Reed Smith In-depth

On 17 November 2021, the European Commission (Commission) proposed a Regulation to curb EU-driven deforestation and forest degradation. The Council and the European Parliament reached a joint provisional agreement in December 2022. Regulation (EU) 2023/1115 on making available on the Union market as well as export from the Union of certain commodities and products associated with deforestation and forest degradation (the Regulation) was published in the Official Journal of the European Union on 9 June 2023 and will enter into force 20 days after its publication, on 29 June 2023.

In essence, to fight climate change and biodiversity loss, the Regulation obliges companies to ensure that cattle, cocoa, coffee, palm oil, rubber, soya and wood products sold in the EU and exported from the EU have not led to deforestation and forest degradation. To do so, the Regulation sets mandatory rules on due diligence and data collection, as well as reporting obligations on all operators and traders who make available on the EU market, or export from the EU market, the covered commodities and their derived products.

The Regulation aims to incentivise the transition to sustainable supply chains by encouraging sustainable behaviour from exporting businesses in all producing countries of deforestation-related products, within and out of the EU. The Regulation intends to achieve a cascade effect from rural producers all the way up to national governments by encouraging companies to relocate their operations away from high-risk producers to low-risk commodity-producing manufacturers. 

Below, our supply chain team explains some key elements of the Regulation, its practical implications for operators and traders, and provides a comparative analysis with the upcoming UK deforestation due diligence regime.

Key elements

Deforestation: The Regulation provides a broad definition of the term ‘deforestation’ that covers “the conversion of forest to agricultural use, whether human-induced or not”. The European Parliament wanted this definition to also include the conversion of “other wooded land” and “other natural ecosystems”, such as grasslands, peatlands and wetlands but the final text did not include such reference. However, within one year of the entry into force of the Regulation, the Commission will conduct an impact assessment to determine whether to broaden the scope of the definition.

The term ‘agricultural use’ covers the use of land for the purpose of agriculture, including for agricultural plantations and set-aside agricultural areas, and for rearing livestock.

Covered products: The Regulation targets seven forest-risk commodities (relevant commodities) – cattle, cocoa, coffee, palm oil, rubber, soya and wood – as well as “relevant products” which are products that contain, have been fed with or have been made using the relevant commodities. Annex I of the Regulation provides a list of relevant products, identifying them by their EU Combined Nomenclature (CN) codes, per relevant commodities (e.g., leather, chocolate, furniture, etc.).

Covered activities: Three main activities are targeted by the Regulation: (i) the “placing” and “making available” of forest-risk commodities (relevant commodities) and their derived products (relevant products) on the EU market, (ii) exporting these products from the EU, or (iii) supplying in any way forest-risk commodities and their derived products for distribution, consumption or use on the Union market from non-EU businesses.