Challenges to the Effective Implementation of the EU Regulation on Deforestation-Free Products (EUDR)

In response to the growing concerns surrounding deforestation and its impacts on the environment and human rights, the European Union has introduced the EU Regulation on Deforestation-Free Products (EUDR). This regulation aims to prohibit certain commodities (ie cocoa, coffee, palm oil, soy, cattle, rubber and wood) and their derived products subject to deforestation or forest degradation from being imported into, traded within or exported from the EU. The regulation also mandates that these commodities be traced back to their plots of origin and produced in accordance with relevant national and international legislation.

While the EUDR’s entry into application was deferred by 12 months (now entering into application on 30 December 2025), its implementation remains a complex endeavor and presents a number of challenges. These challenges can be broadly grouped into three main categories: legislators’ policy effectiveness, authorities’ enforcement and economic operators’ compliance. This post explores these challenges in brief. 

Legislators’ policy effectiveness 

At the heart of the EUDR’s objectives is the commitment to combat deforestation and protect human rights, aligning with the broader goals of the European Green Deal. However, from a normative design perspective, several issues could hinder the regulation's effectiveness. 

One significant concern is the potential re-routing or bifurcating of supply chains. Commodities that fail to meet EUDR criteria may simply be diverted to other markets, which could undermine the regulation’s overall impact on global deforestation. The EUDR’s stringent and extensive compliance requirements (which includes, for instance, tracing commodities back to their plot of land of origin and ensuring the risk of incompliance is negligible) may also inadvertently favor larger suppliers who arguably have the resources and financial capability to aggregate all necessary supply chain information, automatically disadvantaging smaller suppliers and small to medium enterprises. Furthermore, farmers in higher risk countries may find themselves losing market access as EUDR operators prioritize sourcing from lower risk origins, thereby jeopardizing their livelihoods. 

Authorities’ enforcement 

For the EUDR to achieve its objectives, effective enforcement by authorities is crucial and this requires significant investment in new capabilities, including financial resources, technology and training (the same applies for companies in scope of EUDR). Customs and national competent authorities need to adapt their operations and systems to enforce the EUDR adequately, including conducting checks and audits, identifying and blocking non-compliant shipments and sanctioning non-compliant operators.

Furthermore, there are differing interpretations on the EUDR requirements among various authorities. This lack of uniformity and the decentralized nature of enforcement (ie the discretion of each Member State to impose various sanctions) can create confusion for economic operators and lead to inconsistent enforcement practices. Clear guidelines from the European Commission are needed to not only standardize enforcement measures across the EU, but also to avoid potential circumvention and regulatory arbitrage, which can ultimately undermine the effectiveness of the EUDR.

Collaboration and information exchange among customs and national competent authorities is essential to prevent unnecessary supply chain disruption and inconsistent enforcement. Effective communication ensures that compliant goods are not blocked at borders, while non-compliant products are appropriately prevented from entering or leaving the EU.

Additionally, the EU Information System (TRACES) should be efficient, secure and capable of handling high transaction volumes on a timely basis. Owing to the immediacy of supply chains, mitigation measures and fallback options should be in place in case of system disruption.

Economic operators’ compliance 

Economic operators face a range of practical considerations in adhering to EUDR requirements. These include scoping, legal certainty, operational, informational, data, technology and planning challenges. 

Businesses first need to clearly map out all relevant legal and transactional flows to understand which of their entities are subject to obligations and for which relevant products. This often requires cleansing databases, and experience shows that transactional and Harmonized Systems (HS) codes’ classifications are often incorrect or outdated. This is further complicated by the fact that the EUDR can be interpreted in many ways on many aspects (eg exact obligations for non-EU established corporations, tolling manufacturing configurations, due diligence requirements for traders, or regime applicable to Point of Sale materials). 

The integration of the EUDR into existing processes is often complex, requiring important changes in governance and allocation of responsibilities. This, in turn, links to information management. Internally, cross-functional collaboration is essential for compliance. Teams must work together to share relevant knowledge, avoid redundancies, coordinate as well as document compliance efforts across departments involved. Externally, operators face challenges in obtaining necessary information from suppliers, particularly when suppliers are reluctant to provide certain data or sign new contractual provisions or policies. Operators also receive constant requests from customers expressing their expectations in terms of communicating due diligence statements, geolocation data and evidence of compliance.

The data challenge is also significant, starting with the need for origin traceability through the end-to-end management of due diligence statements, including reception, submission, retrieval, referencing, communication, archiving and reporting on due diligence. Accurate and efficient data linkages as well as systems updates and automation (to the extent possible) are generally required to enable the smooth movement of goods and commodities across the supply chain and in the EU, especially with large volumes and just-in-time production models. Companies need to decide the extent to which they develop their capabilities (especially for risk management and EU TRACES interfacing) inhouse by using a master data platform or outsourcing to third-party point-to-point service providers. Today, no off-the-shelf, end-to-end solutions exist, especially when companies have different Enterprise Resource Planning systems and configurations in place (legacy systems and different systems for direct and indirect spend).

In terms of planning, operators must carefully schedule their go-live decisions, stock building and analyze financial implications (premia on EUDR-compliant goods, warehousing costs, fines, etc) to mitigate potential supply chain disruptions. For this, they often rely on suppliers’ own EUDR readiness and capabilities. Companies must also consider the potential future scope expansion of the EUDR (ie commodities and types of land covered) and ensure that their solutions offer resilience to other regulations (eg EU Corporate Sustainability Reporting Directive, Corporate Sustainability Due Diligence Directive, Forced Labour Regulation, Ecodesign for Sustainable Products Regulation, Batteries Regulation) to avoid duplicative compliance efforts, create synergies and identify operational and strategic opportunities. 

Conclusion

In summary, the implementation of the EUDR—and compliance therewith—presents a complex nexus of challenges for legislators, authorities and businesses. Effective implementation requires greater clarity and coordination as well as simpler yet effective solutions to root out deforestation while reducing compliance costs. For instance, limiting EUDR obligations only to first operators (that is, removing obligations for downstream operators and traders) would likely greatly reduce administrative burden for all stakeholders without infringing on the objectives and impact of the regulation. A delay in the entry into application of the EUDR may also be welcomed: it would give time to policymakers to provide clearer guidance on outstanding topics and to consider useful simplifications, authorities to align and get ready for enforcement, and companies to ensure full compliance in the most effective manner. 

The views reflected in this article are the views of the authors and do not necessarily reflect the views of the global EY organization or its member firms.

Jeroen Truin is a Partner EMEA Operating Model Effectiveness at Ernst & Young Ltd.

Christophe George is a Sustainability Regulations Compliance Expert at Ernst & Young Ltd.