What is the EUDR?

The European Union Deforestation Regulation (EUDR) is a landmark policy aimed at eliminating goods linked to deforestation from the EU. The regulation targets companies placing seven commodities and select derivatives on the EU market, requiring them to prove their products are deforestation-free. The EUDR introduces new requirements for corporate supply chain practices and establishes standards aimed at promoting sustainability and sustainable supply chains.

The EUDR contributes to the implementation of the European Green Deal—a  policy initiative designed to foster a more competitive and climate-resilient economy. The policy recognizes that commodity-reliant industries are increasingly vulnerable to deforestation, facing degraded soil quality, disrupted water cycles, and biodiversity loss. Losing forest-regulated rainfall patterns also worsens extreme droughts and flooding. These environmental impacts reduce yields, destabilize ecosystems, and threaten the long-term viability of global value chains.

By enforcing strict due diligence obligations on companies, the EUDR can help strengthen the resilience of global supply chains in the long term. Companies that act early can transform EUDR compliance into a competitive advantage—reducing environmental and regulatory risks while targeting premium markets for deforestation-free, sustainably sourced products.

Which industries are affected by the EUDR?

Deforestation—often driven by land cleared for agriculture—threatens global ecosystems and climate stability. To maximize its impact, the EUDR targets the agricultural commodities and derived products most linked to global deforestation. These include:

• Cattle (and derived products such as beef and leather)
• Cocoa (and related products such as chocolate and cocoa butter)
• Coffee
• Palm oil (including derivatives used in automotives, cosmetics, and mining)
• Rubber (and related products such as tires and tubes)
• Soya (including derivatives used in soy-based food and animal feed)
• Wood (including timber, pulp, paper, and furniture)

The EUDR applies only to certain products listed in Annex I, which are identified by specific product codes (CN codes). Items not on this list—such as cosmetics with palm oil or cocoa butter—are not covered at this time. The European Commission is currently reviewing other materials linked to deforestation, like maize and biofuels, so the list may grow in the future.

Importantly, the EUDR applies to all listed commodities and products placed on the EU market or exported from the EU, regardless of where they were produced. The only exemption applies to goods made entirely from recycled waste, like recycled wood or paper.

What are the EUDR compliance requirements?

Companies dealing in EUDR-regulated commodities must meet strict compliance standards to access the EU market. Products must be:

• Deforestation-free (produced on land not deforested after December 31, 2020)
• Fully traceable throughout the supply chain
• Produced following land use, environmental, and labor laws in the country of origin
• Backed by a due diligence statement (DDS) confirming compliance

Companies must submit a DDS for each shipment or batch before the product enters the EU market or is exported from the EU. If products originate from multiple sources, each source must be individually verified as compliant, ensuring no mixing of compliant and noncompliant materials.

What are the EUDR DDS requirements?

The DDS formally declares that the regulated commodity or product meets EUDR regulations and provides supporting information. Companies must submit this statement to the EU’s reporting platform TRACES before placing any regulated goods on the EU market or exporting them abroad. A complete DDS must include these three key steps:

1. Collect supplier data

To ensure transparent tracing, companies must collect, verify, and retain the following information for at least five years:

• Product description
• Product quantity
• Country of production
• Geolocation coordinates of the plots of land where the commodities were produced
• Date or time range of production
• Identity details of suppliers and recipients, including names, addresses, and contact information
• Proof that land use complies with deforestation regulations and laws of the origin country

2. Assess risks

Using the collected data, companies must determine the deforestation risk levels of the regulated materials and products. They must demonstrate that their goods are compliant before they can be sold or traded on the EU market. Risk assessments should consider the following criteria:

• The complexity of supply chains
• The potential impact on indigenous communities
• The origin country’s risk level, including factors like deforestation rates, government corruption, or customary land rights
• Presence of certification schemes

3. Mitigate risks

If a commodity or product’s deforestation risks are not negligible, companies must mitigate the issues before continuing to the EU market. These risk-reduction measures must also be documented in the DDS.

