EU Acts Against Deforestation with Regulation 2023/1115

In an effort to combat global deforestation and forest degradation, the European Union has introduced Regulation (EU) 2023/1115. This regulation, which became enforceable on June 29, 2023, addresses the environmental and social impacts of deforestation driven by EU consumption and aims to mitigate climate change and biodiversity loss.

Overview of Regulation (EU) 2023/1115

Regulation (EU) 2023/1115 focuses on the availability and export of certain commodities and products associated with deforestation and forest degradation within the EU market. It replaces the previous Regulation (EU) No 995/2010, expanding its scope to cover a broader range of commodities and products, and introduces stringent due diligence requirements for operators and traders.

Objectives and Scope

The primary objectives of the regulation are to:

1. Reduce Deforestation and Forest Degradation: By ensuring that products placed on the EU market or exported from it do not originate from deforested land or contribute to forest degradation since December 31, 2020.
2. Promote Sustainable Supply Chains: Operators and traders must implement due diligence systems to verify that their products are deforestation-free and comply with the legislation of the country of production.
3. Enhance Transparency and Accountability: The regulation mandates detailed reporting and risk assessment, increasing transparency along supply chains.

Key Provisions

1. Due Diligence Requirements: Operators must collect detailed information about their products, perform risk assessments, and implement risk mitigation measures. They are required to provide due diligence statements, accessible to authorities and, to some extent, the public.
2. Geographical Risk Assessment: The European Commission will classify countries or regions as low, standard, or high-risk, influencing the level of scrutiny and due diligence required.
3. Regular Compliance Checks: National authorities will conduct checks, and non-compliance could lead to significant penalties, including fines up to 4% of a company’s EU turnover, confiscation of products, or exclusion from public funding.

Origin of the Issue

The EU's consumption has been a significant driver of global deforestation, particularly in tropical regions. The new regulation acknowledges this responsibility and seeks to mitigate its impact by promoting deforestation-free products. Cooperation with producer countries and other major consumer markets is emphasized to achieve global sustainability goals.

Affected Commodities and Products

Regulation (EU) 2023/1115 aims to mitigate the EU's contribution to deforestation and forest degradation by targeting a wide range of commodities and their derived products. This regulation encompasses several critical areas:

1. Commodities:

   • Cattle: The regulation includes cattle products such as beef and leather. The expansion of pastureland for cattle rearing is a significant driver of deforestation, particularly in regions like the Amazon rainforest.
   • Cocoa: Cocoa farming, often linked to deforestation in West Africa, is targeted due to its extensive land use and impact on tropical forests.
   • Coffee: Coffee cultivation, especially in Central and South America, frequently involves clearing forest land, making it a key commodity under this regulation.
   • Palm Oil: This versatile commodity is a major cause of deforestation in Southeast Asia. The regulation seeks to ensure that palm oil entering the EU market is sourced sustainably.
   • Rubber: Used extensively in manufacturing tyres and other products, rubber plantations are a significant factor in forest loss.
   • Soy: Widely used for animal feed, soy farming is responsible for large-scale deforestation, particularly in South America.
   • Wood: The regulation covers timber and other wood products, addressing illegal logging and unsustainable forestry practices.

2. Derived Products:

   • Leather: Derived from cattle, leather is a common material in the fashion and automotive industries.
   • Chocolate: Made from cocoa, chocolate production impacts deforestation in cocoa-producing regions.
   • Tyres: Manufactured from rubber, tyres are essential in the automotive sector and contribute to deforestation.
   • Furniture: Often made from wood, furniture production is a significant driver of logging activities.

This regulation aims to ensure that all these commodities and products are "deforestation-free," meaning they must not come from land that was deforested after December 31, 2020. Additionally, they must comply with the legal requirements of their country of origin, covering aspects like land use rights, environmental protection, and labor laws.

By enforcing these requirements, the regulation promotes sustainable supply chains and reduces the EU's environmental impact. It emphasizes the need for detailed due diligence and transparency from operators and traders, ensuring that products reaching the EU market do not contribute to deforestation and forest degradation globally.

Enforcement and Penalties

Regulation (EU) 2023/1115 establishes stringent enforcement mechanisms to ensure compliance. Here are the key aspects:

1. Due Diligence Statements: Operators and traders must provide due diligence statements to demonstrate that their products are deforestation-free and comply with relevant legal requirements.

2. Regular Checks: Competent authorities in EU Member States are tasked with carrying out regular checks on operators and traders to verify compliance. These checks can occur without prior warning, especially for high-risk products.

3. Penalties for Non-Compliance:

   • Fines: Up to 4% of the company's annual EU-wide turnover, proportionate to the environmental damage and the value of the non-compliant products.
   • Confiscation: Confiscation of the products or the revenues gained from them.
   • Exclusion from Public Procurement: Temporary exclusion from public procurement processes and public funding.
   • Market Restrictions: For serious or repeated infringements, there can be a prohibition on placing the products on the EU market or exporting them, and a ban on using the simplified due diligence process.

4. Transparency and Accountability:

   • Operators must ensure their due diligence systems are transparent and include robust risk assessment and mitigation measures.
   • This involves collecting detailed information, conducting independent audits, and providing necessary documentation to demonstrate compliance.
   • The regulation emphasizes the importance of supply chain transparency, requiring companies to communicate due diligence statements down the supply chain.

Conclusion

Regulation (EU) 2023/1115 represents a significant step towards addressing the environmental challenges posed by deforestation and forest degradation. By imposing rigorous due diligence requirements and promoting sustainable supply chains, the EU aims to lead global efforts in protecting forests and combating climate change.