The ‘E‘ of ESG: Postponement and simplification of the EU Deforestation Regulation

Introduction 

The European Parliament adopted a set of targeted amendments to simplify the EU Deforestation Regulation (the Regulation, EUDR). The EUDR aims to minimise global deforestation and forest degradation by banning relevant commodities and products linked to deforestation or forest degradation from the EU market and imposing binding due diligence obligations on companies that import, export, or trade certain products made from high-risk commodities (see our earlier blog).  

This blogpost outlines the key modifications introduced and sets out next steps companies should take to ensure compliance with the EUDR. 

One year postponement for all companies 

The adopted text postpones the date of application of the EUDR by 12 months. As a result, the EUDR will now apply to large and medium-sized enterprises from 30 December 2026 and to micro and small enterprises from 30 June 2027. This marks the second postponement of the Regulation which was originally set to apply from 30 December 2024 but was already delayed by 12 months once in late 2024.  

Simplified due diligence obligations for non-SME downstream operators and traders 

The adopted text considerably simplifies the due diligence obligations imposed on downstream operators and traders not qualifying as micro, small or medium-sized enterprises (non-SME). To this end, the text formally introduces the category of downstream operators to refer to companies that place on the market or export relevant products made using other relevant products, all of which are already covered by a due diligence statement (DDS) or by a simplified declaration (see below) submitted by the upstream operator.  

Under the adopted text, only the upstream operator must submit a DDS or simplified declaration when first placing a product on the market or exporting it. Non-SME downstream operators and traders no longer have to submit their own DDS (nor provide a DDS to customs authorities) but must only register in the EU information system. They are also relieved from the obligation to ascertain that due diligence was exercised properly upstream. Only in the case of “substantiated concerns” with respect to a product's conformity prior to placing or making it available on the market, they are obliged to “verify” whether due diligence was exercised. While the adopted text does not further specify the meaning of substantiated concerns and the scope of this obligation, further clarification is to be expected in future guidance by the Commission. Additionally, non-SME downstream operators and traders are no longer subject to the annual reporting obligation.  

Note, however, that the first downstream operator or trader in the supply chain must still collect either the DDS reference number or the simplified declaration identifier, while all subsequent downstream operators and traders must only collect and store contact information such as the supplier’s name, postal address and email address. In practice, this means that downstream operators and traders must assess whether their supplier acts as a “first time” (i.e., upstream) operator in order to determine whether their obligation to collect certain information extends to the reference number of the DDS or the declaration identifier. 

Relief for micro and small primary operators  

While the due diligence obligations of upstream operators remain, in principle, unchanged, the adopted text introduces significant relief for certain micro and small operators which sell their goods directly on the EU market.  

To this end, the text defines a new category of "micro and small primary operators". These are upstream operators who: 

Note that operators who formally exceed the size criteria for micro and small undertakings may still fall under this category if they can demonstrate that their activities covered by the EUDR do not exceed the thresholds outlined above. For example, a large or medium-sized farming enterprise harvesting soya as well as other produce not covered by the EUDR may avail itself of the reduced due diligence obligations for micro and small primary operators if it can demonstrate that its balance sheet, net turnover and average number of employees figures associated with harvesting soya are below the above thresholds.  

Micro and small primary operators are exempt from submitting a DDS. Instead, they must submit a one-time simplified declaration to the EU information system. Unlike the regular DDS, the simplified declaration allows micro and small primary operators to replace the geolocation data of the plots of land by the postal address of those plots of land or establishments where the relevant commodities were produced. Furthermore, the declaration is to be submitted once per enterprise, rather than for each individual product. Operators are not required to regularly update the information thereafter but may update the information following any major changes to the information provided. 

Moreover, micro and small primary operators are exempt from submitting the simplified declaration altogether, where the required information for the simplified declaration is already available in an EU or national system or database. This applies, for example, in case of entries in national cattle registry databases, which Member States are required to establish under the EU Animal Health Law.