The EUDR

What are the obligations of operators further down the supply chain?

Operators further down the supply chain are those who transform a product listed in Annex I (which has already been subjected to due diligence) into another product listed in Annex I. Their obligations vary depending on whether they are Small and Medium-sized Enterprises (SMEs) or not. When submitting their due diligence statement in the Information System, non-SME operators further down the supply chain may refer to due diligence performed earlier in the supply chain by including the relevant reference number for the parts of their relevant products that were already subject to a due diligence. However, they are obliged to ascertain that due diligence was carried out and they retain legal responsibility in the event of a breach of the Regulation. For parts of relevant products that have not been subject to due diligence, non-SME operators shall exercise due diligence in full and submit a due diligence statement. SME operators further down the supply chain are subject to the same obligations as an operator and retain legal responsibility in the event of a breach of the Regulation. However, in respect of parts of their products that have been subject to a due diligence, they are not required to a) exercise due diligence for parts of their products that were already subject of due diligence exercise; b) to submit a due diligence statement in the Information System. However, they still have to provide due diligence reference numbers obtained from previous steps in the supply chain. For parts of relevant products that have not been subject to due diligence, SME operators shall exercise due diligence in full and submit a due diligence statement.

Which companies are non-SME traders and what are their obligations?

A non-SME trader is a trader which is not a small and medium-sized undertaking pursuant to Article 2(30) of EUDR. This provision refers to the definitions provided in Article 3 of Directive 2013/34/EU. This will essentially include any large company that is not an operator and commercialises the products included in Annex 1 on the market, for instance, large supermarket or retail chains. By virtue of Article 5(1) of the Regulation, the obligations of large traders are the same as those of large downstream operators: a) they need to file a due diligence statement; b) when doing so, they may rely on the due diligence previously carried out in the supply chain but, in such a case, they are subject to the provisions of Article 4(9); c) they are liable in case of breach of the Regulation, also for a due diligence carried out or a due diligence statement submitted by an upstream operator.

What are the challenges and opportunities of EUDR compliance?

"Challenges: Traceability: Tracking the origin of raw materials is complex, especially when dealing with products that go through multiple stages of processing. Compliance Costs: Small and medium enterprises (SMEs) may find the costs of compliance daunting, as it may require investments in new technologies or processes. Supply Chain Complexity: Many businesses have global supply chains with multiple layers, making it difficult to ensure every link in the chain meets deforestation-free standards. Data Collection and Management: Gathering the necessary data and documentation to prove compliance and prepare for due diligence checks can be a significant challenge. Accurate Farm Mapping: Ensuring accurate farm mapping, especially for smallholders, is crucial for compliance and requires proper training and tools. Opportunities: Market Differentiation: Companies that achieve deforestation-free compliance can differentiate themselves in the market, appealing to eco-conscious consumers, investors, and partners. Access to New Markets: Compliance opens doors to markets with stringent environmental standards, like the European Union. Supply Chain Resilience: Supply chain traceability offers a better understanding of supply chain operations, setting companies up for agile, resilient success. Enhanced Brand Value: Companies committed to sustainable practices often see a boost in their brand perception, investor interest, and customer loyalty. Operational Efficiencies: Streamlining supply chains for sustainability can lead to cost savings and operational improvements. Risk Mitigation: Reducing dependency on deforested lands lowers the risk of regulatory fines and supply chain disruptions. These challenges and opportunities highlight the need for businesses to adopt a proactive and comprehensive approach to EUDR compliance, leveraging technology and sustainable practices to mitigate risks and unlock new opportunities for growth and market differentiation."

How are cooperatives addressing field data quality for EUDR compliance?

"Cooperatives are taking several steps to address field data quality for EUDR compliance: Proactive Support for Government Policies: Cooperatives are aligning their efforts with government initiatives like the National Cocoa Traceability Systems (NCTS) in Ghana and Côte d’Ivoire. They are ensuring they are prepared to provide high-quality data that demonstrates compliance with traceability and due diligence requirements. Improving Data Collection and Management Capabilities: Cooperatives are actively working to enhance their data collection and management skills. They are seeking training and resources to improve traceability, staffing, literacy, digital literacy, and data interpretation. By systematically improving these capabilities, cooperatives can enhance data quality, leading to better traceability, transparency, and easier certification. Implementing Data Governance Policies and Strategies: Cooperatives are establishing clear data governance policies and strategies to address issues related to data ownership, security, privacy, access, use, sharing, and storage. This helps clarify roles and responsibilities regarding data management within the cooperative and with external stakeholders. "

How can cooperatives improve field data quality for EUDR compliance?

"Cooperatives can improve field data quality for EUDR compliance in three ways: Proactively support government policies: Cooperatives can work with government initiatives like the National Cocoa Traceability Systems (NCTS) to ensure their data collection and management practices align with national standards and requirements. Improve data collection and management capabilities: Cooperatives can invest in training and resources to enhance their data collection and management skills. This includes training on digital literacy, data interpretation, and traceability. Implement data governance policies and strategies: Cooperatives can establish clear policies and strategies for data governance, including data ownership, security, privacy, access, use, sharing, and storage. This can help to ensure that data is collected and managed responsibly and transparently."