Deforestation Directive: A guide for SMEs
Impacts of our consumption in the EU can be felt far elsewhere - this directive aims to tackle deforestation outside of the EU caused by products we consume. This extensive new regulation requires deep supply chain transparency, due diligence, traceability, and tight risk management across a large expanse of businesses.
Who does the Deforestation Directive apply to?
The EU Deforestation Directive applies across a broad range of businesses from micro-enterprises to the largest businesses. The focus is on businesses that import, export, or place specific products on the market: cattle, cocoa, coffee, palm oil, rubber, soy, and wood. The directive applies to both “operators” and “traders” of these products.
Examples of small businesses that could be implicated by this directive include specialty importers, chocolate producers, retail food shops, restaurants, furniture producers, and more. Especially exposed are businesses importing raw materials from abroad into the EU.
How does the Deforestation Directive impact small & medium sized businesses (SME)?
The EU Deforestation Directive applies across most businesses, although the smallest businesses have a longer transition period. While the administrative burden has been slightly reduced for SMEs, the actions needed are still extensive.
What do businesses need to do?
Practically, the Deforestation Directive prohibits the sale or export of items that do not meet all 3 of the following requirements:
Are deforestation-free (e.g. forests were not destroyed or degraded after 2020 to produce the items, including abroad)
Were produced following the laws of the country where they originated (for example, were not produced with illegal forest harvests)
Have a due diligence statement
The requirements for conducting a due diligence are extensive. However, a due diligence is not required in all situations. For operators, there are some exceptions in the decision chart below (based on Article 4, paragraph 8):
When required, the due diligence statement has many components outlined in Article 8. These include:
Detailed information about the product, including its composition, origins, the location of harvest, contact information, and more.
A risk assessment evaluating the risk that the products do not comply with the requirements, such as deforestation, breaking local laws, and many other impacts.
Risk mitigation, such as the policies, procedures, and controls used to reduce any risks to a negligible level
Registration within a central system with the European Commission, and a tracking number that ensures traceability
When do you need to comply?
The directive came into force June 2023, and most businesses must comply by December 2024. Micro and small businesses have a little more time to comply, until June 2025.
Ready to take the next step?
The core of this regulation is to ensure that consumers in the EU can trust that the products they purchase have been responsibly sourced. As a SME, this can feel intimidating, but it is possible. By working with products harvested from forest partnership programs, with certification schemes, or finding the right responsible suppliers, change is possible.
Making big changes takes time, and can be expensive. At QuickSustainability, we focus on helping SMEs take the practical steps that help them become more sustainable, compliant, and profitable. Contact us to get started on your journey.
