EUDR, deforestation regulation, means fighting against deforestation, climate change and biodiversity loss. The aim of regulation is to ensure that companies don’t collect raw materials for their production from deforested areas. The regulation covers a wide range of commodities that are linked to deforestation, including soy, palm oil, beef, wood, cocoa, and coffee, as well as products derived from these commodities like leather, chocolate, and furniture. If a company is dealing with these commodities and derived products, it needs to comply with the regulation.
What actions does the EUDR require from companies?
Regulation has a big impact on companies, not only in terms of new data requirements like geographic coordinates but also in relation to daily business, manufacturing and logistics processes.
If a company is dealing with EUDR-regulated commodities and derived products, it needs to comply with the regulation starting 1.1.2025. Companies need to list all the EUDR-related commodities and products they use in their business operations, how they use those (e.g. in manufacturing processes), which employees are involved in the regulation, who need to be involved in upstream operations (e.g. material suppliers) and trace their own data for distributors, retailers, and other customer-facing parties. To achieve comprehensive transparency for the commodities, every company in the supply chain needs to do their own part.
To reach a compliant supply chain it is essential to develop both business processes and IT solutions of the value chain. Technically, the solution is highly dependent on the EU TRACES NT platform and its functionality.
From the end-user and business standpoint, the success of the solution depends on the people working in the actual context, such as in warehouses, procurement, product manufacturing, and logistics. The EUDR increases the level of responsibility and the number of tasks in daily operations, making it essential to design tools and clear guidance for employees.
What we have learned so far
Based on what we have observed, companies are trying to find out how to reach needed compliance for a set of requirements that is still in flux. How the requirements should be translated into actionable steps across various contexts and businesses.
We have also noticed that companies differ a lot related to sustainability and EUDR goals. Some operators demand more detailed data about the origin of the raw material than others. Therefore, subcontractors and suppliers need to be aware of customers’ specific data and process requirements.
Companies also understand that EUDR isn’t only about regulation, it´s about resilient business. Transparency with the supply chain will give (maybe uncover) a detailed understanding of the buying habits and processes. Climate change will affect material availability in the future, so lack of material affects the entire value chain and the operators in it. Companies share the same risks.
Our top recommendations related to your EUDR solution
In our approach, we combine our expertise in user insight, business strategy, and transformation design with data and integration architecture and comprehensive lifecycle management. To achieve supply chain transparency, it requires collaboration across the business networks. Transparency fosters resilience, enabling a company to respond and adapt to disruptions or unexpected changes that could harm its business operations, people, brand, or reputation.
1. Understand the needs and the current state
Even though the deadline is knocking behind the door, don’t rush. Before jumping into the IT or data solution, it´s good to take a breath and think about what matters the most in the long run. Combine all the relevant experts and create a holistic understanding of the current situation and the demands for the different functions of the organisation imposed upon by the upcoming regulation. What are the requirements, what are the unknowns in their own context and finally what is the solution that matches the data, operations and business processes?
2. Define together how EUDR affects business and what are the risks and unknown issues
- What material, products and parts need to be traced?
- What is your role, are you importing commodities into the EU, or are you buying processed materials or products?
- Are you buying commodities or products from certain regions that have higher sourcing risk than others? Remember that suppliers from high-risk areas must provide additional information to meet EUDR requirements.
- Do you have internal capabilities or solutions to do the tracing in your own production, meaning tools, data, systems and people?
- How to transfer data between upstream suppliers and downstream customers?
3. Create the minimum viable solution and conduct a risk assessment
- Define the data flows in the whole supply chain
- Define data models and the key systems used
- Plan how to trace through mass production phases, like silos and tanks
- Involve suppliers and customers in agreeing on the data exchange way of working and systems
- Involve internal employees who are involved in the traceability to give their own needs and concerns
- Develop data-based tools and processes for tracing the material that works primarily through TRACES API, but be prepared to have a backup plan too
4. Plan forward. Think about the business value and scalability of the solution you are building
- What are the business benefits of your more traceable value chain?
- How to scale the solution into other regulations, directives or new commodities?
- Innovate how to get value out of the data. Could you generate more business benefits by sharing additional data with your customers?
- Gather continuous business insight from the network. Find out what EUDR and other business and sustainability targets are, what the challenges are and how to develop common capabilities together.
We currently support our customers in their EUDR journeys by clarifying and prioritising the regulation and business needs, finding out the gaps between the data requirements and the current data availability and developing solutions for production traceability. Please contact me if you want to talk more.
