The steady growth of the Deforestation Regulation

Clarifying the detail of this forthcoming legislation and explaining its application to organisations working within the footwear supply chain.

by Nicola Pichel-Juan

The World Wide Fund for Nature (WWF) – known as The World Wildlife Fund in Canada and the USA – estimates that in the time it takes to say the word ‘deforestation’, an area of forest the size of a football pitch is destroyed, with up to fifteen billion trees being cut down globally every year.

This not only destroys the habitats of many animals, insects and birds, but also has a dramatic impact on the world’s climate. It is estimated that forest loss and damage is responsible for around ten per cent of all global warming. Trees absorb and store carbon dioxide (CO₂), but if they are cut down this is released into the atmosphere. Forests also influence rainfall patterns, and the quality of water and soil, as well as helping to prevent floods.

Will it affect footwear companies?

The question “what does deforestation have to do with footwear?” may well be asked. The answer is that materials frequently used in the manufacturing of footwear (such as leather and natural rubber) could have supply chains that are linked to deforestation. For example, large areas of the Amazon rainforest have been felled to create more pastures for grazing cattle for the beef industry. The skins from those cattle are processed into leather, and some of that leather could enter the footwear supply chain. Deforestation has also taken place in parts of south east Asia and sub-Saharan Africa to enable more rubber trees to be planted, which reduces biodiversity and can adversely impact local communities.

The European Union’s Deforestation Regulation 2023/1115 (known as ‘EUDR’) on deforestation-free products came into force on 29th June 2023, and will come into effect – at which time action must be taken by the company – from 30th December 2024. An exception is for any organisations defined as ‘small’ or ‘micro’, which will fall under the scope of the regulation from 30th June 2025.

The EUDR aims to: i) avoid products that Europeans purchase, use and consume contributing to deforestation and forest degradation either within the European Union or globally, ii) reduce carbon emissions caused by European Union consumption and production of the relevant commodities by at least 32 million metric tonnes per year, and

iii) address all deforestation and forest degradation driven by agricultural expansion to produce the commodities in the scope of the regulation.

Commodities and their derivatives

The regulation covers seven commodities – cattle, cocoa, coffee, oil palm, rubber, soya and wood, as well as certain products derived from those commodities. Affected commodities and their derived products cannot be placed onto the EU market without firstly a statement of due diligence confirming there is no deforestation in the supply chain, and secondly full traceability of the commodity back to the plot of land where it was produced.

For leather, this latter requirement would be the farm where the cow was raised. This is likely to be particularly challenging within the leather value chain, as a tannery may be purchasing skins from more than one slaughterhouse, and each slaughterhouse could have links with many hundreds of farms or small holdings. Although it has been agreed that traceability requirements for hides, skins and leather can be dealt with on a batch-by-batch basis (rather than having to have traceability of each individual hide), this is still likely to be a significant undertaking for any company.

The due diligence process involves gathering information about the item and its supply chain, including the geolocation where it was produced. Then, depending on the information collected, it may be necessary to carry out a more detailed risk assessment. If a risk of deforestation or forest degradation is identified, mitigation measures must be implemented to ensure that the risk is eliminated or reduced to a negligible level.

Responsibility for compliance with the regulation falls on the following:

• the ‘operator’ – the first ‘natural or legal person’ established in the European Union who makes the products available on the European Union market, or
• the ‘trader’, who is any other ‘natural or legal person’ in the supply chain subsequently making the products available.

The first step to take for any organisation potentially affected by this regulation is to check the Annex of the regulation, as this provides a list of all the commodity codes that are currently in scope. An organisation falls under the scope of the regulation if it is importing any items with these commodity codes into the EU or trading any such items within the Union.

Commodity codes included in the EUDR
Relevant commodity	Relevant products
Cattle	ex 4101 – raw hides and skins of cattle (fresh, or salted, dried, limed, pickled or otherwise preserved, but not tanned, parchment-dressed or further prepared), whether or not dehaired or split.
	ex 4104 – tanned or crust hides and skins of cattle, without hair on, whether or not split, but not further prepared.
	ex 4107 – leather of cattle, further prepared after tanning or crusting, including parchment dressed leather, without hair on, whether or not split, other than leather of heading 4114.
This table contains an extract of data from Annex 1 of the EUDR, showing leather commodity codes that may be relevant within the footwear value chain. Any organisations which are potentially affected must check the actual text of the regulation itself. Please note that the ‘ex’ preceding the commodity code denotes that other items with the same commodity code are not affected by the regulation. For example, while the commodity code ‘4101’ is also used for buffalo and equine hides and skins, only bovine leather derived from cattle is under the scope of the regulation.

How far does it reach?

The scope of the legislation does not currently extend to finished goods such as footwear, bags or belts that are manufactured from leather. Therefore, only organisations that are importing leather (or natural rubber) into the European Union to support European footwear manufacturing or organisations sourcing the same commodities from European manufacturers are likely to be directly impacted.

For instance, it would not be a breach of the regulation in its current form to import a finished footwear item into the European Union that was manufactured from commodities linked to or at risk of being linked to deforestation. Of course, that is clearly not something that any organisation should knowingly be doing.

However, it is possible that future updates to the regulation may bring further commodity codes into scope. There is also a myriad of other pieces of legislation coming into force over the next few years which will require supply chain due diligence and traceability on climate-related issues. Future legislation includes equivalent UK legislation relating to deforestation, as well as the European Union’s long-awaited ‘Corporate Sustainability Due Diligence Directive’ (CSDDD). It is vital that all organisations take action to understand and trace the materials used within their value chains.

Publishing Data

This article was originally published on page 26 of the September 2024 issue of SATRA Bulletin.

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