Which suppliers are affected by the EUDR?

The EUDR applies to key players across the supply chain. Companies legally required to comply are classified as:

Operators

Organizations are considered operators if they place regulated commodities or products on the EU market for the first time or export them outside the EU. These include agricultural producers, importers/exporters, and EU-based manufacturers using newly imported materials.

Regardless of their size or revenue, all operators must comply fully with the EUDR regulations. These include small and medium-sized enterprises (SMEs), which are subject to the same due diligence and reporting obligations as larger firms. SMEs must also provide DDS reference numbers from any prior operators to downstream stakeholders in the supply chain.

Traders

Traders are companies that process or distribute regulated commodities or products already placed on the EU market. Examples of traders include EU-based distributors, wholesalers, and retailers.

For traders, responsibilities vary based on their size. Large traders must:

• Submit a full DDS for every transaction
• Track and document suppliers and buyers
• Ensure that upstream operators are EUDR compliant

SME traders are not required to submit a DDS, but they must:

• Maintain tracing records on suppliers and buyers
• Retain documentation for at least five years
• Provide information to authorities when requested

To qualify as SME traders under the EU deforestation regulation, companies must meet at least one of the following criteria:

• Fewer than 250 employees
• Annual turnover of €50 million or less
• A balance sheet total of €43 million or less

Smallholders and farmers producing regulated materials outside the EU are not directly subject to EUDR obligations. However, they are expected to follow legal and sustainable land-use practices. They also need to provide information to operators and traders to support their compliance obligations. Their contributions help ensure their products are deforestation-free and legally sourced.

When do businesses need to comply with the EUDR?

To give industries time to adapt, the EUDR has phased its implementation depending on the business size. SME operators and traders have an additional six-month grace period to comply. These are the timelines for companies to comply:

• December 30, 2025: For large and medium companies above the EU SME threshold
• June 30, 2026: For companies under the EU SME threshold

Why is EUDR compliance important?

All companies within the EUDR’s scope must comply to continue business activities within the European Union. Noncompliance can result in serious legal and financial consequences. However, companies that embrace EUDR compliance strategically can realize long-term commercial gains and enhance their operational resilience.

Penalties for EUDR noncompliance

EU member states can establish their own framework for legal penalties, but they must include at a minimum:

• Monetary fines
  Companies will face fines proportionate to the environmental damage and the value of the relevant commodities and products, at least 4% of the operator’s or trader’s total annual turnover in the EU for the previous financial year. For large companies, this could amount to millions of euros.
• Seizure of goods and profits
  Authorities may confiscate noncompliant materials or the revenue earned from their sale.
• Public sector bans
  Companies found in violation can be excluded from public procurement processes and funding opportunities, including grants and tenders, for up to 12 months.
• Market access bans
  For severe or repeated violations, companies may be temporarily prohibited from placing products on the EU market or exporting them outside the EU.

Long-term benefits of EUDR compliance

• Lucrative market access
  The EU is one of the world’s largest consumer markets, offering significant growth potential for companies. Remaining compliant ensures uninterrupted trade and reduces the risk of costly shipment delays or border rejections.
• Stronger supply chain connections
  Anti-deforestation measures can enhance transparency and communication with suppliers. This helps to build resilient trust-based partnerships and ensures more reliable and sustainable supply chains, especially in volatile or high-risk regions.
• Competitive advantages
  Early adopters may gain preferential access to procurement opportunities and appeal to sustainably minded consumers.
• Enhanced ESG investment opportunities
  Many investors and financial institutions require robust ESG credentials, including deforestation safeguards. Businesses demonstrating EUDR compliance signal a strong alignment with global sustainability standards, which can attract green finance, investment, or public funding.

