The new European Union Regulation on deforestation-free products (EUDR) will soon replace the European Union Timber Regulation (EUTR), and a new study has revealed that timber importers in the United Kingdom, Belgium, Austria, France and Italy are woefully unprepared for the upcoming regulatory changes.
It is highly likely that under the EUDR, mandatory due diligence obligations will now be imposed on importers who place goods on the EU market for the first time. The requirement to provide due diligence all the way back to the point of origin will demand significant changes from industry players worldwide.
A study by the agency iov42 revealed that 74% of those surveyed admitted that they are not fully prepared for the upcoming regulation, possibly because the regulation has not yet been officially approved. However, when looking at specific regions, it is concerning that 12% of Belgian importers were not fully aware of the upcoming regulation, while 51% of importers in the United Kingdom claimed they were only slightly prepared.
Nevertheless, 72% of those surveyed revealed that they are actually interested in preparing for the implementation of the regulation, and 43% claimed that they view solutions for full traceability positively. However, they are held back by unfounded fears and a lack of understanding of how traceability solutions, such as Distributed Ledger Technology (or more commonly referred to simply as blockchain), can ensure due diligence.
Of those surveyed, 46% of respondents do not fully understand the regulations and how they will affect them, while 56% believe that using traceability technology, such as blockchain, may lead to the disclosure of trade secrets. Interestingly, 48% also indicated that greater traceability could reveal flaws or problems in the supply chain, thereby highlighting why regulation is necessary.
David Coleman (David Coleman), Product Director at iov42, explained: “We are at a critical juncture in the timber industry. Given that new, comprehensive regulations are approaching, it is essential that industry participants are prepared. Our research shows that importers in Europe are to some extent ready to adapt to these rules, but there is still hesitation and a lack of understanding regarding how traceability solutions can help. Distributed Ledger Technology (DLT) is ideal for helping companies improve the traceability of their timber in light of the upcoming regulatory changes, as well as for building bonds of trust throughout the timber ecosystem.”
The study also found that, on average, 83% of respondents spend half or more of their time searching for information about customers, which means that much less time is devoted to revenue-generating activities. Currently, it is not unusual for companies to store due diligence evidence in one place. This means that documents are tied to individual employees, meaning they are not easily accessible to the wider company, clients or for enforcement purposes, and can even be lost if the person in question leaves the company. However, law enforcement authorities may demand access to evidence regarding timber transactions made several years ago, which makes finding the documents difficult.
If companies are found not to have carried out due diligence, it can not only harm their reputation, but in more serious cases of non-compliance, it could result in fines, seizures and, in the worst-case scenario, even imprisonment.