New traceability requirements brought on by the European Union Deforestation Regulation (EUDR) will soon go into effect. Companies, trade groups, and operators doing business with the EU are working to develop solutions to comply with this new regulation. At this point it seems no one has a handle on how this will work in practice. Current sourcing and handling fall short of the traceability requirements due to the complexities involved in procurement and the acceptability of blending products through mass balance systems. Tracking source materials for composite goods like paper, packaging, pellets, furniture, etc. to the plot of land will be difficult. In addition, companies that are presently certified through SFI, FSC, or PEFC, cannot rely on existing programs as they currently do not meet compliance.

EUDR requires operators placing goods on the EU market to prove that certain commodities -including soy, beef, palm oil, wood, cocoa, coffee and rubber – are deforestation-free. The intent is to ensure these products no longer contribute to deforestation or forest degradation (e.g., conversion of natural stands to plantations). For wood products, this means additional work is needed to connect the harvest location (geolocation) to the raw material or finished product when traded. This information is relatively simple to obtain early in the supply chain, however it must follow the wood through the multiple stages of trucking, collecting, storing, manufacturing, and shipping.

As noted above, existing chain-of-custody standards allow blending of raw materials through mass balance systems. But this is not allowed with EUDR. The burden is on operators to ensure that the requirements of geolocation and due diligence are met at all points along the supply chain. Operators will need systems and processes in place soon to collect and verify the information provided by their suppliers. Even when an upstream supplier provides due diligence, the operator is ultimately responsible for verifying that the information is reliable.

The impact of this regulation is yet to be seen, but I’m confident there will be risks to consider along the way. A positive perspective is that it should generate new ideas and innovative solutions for forest supply chain traceability, and validation for sustainability within the industry. The negative perspective is that it could cause existing supply chains to become complicated, inefficient, and less transparent as companies implement black-box systems that are difficult to understand and verify. Additional unknowns are issues related to landowner privacy, increased fraud and litigation, limiting access to markets, and disincentives for investment in wood commodities.

This sounds like a good opportunity for Blockchain technology. There are some unique aspects about blockchain that could help, but I’m not convinced it is the “be-all and end-all” solution for EUDR. I believe it will require a creative combination of technology and process improvements to prove compliance.

My hope is that the industry finds an innovative and practical solution to comply with EUDR. Personally, I would like to see open standards and access to better technology as firms collaborate on building transparent networks and improved sourcing practices.

Photo by Sarah Worth on Unsplash

Categories: Geospatial Technology Adoption

Tagged as: Blockchain EUDR Geolocation supply-chain-management sustainability Technology Tracability traceability

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