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Following the European Commission’s proposal to delay the implementation of the EUDR to December 30, 2025 for large companies and June 30, 2026 for micro and small enterprises, understanding the rules is now more important than ever for the forest products markets.
Use this guide to explore how the EUDR affects your production processes, supply chain management and market positioning.
Navigating the new regulations will present challenges for players across the globe. Here we’ve answered your questions about the EUDR, addressing specific concerns and the potential operational impacts of the new rules.
Scroll down to keep reading the frequently asked questions about the EUDR, and fill in the form below to read Fastmarkets director, Europe packaging and graphic papers Alejandro Mata Lopez’s forecast on the impact of the regulation on production costs, competitiveness and the overall market.
The EUDR requires companies trading in wood and products derived from wood to conduct extensive diligence on their value chains to ensure their products are not a result of deforestation, forest degradation or breaches of local environmental and social laws.
From the deadline (December 30, 2024 under the original proposal, or December 30, 2025 if the postponement goes ahead), EU companies will need to guarantee their wood products did not result from deforestation that occurred after December 31, 2020.
The main objective of the regulation is to reduce the EU’s impact on global deforestation and ensure that all products consumed within the EU do not contribute to the destruction of vital forest ecosystems, reducing overall greenhouse gas emissions and biodiversity loss. While the EUDR is a European legislation, the rules are aimed at promoting sustainable production and consumption patterns globally.
The rules apply to European wood, pulp and paper companies and will also impact all EU imports and exports.
Pulp is the European paper and board industry’s largest import, totaling over 6 million tonnes of pulp in 2023, mainly from Brazil, North America and Chile. Graphics, boxboard and containerboard were the next largest imports over that period, respectively.
Within the EU, companies that buy market pulp will be some of the most affected by this new regulation as this is the principal product imported from overseas to Europe.
However, integrated companies that produce their own pulp will also experience a significant impact, as complying with the rules will result in additional costs due to the expenses of tracing the origins of wood and pulp back to their source.
Overall, the new regulation could have a significant impact on the competitiveness of the European paper packaging industry, reducing external demand for European products due to the higher costs associated with complying with the rules.
The new rules could increase demand for recycled fibers. As a result, the increase in recycled pulp demand could drive up paper-for-recycling (PfR) prices. OCC prices have already been rising significantly over the last year — the average OCC PIX is 62% higher than a year ago — and the new possible demand for recycled fibers in the region could push prices up further.
The switch would also require various innovations around the industry, as some paper grades cannot transition from using virgin to recycled fibers due to their specific characteristics. For example, certain cartonboard papers used for food packaging cannot be produced with recycled materials.
Under the regulation, manufacturers will be required to implement more robust traceability processes to ensure that their products do not contribute to deforestation. This involves a significant increase in documentation and verification processes throughout the supply chain, from raw material sourcing to the final product.
Manufacturers may need to adapt their sourcing strategies, prioritizing suppliers who can provide verified deforestation-free materials quickly and efficiently.
Similarly, procurement officers will need to establish protocols to ensure that sourced materials do not contribute to deforestation. This involves implementing comprehensive risk assessments and verification processes to confirm the origin and sustainability of the forest products.
Investing in sustainable practices will be crucial. Integrating environmentally responsible methods, such as sourcing certified raw materials, optimizing resource use and minimizing waste will allow manufacturers to align with global sustainability trends, boosting their sustainability credentials and attracting consumers who prioritize environmental stewardship.
Manufacturers will also need to use technology to assess the transparency and traceability across their supply chains. Alongside facilitating compliance to EUDR standards, new technologies can improve operational efficiency and data accuracy.
Compliance with the EUDR will require increased investment in sustainable sourcing and advanced technologies to provide transparency to their supply chain.
These changes can lead to higher operational costs, which could lead to changing pricing strategies, either passing on the additional costs to consumers or adjusting product lines to focus on items that can command higher prices due to their sustainable attributes.
This could, in turn, reduce the competitiveness of the European paper packaging industry worldwide. Higher cost fibers and additional operational costs could affect overseas prices of European paper for packaging exports, making them more expensive and reducing external demand for European products.
Reduced competitiveness could strongly impact European companies’ revenues, as Europe is a net exporter of paper packaging grades. This could be particularly problematic for the cartonboard and sack kraft industries as net exports represent 28% and 42% of their total production respectively.
Companies will face increased operational expenses, regulatory scrutiny and the threat of fines for non-compliance, which could reach a minimum of 4% of the annual turnover, confiscation of goods and even a temporary ban from participating in EU procurement or tenders.
Interested in learning about the impact the EUDR will have on the market over the long term? Access Fastmarkets director, Europe packaging and graphic papers Alejandro Mata Lopez’s forecast examining the challenges the regulation will pose to the European pulp and paper industries here.