The fight over Europe’s anti-deforestation law

TTime may be running out for companies doing business in Europe to trace the origins of ingredients in everything from lipstick to soap, as the EU appears poised to take up the fight against the global scourge of deforestation. The EU’s landmark Deforestation Regulation (EUDR) is set to come into force early next year, potentially upending billions of dollars in global trade.

At the heart of the EUDR is a simple but ambitious goal: to reduce deforestation and thereby curb climate change. The regulation requires companies to look deep into their supply chains to ensure nothing comes from deforested areas anywhere in the world. The idea has gained widespread support from environmentalists and even some multinational corporations.

But not everyone is on board. For global corporations with tens of thousands of suppliers, the task of compliance is daunting enough. This is almost impossible for smaller companies. Most of them rely on a few key suppliers and don’t have the clout or systems to track everything beyond that first level. It’s like asking them to keep track of every ingredient in a recipe while they can barely keep up with the grocery list.

The complexity raises serious concerns about bureaucracy. How much bureaucracy is too much? Larger European companies are already struggling with the burden of sustainability reporting. There is a real fear that they will become even more bogged down in paperwork and processes, losing valuable time and resources that could be better invested in finding greener, sustainable solutions.

This poses a real risk: instead of helping smaller suppliers improve their practices, EUDR could actually push them out of the global supply chain. And regions such as Southeast Asia, Latin America and Africa could be sidelined as major European companies switch to suppliers in areas with stricter deforestation regulations such as Norway, Finland and New Zealand.

Developing countries are already arguing that they are being unfairly affected by the EUDR rules, which they say could harm their economies by making it more difficult for them to compete in global markets. Some have even described the legislation as “discriminatory and punitive.”

All of this explains why the future of EUDR is still not entirely certain. The law was passed in June, but last month the European Commission proposed delaying implementation by 12 months, raising questions about when or if the EUDR will be implemented.

Nevertheless, the groundbreaking regulation remains the best solution we have to combat deforestation. Other approaches such as CO2 offsetting – a prime example of which is the deforestation of a 2,400 hectare forest by the Swiss Post in Germany last year – have been heavily criticized. “Unfortunately, the way out of the climate emergency is not that easy,” said Greenpeace. Others call carbon offsetting a “license to pollute,” fueling the already heated debate about greenwashing.

And for any real challenges posed by EUDR, technology could provide some answers. AI-powered tools like Prewave are emerging as potential solutions to address supply chain challenges. These systems mine data to assess risks, flag compliance issues, and streamline audits. AI relies on solid data, and this is hard to come by in the areas most affected by deforestation. So it’s not a magical solution, but a start.

The EUDR could set a global precedent, with Europe already leading the way on sustainability. But even if it is implemented, the exact impact remains questionable. The EUDR could pave the way for a more sustainable world or trigger a new wave of protectionism, with countries turning inward to avoid the high costs of compliance.

In any case, companies doing business in Europe would have to adapt – and quickly.