Six steps to ensure EUDR compliance

For many organizations, the new EUDR regulations prompt a thorough reassessment of their supply chain practices. Companies should take the following steps to ensure they comply while using their resources efficiently:

1. Determine EUDR applicability
   Companies should confirm whether their goods fall within the EUDR's scope. They must also assess their compliance responsibilities based on their business activity—whether they qualify as operators or traders along the supply chain.
2. Assess information gaps
   Examine current data collection and management processes to identify missing information on suppliers and buyers throughout the value chain. Companies will need strong data ecosystems to fulfill the EUDR due diligence’s data and risk assessment requirements.
3. Build due diligence infrastructure
   Technology solutions and clear protocols are vital for channeling the accurate and verified information necessary to comply with the EUDR. Adapt or expand existing monitoring and data management systems to meet these stronger transparency standards.
4. Mitigate compliance risks
   Identify and address weak links in the supply chain. Effective risk mitigation may include on-site audits and field inspections, satellite data, third-party assessments, or switching to alternative verified suppliers.
5. Engage stakeholders
   Compliance monitoring and risk management require proactive collaboration among stakeholders across the supply chain. Ensure upstream partners understand and support their EUDR requirements and implement supplier codes of conduct and contractual obligations.
6. Store information
   EUDR regulations require companies to retain due diligence information for at least five years. Authorities can request this information at any point during this time. Ensure data storage systems can reliably protect due diligence-related data for potential audits.

Key technology tools that support EUDR compliance

The EUDR DDS elevates supply chain transparency. Technology solutions become vital for securing this clarity by consolidating information across often far-flung stakeholders. Consider incorporating these tools to mitigate legal risk exposure and ensure ethical sourcing and auditability.

• Geolocation monitoring
  Geolocation tools capture and verify the location and activity of commodity production areas. This helps ensure goods can be traced to the specific plots of land to prove their deforestation-free origins. Geolocation mapping can identify the precise GPS coordinates. Meanwhile, satellite monitoring and geospatial analysis can identify changing land use patterns to flag deforestation risks.
• Tracking software
  Tracking platforms enable stakeholders to trace commodities and products through complex multilevel supply chains. These solutions use tokenization technology to create a digital twin of a material that records its sustainability attributes, including EUDR-related datasets and DDS reference numbers. This enables systems to maintain the material’s provenance and document a transparent chain of custody through different transactions. Individualized tokens are especially valuable when materials from different sources are commingled. No matter how mixed, stakeholders can still identify and access each material’s EUDR data through each transaction.
• Cloud data management
  The EUDR’s due diligence reporting requires consolidating diverse information, including integrating details from internal ERP systems and external stakeholders. Comprehensive cloud data management helps by harmonizing environmental data into a single and verified source of truth. Automation capabilities can further streamline this process, reducing manual labor and errors. This unified data landscape helps the entire network maintain secure, accurate, and traceable information.
• Risk assessment and analytics tools
  Risk assessment platforms can help users analyze data from multiple sources to optimize their environmental compliance. This proves especially valuable for managing mitigation strategies for high-risk suppliers or regions. These tools can integrate and examine information from satellite imagery and public databases on land rights, corruption, and enforcement. More advanced solutions incorporate AI capabilities for enhanced risk assessments.
• Reporting and auditing tools
  Companies can simplify their EUDR DDS filing process with real-time, on-demand reporting solutions. These systems can automatically generate, manage, and submit DDS reports that meet EUDR standards—even adjusting information as authorities change or expand requirements. This documentation can be stored, organized, and retrieved for analysis and auditing.
• Due diligence management
  A DDS is required for each transaction involving regulated commodities or products. Declaration management tools can streamline this process by tracking DDS records for outbound and inbound goods. Users can then collect, manage, and submit these statements to customers and authorities. Clear due diligence documentation also helps maintain audit trails for verification.
• Mobile applications
  Handy mobile applications facilitate on-site data collection and communication with farmers, suppliers, and field agents. This replaces slow paper-based systems with real-time cloud-driven monitoring and alerts—reducing errors and accelerating validation processes. Timestamped and geotagged documentation also serves as valuable evidence in audits. In addition, mobile connectivity can provide accessible multimedia training to help suppliers understand their EUDR requirements.

SAP sustainability customers in action