The EUDR: A pathway to deforestation-free supply chains in Europe

The EUDR challenges businesses to facilitate deforestation-free products while unlocking opportunities for sustainable supply chain practices.

In brief

• The EUDR presents significant challenges for businesses, but also offers opportunities for enhancing sustainability and supply chain resilience.
• Compliance with the EUDR requires transformative changes in sourcing practices, promoting transparency and traceability in global supply chains.
• Successful adaptation to the EUDR can lead to economic rewards for producers while contributing to the fight against deforestation and human rights violations.

What’s at stake? Understanding the EUDR's impact on businesses

From 30 December 2025, the European Deforestation Regulation (EUDR) requires companies all over Europe to demonstrate that the products they bring into the EU market within the commodity categories of coffee, cocoa, timber, palm oil, rubber, soya, wood and cattle are deforestation free. Companies must also be able to demonstrate that these products have been produced in accordance with the national legislation in the country of origin, including labor rights, rights of indigenous people, and human rights protected under international law.

Whilst that may sound fair and reasonable, and perhaps even a good idea, to many European citizens and consumers, it represents an unprecedented challenge for businesses. But the good news is: it may also hold great potential. A potential that goes beyond quick wins, low-hanging fruit and short-term cost-cutting, and towards creating increased and lasting structural resilience in global supply chains. But how do we get to that upside? What does it take to turn a potentially disruptive directive into a strategic advantage for businesses? How does short-term disruption make way for long-term resilience?

The EUDR is arguably the first major regulatory EU-wide attempt to seriously combat deforestation. This fight is urgent as deforestation is a major global driver of both biodiversity loss and climate change — arguably two of the most critical challenges facing our planet today. If society as a whole is able to eliminate illegal deforestation through responsible sourcing of goods and more sustainable consumption, it would represent a significant achievement. However, a major challenge is that today’s global supply chains are so lengthy and complex that sourcing goods more responsibly is often impractical for many companies. Many products within the commodities covered by the directive, particularly those in the mass-market and lower-priced categories, often have limited traceability and are produced and traded according to longstanding practices developed over many years. 

From directive to action: How the EUDR affects supply chains

The EUDR may appear abstract to individuals who do not have direct experience in food supply chains, commodity trade, or related fields.

So let’s paint a picture of a simplified example of a conventional chocolate bar containing cocoa from West Africa:

The retailer offering the chocolate bar has acquired the product from a trader or wholesaler, who, in turn, obtained it from a manufacturer. The manufacturer sourced the individual ingredients from three different ingredient suppliers. One of these ingredient suppliers has refined raw cocoa beans into cocoa-based ingredients (e.g. cocoa butter, cocoa mass or cocoa powder). Raw cocoa beans are imported in bulk, with the processor—still operating within the EU—only segregating beans to a limited extent for certain specified purposes. For the sake of simplicity, we skip a couple of supply chain links (and a complicated political process involving minimum prices and the Côte d’Ivoire Cocoa Board) and move to the cooperative in rural West Africa who sells the actual cocoa beans. These cocoa cooperatives are made up of thousands of smallholder farmers and families, each with their own small plot of land scattered across large areas of farmland, much of which was previously rainforest.

Coming back to the retailer who sold you the chocolate bar their obligation under the EUDR is to verify the geolocations for all plots of land from which the cocoa in that chocolate bar originates, before it hits retail shelves. This procedure also includes being able to document that no human rights or labor rights were violated in the production of that cocoa.

Overwhelming? Understandable. And we haven’t even talked about the fact that our chocolate bar might also contain palm oil…

This is of course a simplified picture, and there are provisions within the legislation as well as related official guidance and FAQs that allow for certain measures to facilitate the practical implementation of the EUDR. But no matter what, it will require transformative change, substantial operational impact and supply chain collaboration to make our illustrative chocolate bar deforestation free.

What’s the upside — and when will we see it?

It is evident that compliance with the EUDR requires considerable investments for numerous companies. Substantial resources must be allocated to new supply chain systems, technological solutions and systems integration, traceability measures, due diligence processes, and extensive supplier engagement. In particular, the latter part is beginning to have a noticeable impact, as suppliers often have clear incentives to meet EUDR data requirements and obligations for their customers.

If successful, global supply chains will increasingly favour sustainable agriculture as non-compliant goods to the EU are gradually restricted. As the risk of fines, customs issues and production problems for European operators and traders increases, the upstream demand for more transparency and traceability will nurture much needed supply chain collaboration and co-investment. If this happens, we may yet see a point where producers on the ground (for example cocoa farmers in West Africa, coffee growers in Kenya or palm oil smallholders in Indonesia) will be economically rewarded and incentivized for establishing more sustainable production practices.

If that happens, we can expect the EUDR to address deforestation and human rights issues while protecting the rights and livelihoods of indigenous peoples and local communities dependent on forests.

Translating the EUDR’s benefits into a business case

If the EUDR functions as intended, we should consider not only the environmental implications but also the business opportunities it presents. As a business leader, imagine you're in the middle of a crisis, where supply chains are disrupted, urgent decisions are needed, and visibility is limited. Now ask yourself: Would you have wanted the insights that could have helped you steer clear of this storm?

Unpredictable and extreme weather events, rising temperatures, changes in precipitation patterns, soil depletion from unsustainable agricultural practices and other sustainability-related issues are already causing supply chain disruptions and increased sourcing costs — just look at what happened to cocoa and coffee prices during the last year. These are real causes of concern, and would make any category manager worry about next year’s profit margins and sales volumes. To mitigate such risks, companies should maintain sourcing options and alternatives that are readily available, and ensure that relevant risks are continuously identified and monitored. To this end, transparency, traceability and supply chain collaboration will be key ingredients in the economically sustainable business case of the future.

The EUDR represents a golden opportunity for businesses to increase knowledge, gain insights and establish much needed sustainability risk processes to stay successful and profitable in an increasingly uncertain world.

If your business falls within the scope of the EUDR and you are planning its implementation, it may be useful to explore ways to improve your investment. If you are uncertain about whether your business is in scope, it is advisable to clarify this promptly. For more information on how the EUDR can be applied to risk management, resilience, and sustainable supply chains, further resources are available - contact your local EY, representative.