Fighting deforestation: how Regulation (EU) 2023/1115 is changing the game for business

Relevant commodities and relevant products may not be marketed, supplied or exported unless all of the following conditions are met:

(a) they do not cause deforestation;

(b) they have been produced in accordance with the relevant legislation of the country of production; and

(c) they are covered by a due diligence declaration.

The Regulation introduces due diligence obligations for companies marketing and/or supplying selected commodities or products to the EU or exporting them outside the EU. As part of due diligence, obliged entities must collect information on the origin of their products, conduct a deforestation risk assessment based on that information (whether there is a risk that the relevant products to be marketed or exported are substandard) and, where appropriate, implement risk mitigation measures (adequate to achieve no or negligible risk). The due diligence declaration then confirms that the obliged entity has exercised due diligence and no more than negligible risk has been identified.

In this scheme, companies are therefore directly responsible for ensuring that their supply chains meet the requirements of the Regulation. This emphasises transparency and cooperation with all actors in the supply chain. Failure to comply with the rules may result in sanctions such as fines, confiscation of products or exclusion from public procurement.

In addition, the Commission is to identify the riskiness of individual countries and, on the basis of this identification, classify them into high, standard and low risk categories; this classification then determines the extent of the Member State's obligation to carry out controls in accordance with the Regulation. The system will also make it easier for companies to assess the riskiness of their suppliers.

Medium and large enterprises were to be subject to the new obligations as from 30 December 2024; smaller enterprises as from 30 June 2025, but a delay of 1 year was agreed at EU level. This was due to Member States' (producers and suppliers) concerns about excessive bureaucracy, increased costs or complications in the supply of beef, chocolate and other foodstuffs.

Summary

The Regulation has a wide-ranging impact on supply chains - not only final sellers but also suppliers have to comply with strict transparency and accountability requirements.

The pressure to increase corporate due diligence obligations is also evident in the Corporate Sustainability Due Diligence (CSDDD, CS3D) legislation, which applies to the human rights practices of large corporations, including production and supply chains.

As regards corporate due diligence directly in relation to deforestation, a specific case is already before the courts in France, where proceedings are pending against a company operating a retail chain ( Envol Vert et al v Casino Guichard-Perrachon). The subject of the proceedings is precisely the lack of due diligence in the supply chain - in the sale of beef, taking into account the impact of these activities on deforestation in Brazil and Colombia.

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