With the European Union (EU) Deforestation Regulation (EUDR) set to take effect on 30 December 2024, businesses across various sectors must ensure their supply chains are deforestation-free to continue selling in the massive EU market.
The EUDR represents a significant step by the EU in its fight against global deforestation.
The regulation applies to companies trading in the EU with specific commodities like cattle, cocoa, coffee, and wood, along with products derived from them. This means companies involved in agriculture, food and beverage, cosmetics, and timber will all be impacted.
Impact on packaging
While the EUDR doesn't directly target packaging materials, it indirectly affects packaging derived from regulated commodities.
These would include paper and board packaging, derivatives of palm oil and rubber used for seals, gaskets and protective gloves used in the packaging process, and cattle which provide leather, will also be affected.
Paper and board packaging, a major segment in Europe, falls under this category.
This segment, with 129 billion pack units sold in 2023 across consumer-packaged goods sectors is expected to grow at a compound annual growth rate (CAGR) of 0.16% between 2022 and 2028, according to GlobalData, a leading data and analytics company.
Companies producing such packaging will need to guarantee their wood sources are not linked to deforestation.
EUDR compliance requirements
To comply with the EUDR, companies must implement mandatory due diligence reporting for their supply chains. This involves comprehensive data collection to prove product traceability.
They must demonstrate that their products are deforestation-free by showing that they don't contain materials from land cleared after 31 December 2020.
Non-compliance can result in hefty fines, product confiscation, and reputational damage.
“The EUDR has significant implications for companies trading in the EU, and time is running out for packaging suppliers to plan and implement their compliance strategies,” said Siddarth Sehgal, Consultant and Packaging Analyst at GlobalData.
The regulation might lead to increased compliance costs for companies already grappling with global commodity price volatility. These costs could ultimately be passed on to consumers, potentially causing inflation in some EU countries.
“The exact impact on consumers will depend on a variety of factors, including how companies choose to respond to the regulation and how the regulation is enforced,” added Sehgal.
