As the EU Deforestation Regulation (EUDR) compliance deadline draws near, it is crucial for businesses to close critical knowledge gaps and leverage advanced AI and blockchain technologies to ensure accurate reporting and transparency. This proactive approach not only helps businesses meet EUDR requirements with ease but also ensures continued access to the EU market, positioning them for long-term success in an increasingly regulated global landscape.
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By Jon Trask
On November 14, 2024, the European Parliament voted to amend and postpone the EU Deforestation Regulation (EUDR) – originally set to take effect on December 30 – by one year for large companies and to June 30, 2026 for small companies. The move was meant to ensure each has the necessary time to become EUDR compliant.
On December 3, the Council reached a provisional agreement with the European Parliament on a proposed targeted amendment of the EU deforestation regulation, postponing its date of application by 12 months. This provisional agreement still needs to be confirmed by both institutions before going through the formal adoption procedure.
But while this may come as a relief to some, many are still navigating the complexities of the regulation, especially when it comes to understanding the requirements across their supply chains. While the phased implementation of EUDR aims to ease this transition, the lack of proper education and support leaves many companies at risk of non-compliance, penalties, and even losing access to the EU market.
This raises an important question: can blockchain, combined with emerging technologies, truly deliver its promise to revolutionize agriculture and create resilient supply chains?
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The Road to EUDR Compliance
While companies understand the importance of complete supply chain transparency for EUDR compliance, achieving this still presents significant challenges, especially for those sourcing from high-risk regions. To comply with the EUDR, geolocation data must be submitted in the due diligence statements to regulatory bodies in a precise and verifiable manner. However, the collection and verification of this essential data are often challenging due to technology gaps that make it harder to verify the accuracy of the provided geolocation data, with suppliers often lacking detailed knowledge of the exact origins of their commodities. This is particularly problematic when working with smaller suppliers who lack the digital tools for comprehensive tracking.
A Morningstar report published in April 2024 highlighted that only 16% of companies in the food product sector have robust deforestation programs. In comparison, 32% have weak programs, and 27% lack any program altogether. These gaps in readiness expose industries to significant risks, especially in sectors like consumer durables, where 63% of companies lack adequate deforestation strategies. This underscores the urgent need for more vigorous compliance efforts, particularly in high-risk sectors such as coffee, cocoa, and palm oil.
Companies must proactively assess and manage risks in their supply chains, offering transparency on the quantity, origin, and compliance status of each product in public reports to avoid regulatory penalties. However, accurate risk assessment and management becomes nearly impossible when farmers, especially in remote areas, have limited access to reliable data. For some suppliers, the commodities may pass through multiple companies and countries, which adds a layer of complexity. It is rare that a commodity from a single plot of land is passed through a supply chain in isolation. Instead, it is common that harvests from different plots are combined for processing, increasing the risk of goods from deforested land being mixed with those from non-deforested land.
Blockchain technology offers a powerful solution to these challenges, providing transparent, traceable records that allow companies to meet EUDR compliance more easily. By integrating blockchain into the supply chain, companies can securely track the origin and environmental impact of products, ensuring real-time compliance and risk management. In regions prone to deforestation, businesses are required to conduct rigorous due diligence and submit compliance statements through a European register called “Traces NT.” Yet, many farmers across the globe struggle to understand and meet the EUDR’s complex requirements due to limited resources and knowledge. This lack of understanding can lead to gaps in documentation and difficulties in meeting regulatory standards, ultimately risking supply chain disruptions and non-compliance penalties.
Blockchain can bridge this gap by providing a digital solution that simplifies data tracking, verification, and reporting, empowering farmers to meet these standards and strengthening the entire supply chain’s resilience against deforestation-related risks.
Leveraging Technology For Effective EUDR Compliance
Blockchain’s immutable records provide a secure and transparent way to verify product origins and cultivation practices. When paired with AI-driven analysis, companies can monitor supply chain data in real time, offering actionable insights that help mitigate risks early. This combination of technologies not only enhances data accuracy but also streamlines the compliance process, making it easier for businesses to meet regulatory requirements. Yet, many regions lack the necessary infrastructure for reliable data collection, which can lead to gaps in land-use information, delaying risk identification and hindering effective monitoring.
To overcome this challenge, AI-driven systems that integrate satellite monitoring offer a solution for real-time oversight, enabling businesses to track land use in high-risk areas and proactively identify potential deforestation. By providing access to accurate, up-to-date data, companies can more effectively mitigate risks as they arise and reduce the need for manual oversight. Real-time monitoring aligns with the EU’s proactive approach to enforcing compliance and preventing unauthorized activities in the supply chain.
In addition to tracking land use, these technologies also support the automation of compliance reporting, allowing companies to generate detailed reports that meet EUDR’s documentation requirements efficiently. Technology platforms can further enhance compliance by offering educational resources directly to suppliers and traders, helping them understand EUDR standards and apply necessary measures to close compliance gaps. By clarifying misconceptions and providing guidance on compliance expectations, companies can ensure greater consistency throughout their supply chains, fostering a more transparent and resilient global supply chain network.
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About the author: Jon Trask is CEO and Founder of Dimitra and has been working with blockchain since 2017. Prior to founding Dimitra, Jon had an extensive career building and developing enterprise software solutions to revolutionize supply chain processes and improve immutable traceability. A recognized expert in his field, Jon is also Founder and CEO of Blockchain Guru and a Partner with the Blockchain Training Alliance. Jon’s mission now is to increase farming connectivity, particularly with those disenfranchised across the globe, and to leverage the power of innovative technologies to bridge farming and technology.
Featured image: Marcelo Perez del Carpio/Climate Visuals Countdown.
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