EUDR in Practice: How to Correctly Set Up Due Diligence in the Supply Chain

The EU Deforestation Regulation (EUDR) introduces new due diligence obligations for companies working with selected commodities and products. In practice, this means that relevant products can only be placed on the EU market or exported from the EU if the company proves they meet EUDR requirements and are supported by the corresponding documentation. Due diligence thus becomes a key process that must not only be performed but also demonstrably documented.

Due Diligence Obligations under EUDR:

1) Obligation to collect and verify information on the commodity/product and supply chain

This primarily involves:

• Product identification: Classification (trade name, type) and quantity information.

• Country of production and other relevant information regarding origin.

• Geolocation data: The exact coordinates of the plot of land where the commodity was produced.

• Supplier data: Information on all operators and traders in the supply chain.

• Evidence of "deforestation-free" status: Information confirming that the products do not contribute to deforestation.

• Legality of production: Confirmation that commodities were produced in accordance with the relevant legislation of the country of production (e.g., land use rights, environmental protection, forest-related rules, labor rights, human rights, and tax/trade regulations).

2) Obligation to assess the risk of the origin of commodities and products

Under the due diligence system, entities must verify and analyze the collected information. The company must assess whether there is a risk that the product:

• Does not meet EUDR requirements;

• Has an unclear origin;

• Is associated with a higher level of risk in the supply chain.

The result must be a clear decision on whether the risk is negligible or whether further measures are required. The scope and depth of the risk assessment may vary depending on the risk category assigned to the country of production by the EU.

3) Obligation to adopt risk mitigation measures

If the risk cannot be evaluated as negligible, the company must adopt proportionate measures to reduce it, which may include:

• Requesting additional information, data, or documents;

• Conducting independent surveys or audits;

• Implementing other measures related to information requirements for the product/supply chain.

Entities must duly document their decisions regarding mitigation procedures, review them regularly (at least once a year), and make them available to competent authorities upon request. Without reducing the risk to a negligible level, the product cannot be placed on the EU market or exported.

4) Obligation to submit a Due Diligence Statement

After performing due diligence, the company must submit a Due Diligence Statement via the EU Information System. This statement confirms that:

• Due diligence has been performed;

• The product meets EUDR requirements;

• The risk has been assessed as negligible.

5) Obligation to establish and maintain a due diligence system

The EUDR expects companies to have an internal system in place that includes:

• Clear procedures and measures for performing due diligence (including regular updates);

• Internal controls of the due diligence system;

• Reporting on the due diligence system (this obligation does not apply to SMEs).

6) Obligation to retain documentation and prepare for inspections

Companies must keep relevant documentation for a specified period and be able to present it to supervisory authorities. This includes:

• Background documents for the performed due diligence;

• Information on origin, geolocation, and risks;

• Adopted mitigation measures;

• Confirmation of the statement submission to the EU system.

Our Recommendations

Implementing due diligence in practice involves a combination of data management, supply chain coordination, internal controls, and mandatory reporting. Companies that start setting up their due diligence frameworks early will significantly reduce the regulatory and operational risks associated with placing products on the EU market.

Grant Thornton can help you set up a complete EUDR due diligence framework, including procedures for its ongoing updates, as well as provide targeted support in specific areas:

• Internal system setup: Establishing data collection and evaluation processes (including geolocation and legal data).

• Risk analysis: Evaluating information and documentation for relevant commodities and products.

• Mitigation strategies: Designing and implementing measures for products with a risk of non-compliance.

• Knowledge transfer: Ensuring internal expertise through the implementation of internal guidelines and training for management and key teams.

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