GUIDANCE
A Guide to EUDR:
What It Is, Who It Applies To, and How to Get Started
What Is EUDR and Does It Apply to Your Business?
The EU Deforestation Regulation (EUDR) is one of the most significant pieces of environmental trade legislation to have come into force in recent years. For companies with exposure to global commodity supply chains in the relevant sectors, it represents a genuine compliance obligation, not a distant regulatory development to monitor. For financial institutions, it represents a significant financial risk, both indirectly through investment and loans, but also for future expansion of the legislation which will bring financial institutions in scope.
This article explains what the regulation requires, who it applies to, what the compliance process involves, and what happens if you get it wrong. We also cover how Frontierra's satellite-based deforestation risk monitoring service can provide the compliance evidence you need.
Ready to understand your EUDR exposure? Get in touch with our team or request a demo.
What Is the EUDR?
The EU Deforestation Regulation (EU) 2023/1115 came into force in June 2023. Its purpose is to ensure that specific commodities and derived products placed on the EU market, or exported from it, have not contributed to deforestation or forest degradation after 31 December 2020.
The regulation builds on the FAO definition of deforestation, defining it as the conversion of forest to agricultural use, regardless of legality. Even legally permitted land clearance can trigger non-compliance if it occurred after the baseline date.
The EUDR is the most advanced deforestation regulation currently in force, but it is not the only one. The UK's Forest Risk Commodities regime under the Environment Act 2021 is awaiting implementing legislation, and in the United States, both the proposed federal FOREST Act and New York's TREES Act signal growing demand-side pressure on deforestation-linked supply chains. Companies that build robust due diligence processes now will be well placed as further regulations take effect.
Which Commodities Are in Scope?
The EUDR applies to seven commodity categories and their derived products:
Cattle
Cocoa
Coffee
Palm oil
Soy
Wood
Rubber
Derived products cover a wide range of goods. Chocolate, leather, furniture, tyres, and paper all fall within scope if they contain or are produced from one of the listed commodities, meaning EUDR reaches well beyond agriculture and forestry into food and beverage, retail, manufacturing, and financial services.
Who Does EUDR Apply To?
The regulation applies to operators, defined as any natural or legal person who places regulated commodities or products on the EU market or exports them from it. It also applies to traders further along the supply chain who make products available on the EU market.
The compliance burden differs by business size:
Large operators and traders must complete full due diligence before placing products on the market.
SMEs have reduced obligations but are not entirely exempt.
Financial institutions are not yet subject to the same obligations as commodity operators, but they are explicitly referenced within the legislation. Article 34 acknowledges the role of financing in driving deforestation and confirms that an expansion of scope to include financial institutions will be reviewed in a future phase. For banks, asset managers, and development finance institutions with agricultural or land-use exposure, this is a signal of the regulatory direction of travel, and one that warrants preparation now.
What Does Compliance Require?
EUDR compliance has three core requirements.
Due Diligence Statements
Before placing a regulated product on the EU market, operators must submit a due diligence statement through the EU Information System, confirming that the relevant commodity:
Was not produced on land deforested or degraded after 31 December 2020
Complies with the legislation of the country of production
Statements must be based on evidence, not assumption. Operators are required to collect information, assess the risk of non-compliance, and take mitigation measures where risk cannot be ruled out. Self-reported questionnaires and sustainability reports from suppliers are not sufficient.
Geolocation Data
Operators must identify the specific plots of land where each commodity was produced, to a level of precision that allows satellite verification of forest cover. For complex, multi-country supply chains, this requires a significant uplift in traceability requirements.
Obtaining plot-level geolocation data from suppliers is a practical challenge, particularly for commodities sourced across smallholder networks. It requires proactive engagement with supply chain partners and, in many cases, new data collection processes.
Supply Chain Tracing
Operators must trace commodities back to the plot of land where they were produced. For multi-tier supply chains, this means establishing clear documentation of sourcing locations at each stage of the chain. Where this is not possible, the default is to treat the risk as non-negligible, which effectively blocks market access.
What Are the Penalties for Non-Compliance?
The EUDR carries significant enforcement teeth. Penalties for non-compliance include:
Fines of up to 4% of annual EU turnover
Seizure of non-compliant products
Temporary exclusion from public procurement
Prohibition on placing further products on the EU market
The regulation requires that up to 9% of operators placing high-risk country products on the market are subject to checks. For companies in scope, the risk of enforcement action is real and increasing.
How Frontierra Supports EUDR Compliance
Satellite-Based Deforestation Assessment
Frontierra's deforestation compliance service uses high-resolution satellite imagery to assess every plot of land identified in a sourcing locations database. We establish forest cover at the 31 December 2020 baseline date, identify any deforestation or degradation that has occurred since, evaluate legality, and produce the evidence needed to support due diligence statements under the regulation.
Automated Analysis with Expert Verification
Our approach combines a fully automated initial assessment with expert verification, an important distinction. Frontierra is particularly attentive to the potential for erroneous forest loss data to cut smallholder producers from supply chains unfairly. Human expert review is integrated into our process to ensure that findings are accurate, defensible, and appropriate in their context.
Outputs are designed to integrate with existing client systems and workflows, and the service scales efficiently as volume increases, making it practical for large operators managing complex, multi-country supply chains.
With Frontierra, you get clear, actionable recommendations, not just data, so you know exactly which sourcing locations require further attention and what steps to take next.
EUDR Compliance for Financial Institutions
For financial institutions preparing for future regulatory scope, our assessments provide the spatial evidence and documentation that meets current requirements and can be readily adapted as new frameworks take effect.
Find out more about Frontierra's deforestation monitoring and EUDR compliance service, or get in touch with our team to discuss your issues.
For the latest thinking on deforestation regulation and supply chain transparency, visit our Insights page.
Frequently Asked Questions
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Not yet, as a direct obligation on the same terms as commodity operators. However, Article 34 flags an expansion of scope to financial institutions for future review. Banks, asset managers, and development finance institutions with exposure to deforestation-linked supply chains should treat this as an emerging obligation and begin building the evidence base now.
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Forest loss refers to any reduction in tree cover, including harvesting, fire, and storm damage. Deforestation, as defined by the EUDR, refers specifically to the permanent conversion of forest to agricultural use after 31 December 2020. Satellite monitoring systems detect forest loss, but EUDR compliance assessment requires determining whether that loss constitutes deforestation under the regulatory definition. Frontierra's assessments make this distinction clear.
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Where geolocation data cannot be obtained, the risk of non-compliance cannot be ruled out, and a due diligence statement cannot be submitted. Frontierra can support supply chain engagement and data collection processes, and can work with the information available to assess risk and identify where gaps are most material.
Working on a similar challenge?
Whether you are an operator seeking EUDR compliance or a financial institution looking to assess deforestation exposure, Frontierra has the tools and experience to help.