, palm oil, cocoa, beef, coffee or timber, have to assure traceability to plot level, and must have proof of compliance to these new requirements. The regulation is expected to enter into force in May or June 2023, followed by an 18-month implementation period for larger stakeholders and a 24-month period for small and medium-sized enterprises ("SMEs").
Commentators have described the EU regulation as a “paradigm shift” for deforestation, moving from voluntary initiatives towards mandatory legislation. One of the pillars of this regulation is mandatory due diligence. Mandatory due diligence provides that while no country or commodity as such will be banned from the EU single market, companies will not be allowed to sell their products in the EU or export them from the EU without a due diligence statement. In this statement, companies will have to provide information to ensure that the commodities and products are first, deforestation-free, meaning produced on land that was not subject to deforestation or forest degradation after the cut-off date of 31 December 2020 (as defined by SDG target 15.2) and second, compliant with all relevant applicable laws in force in the country of production, including human rights and Indigenous Peoples’ rights laws. To enable “competent” EU authorities to verify compliance with the deforestation-free requirement, companies also have to collect precise geographical information on the farmland where the commodities that they source have been grown. A country benchmarking system, currently proving controversial, to be developed by the Commission, will “assess countries or parts thereof and their level of risk of deforestation and forest degradation.” This regulation will complement the EU's Sustainable Corporate Governance ("SCG") initiative with the SCG targeting corporate value chains generally, as well as setting out due diligence obligations.
Two further Directives which apply to corporate entities must also be considered in this context. On 5 January 2023 the Corporate Sustainability Reporting Directive ("CSRD") entered into force. With this comes a new era of sustainability reporting.
In addition to addressing the sustainability of supply chains, all three initiatives have the common characteristic of extending jurisdictional reach in an assertive way from parent company through to subsidiaries located in other jurisdictions.
"Unfortunately, the Trilogue has not led to the inclusion of other vulnerable ecosystems important for biodiversity and climate, such as “other wooded lands” including savannahs, wetlands, peatlands or biodiversity rich grasslands"
"No later than one year after the Regulation enters into force the Commission plans to reassess whether and how to include “other wooded lands”, and within two years if other ecosystems with high carbon storage and biodiversity value can be included. It is important to not only protect forests, but all ecosystems threatened by commodity trade as soon as possible."
Alberto Arroyo Schnell, Head of Policy and Programme at IUCN Europe
Resources: