What brands need to know about the EU Deforestation Regulation

The EU Deforestation-Free Regulation (EUDR) aims to tackle deforestation by regulating the import and export of certain commodities associated with forest loss into the EU market. Introduced as part of the EU Green Deal, the EUDR requires companies to ensure their supply chains do not contribute to deforestation. Although its initial scope is focused on commodities such as wood, leather, soy, and palm oil, industries like textiles and fashion must assess the indirect risks posed by their sourcing of specific raw materials.

Understanding the Core Goals of the EU Deforestation Legislation

The EUDR, adopted in December 2022 and set to be fully enforced by December 2024, applies to specific commodities that are linked to deforestation. The targeted commodities include soy, palm oil, beef, coffee, cocoa, wood, and rubber, as well as certain products derived from these raw materials. For SME´s and micro enterprises the EUDR will come into place on June 30, 2025 with a simplified Due-diligence procedure.

However, ready-made garments and shoes are not directly impacted by the EUDR, as the customs tariff numbers for these products are not listed in the regulation’s annex. This is a significant clarification, meaning that while many raw materials used in the textile and footwear industries may be subject to EUDR requirements, the finished products themselves are not.

Specific Due-Diligence Requirements

For businesses handling materials covered by the EUDR, the regulation mandates a due-diligence process to ensure the commodities they use do not contribute to deforestation. These requirements include:

Risk Assessment: Businesses must identify and assess the risk of deforestation within their supply chains (based on Geo-Location and country of origin), particularly for wood, leather, or rubber-based materials.
Risk Mitigation: If any deforestation-related risks are identified, companies are obligated to take action to mitigate these risks. This could include switching to certified suppliers or improving supply chain traceability.
Reporting and Transparency: Companies must submit due-diligence statements for each product and make data available for inspection by EU authorities (e.g. customs) to prove compliance with the EUDR.

Although finished garments and shoes are exempt from the EUDR, companies sourcing wood-based fibres, leather, or rubber must still be aware of the regulation, and help their suppliers to meet the requirements for those raw materials. Therefore, while the final products may be excluded, the responsibility to track and trace the materials remains relevant.

Related products and goods may not be placed, made available or exported on the EU market unless they are:

Does the EUDR apply to your company?

The EUDR applies to any company, large or small, that places relevant commodities on the EU market. This includes:

Importers of wood, leather, or rubber-based materials and products.
Producers within the EU using these raw materials.
Traders who handle these materials within the EU.

You can ask yourself – “Am I the end-user or am I a trader or operator (importer, exporter or producer)?” As a trader and operator you need to ensure that the products fulfill the requirements of the EUDR.

Textile and footwear brands that use wood-based fibres (e.g., viscose, modal), leather, or natural rubber should be vigilant, even if their final products — garments and shoes — are not directly regulated. Sourcing compliance for these materials is still important for avoiding legal risks.

How Can Companies Be Prepared for the EUDR?

Textile and fashion companies can prepare for the EUDR by focusing on the sourcing of specific raw materials, even if their final products are not directly included. Key steps include:

Supply Chain Mapping: Identifying the origins of raw materials like leather or wood fibres used in garments and accessories.
Supplier Engagement: Ensuring suppliers of leather, wood, and rubber comply with sustainability standards and provide certification.
Geo-Location Tracking: Implementing traceability measures for the raw materials used to ensure they are sourced from deforestation-free areas.

The Importance of Geo-Location Requirements

One of the critical requirements of the EUDR is the use of geo-location data for commodities like wood, leather, and rubber. Companies need to provide precise geographic data for the origin of these materials to demonstrate compliance.

For textile companies using wood-based fibres or leather, it is essential to ensure that suppliers can offer the required geo-location data to verify that the materials are sourced from deforestation-free regions, even if the finished products are not listed in the EUDR annex.

Certification and Its Role in Compliance

Certification plays a vital role in demonstrating compliance with the EUDR. Companies sourcing wood, leather, or rubber should look for certification schemes such as the Forest Stewardship Council (FSC) for wood-based materials or recognised certifications for sustainable leather.

However, certification alone may not be sufficient, as the EUDR also requires companies to provide geo-location data and conduct risk assessments. Certification is an important tool but must be part of a broader compliance strategy.

Industry Responses: Challenges and Opportunities

While the exclusion of ready-made garments and shoes may seem like a relief for fashion brands, the use of raw materials like leather and wood still presents challenges:

Challenges:

Complex Supply Chains: Textile companies often have complex supply chains, making it difficult to trace the origins of raw materials like leather or wood fibres.
Costs: The financial burden of implementing traceability and certification systems can be high, especially for small businesses.
Data Gaps: Acquiring the necessary geo-location data for materials sourced from deforestation-prone areas may prove challenging.
Risk of Product exclusion: If businesses fail to meet the EUDR’s requirements, their products could be excluded from the EU market entirely.
Penalties: The EUDR includes strict penalties for non-compliance, such as fines up to 4% of a company’s annual EU turnover, product confiscation, and potential exclusion from public procurement contracts.

Opportunities:

Sustainability Leadership: Companies that proactively ensure deforestation-free supply chains can position themselves as leaders in sustainability, appealing to environmentally conscious consumers.
Enhanced Brand Reputation: By complying with the EUDR, even indirectly, companies can bolster their reputation and increase consumer trust in their commitment to sustainability.

How Cosh! can support companies

Cosh! offers practical solutions for businesses navigating the EUDR’s requirements. Through supply chain transparency tools, risk assessment frameworks, and geo-location tracking, Cosh! helps companies monitor and verify the origin of materials like wood, leather, and rubber, ensuring they comply with the EUDR.

Their services include:

Supply Chain Mapping: Tools for tracking raw material origins and identifying deforestation risks.
Geo-Location Tracking: Helping businesses to find a suitable tool to verify geo-location data for compliance with the EUDR.
Certification Support: Assisting companies by navigating the certification landscape, such as FSC, to meet the regulation’s requirements.

Conclusion

While ready-made garments and shoes are not directly covered by the EU Deforestation-free Regulation, companies using materials like wood-based fibres, leather, and natural rubber must still consider the regulation’s requirements. Compliance will be necessary for these raw materials to ensure they are deforestation-free.

Textile and fashion companies must be proactive in assessing their supply chains, ensuring traceability, and working with certified suppliers. By doing so, they can meet the EUDR’s sustainability requirements, avoid legal risks, and position themselves as leaders in responsible sourcing.

Although the EUDR is about to enter into force at the end of this year, the German government is currently calling for a postponement of around 6 months. Important implementation elements and the prerequisites for efficient national application are still missing. It remains to be seen whether the EUDR will be postponed or whether a transitional solution will be proposed.