EUDR – Solution to prevent enterprises from being excluded from the EU supply chain

Imagine that every 60 seconds, the world permanently loses a tropical primary forest area equivalent to 18 football fields. This is not a natural disaster, but the direct result of destructive land-use conversion for short-term agricultural benefits—from farms and pastures to industrial plantations.
As a leading consumer market, the European Union (EU) has a responsibility to act. The introduction of the EU Deforestation Regulation (EUDR) in 2023 represents a response to this situation, with the objective of shifting supply chains toward sustainability and preventing EU consumption demand from driving global deforestation.

What is EUDR? Three “survival” requirements for export commodities

The EU Deforestation Regulation (EUDR – Regulation (EU) 2023/1115) is an important legal instrument adopted on 31 May 2023 to address the negative impacts of EU consumption and production activities on the global environment. EUDR was developed as an integral part of the Union’s broader sustainability strategy, including the EU Green Deal, the EU Biodiversity Strategy for 2030, and the Farm to Fork Strategy.

Why is EUDR important?

EUDR is important because it represents a strategic step by the European Union in its efforts to combat deforestation and promote sustainable global trade. The regulation aims to sever the link between international consumption and deforestation, which accounts for more than 90% of global forest loss according to FAO data. EUDR establishes new standards requiring products placed on the EU market to be traceable and legally verified, thereby enhancing transparency, accountability, and governance throughout the entire supply chain. At the same time, the regulation supports the implementation of the European Green Deal and the Sustainable Development Goals, and creates a spillover effect as many other countries are referring to similar models to develop deforestation-free economies.

Mandatory scope of commodities and derived products

The scope of EUDR is significantly broader than that of EUTR, covering a detailed list of commodities and their derived products. In total, there are seven main commodity groups subject to control:

  • Timber
  • Cattle
  • Cocoa
  • Coffee
  • Palm oil
  • Rubber
  • Soy

Derived products manufactured from or containing these commodities are also required to comply with EUDR. For example, leather (from cattle), chocolate, tyres, and furniture must all meet the specified criteria. The regulation applies uniformly to all of these commodities, regardless of whether they are produced within the EU or in non-EU countries.

To be sold on or exported from the EU market, these products must meet the following three conditions:

  • They must be deforestation-free.
  • They must be produced in compliance with the relevant legislation of the country of origin.
  • They must be covered by a due diligence statement, demonstrating that the company has verified the origin and ensured that the products meet the requirements of EUDR.

This means that enterprises must demonstrate that any goods within the scope of EUDR are not produced on land that has been deforested and do not contribute to forest degradation after the cut-off date of 31 December 2020.

Entities subject to EUDR compliance

EUDR applies to enterprises that import or export goods within the scope of the regulation on the European Union (EU) market, regardless of whether the products originate from EU or non-EU countries.

The regulation distinguishes two categories of entities subject to the following obligations:

  • Operators: Any natural or legal person who places products on the EU market for the first time or exports those products.
  • Traders: Any natural or legal person, other than an operator, who makes products available on the market.

Obligations and implementation timelines may vary depending on whether the operator qualifies as a small or medium-sized enterprise (SME). Under the regulation, an SME is defined as an enterprise meeting at least two of the following three criteria:

  • An average number of employees not exceeding 250
  • Net turnover below EUR 50 million
  • Total balance sheet assets below EUR 25 million

EUDR affects multiple industries and markets, particularly sectors with supply chains linked to commodities such as timber, cattle, cocoa, coffee, palm oil, rubber, and soy, as well as their derived products.

Industries that are directly affected and require particular attention include:

  • Consumer goods and retail: Involving a wide range of products derived from EUDR-covered commodities, with complex and global supply chains.
  • Agriculture, livestock, and forestry: As primary contributors to forest loss, these sectors need to ensure traceability and legal compliance in production.
  • Automotive: Affected through the use of rubber and leather in tyres and leather seats, as well as palm oil derivatives in manufacturing processes.
  • Chemicals, pharmaceuticals, and industrial manufacturing: Indirectly affected through the use of palm oil derivatives such as glycerol and industrial fatty alcohols in production.

Benefits that EUDR brings to enterprises

The EU Deforestation Regulation (EUDR) takes effect from the end of 2025 and requires that goods entering the EU demonstrate that they are deforestation-free. In addition to strict compliance requirements, EUDR provides several advantages for enterprises. Early adoption of EUDR helps improve supply chain governance capacity, increase brand credibility, and create momentum for long-term sustainable improvement. The following are the main aspects of the overall benefits that EUDR brings to enterprises.

  • Enhancing reputation and brand credibility: Enterprises demonstrate a commitment to sustainable development, increasing trust among customers and global partners. A PwC survey in 2024 indicates that more than 80% of consumers are willing to pay an average premium of 9.7% for sustainably produced products.
  • Expanding international markets: EUDR serves as a “passport” enabling enterprises to access the EU market and other markets with high environmental standards such as the United States, the United Kingdom, and Japan. For example, Vietnamese rubber enterprises have successfully exported to several major markets by complying with EUDR requirements.
  • Improving supply chain management: Enterprises establish comprehensive traceability systems, enhance transparency, proactively control risks, and optimize operational performance.
  • Reducing legal and operational risks: Enterprises avoid severe penalties, such as fines of up to 4% of EU turnover, while ensuring stable operations without disruption due to supply chain non-compliance.
  • Attracting sustainable investment and partners: Compliance with EUDR provides strong evidence of ESG capability, making enterprises more attractive to green investors, financial institutions, and global partners.
  • Creating long-term competitive advantage: Enterprises optimize processes, reduce costs, enhance operational capability, and establish differentiated brand positioning in markets that are increasingly oriented toward sustainable development.

Conclusion

In the context of a global transition toward sustainable development, EUDR plays a central role in encouraging enterprises to place greater emphasis on deforestation prevention and social responsibility. European policies are not only regulatory barriers but also significant opportunities for Vietnamese enterprises to enhance competitiveness, adapt rapidly, and affirm their position in international markets. To achieve this, enterprises need to consider solutions that help prevent exclusion from the EU supply chain as a key enabler for leveraging competitive advantages, maintaining, and expanding export markets in the new period.