Only 12% of suppliers are ready for the European Union Deforestation Regulation (EUDR), which to some extent puts billions of dollars' worth of trade in forestry products at risk.

A recent report acknowledges that a large volume of wooden furniture manufactured in China, Indonesia and Malaysia may be exposed to substantial risk because of sales difficulties, since most supply chain participants – the traders – are not ready for the EUDR requirements.

"Less than six months before the EUDR comes into force, most companies in the timber, paper, pulp, coffee, meat and rubber supply chains are very poorly and inadequately prepared for this regulation", acknowledges a new Forbes report, which reveals that only 30% of upstream suppliers and 12% of downstream product traders have established systems for identifying deforestation. Despite the fact that deforestation and preventing any association with it is becoming "business as usual for the industry", Forbes found that most supply chain participants are struggling to provide reliable data across complex and opaque trading and supply networks. Serious problems exist, for example, in the rubber supply chain, which depends on smallholders and small producers and is not sufficiently prepared to guarantee compliance with the requirements of the Deforestation Regulation.

According to Koltiva, a Swiss and Indonesian organisation of experts in timber harvesting traceability, uncertainty about compliant and non-compliant goods is one of the most serious threats to EUDR compliance. The legislation lays down strict segregation of goods. Any mixing of goods (compliant, non-compliant, unknown) is strictly prohibited. Therefore, ensuring that a consignment complies with the EUDR requires controlled physical separation of goods, which creates problems for smallholders involved in coffee and rubber supply chains. "These supply chains often have a great many stages where goods can be mixed accidentally. There is always the possibility that some land parcels have not been fully mapped," stresses Andre Mavardhi, lead specialist for the environmental and agricultural sector at Koltiva.

At the beginning of July, the head of Lavazza (one of the world's largest coffee producers) urged that the introduction of the EUDR be postponed, over concerns about the supply chain's readiness to meet compliance requirements.

Last year WoodCentral interviewed an expert involved in discussions of the EUDR question at the level of the European Union and its trading partners, who indicated that the EUDR could hamper beef and timber exports from Australia: "The EUDR is a unique B2B regulation drawn up by the European Union but implemented by individual member states." The expert stressed that exporters may need to build two separate supply chains – "EUDR-compliant and non-compliant". It will be "a commercial and ethical decision whether to remain in European Union supply chains".

Earlier this year, ITTO* reported that timber imports had fallen by more than 60% ahead of the introduction of the EUDR. In March WoodCentral wrote that the new rules could cause timber imports from countries with a high deforestation risk (including Indonesia, Malaysia and Brazil) to fall by more than 25%, reaching as much as 38% if the definitions include the conversion of agricultural land (known as EUDR+), with the shortfall being covered by timber from Canada and the USA.

"In countries with high levels of deforestation, such as Brazil, Indonesia and Malaysia, a considerable decline in roundwood production and exports is expected, which will affect the prices of sawnwood and wood panels," acknowledges Craig Johnston, who led the preparation of the report, modelling the potential impact of the EUDR on the global supply of timber products. "At the same time, countries with low levels of deforestation, including Canada (an increase of 1.4%) and the USA (an increase of 0.1%), could see a slight rise in production to meet European Union demand for timber on the market."

* The International Tropical Timber Organization (ITTO) is an intergovernmental organisation that promotes the sustainable management and conservation of tropical forests, as well as the expansion and diversification of international trade in tropical timber from sustainably and legally managed forests.

ITTO:

• Develops internationally agreed policy guidelines and standards to promote sustainable forest management (SFM) and a sustainable tropical timber industry and trade.
• Helps tropical countries (its member states) to adapt these guidelines and standards to local conditions and to put them into practice through projects and other means.
• Collects, analyses and disseminates data on the production of and trade in tropical timber.
• Promotes sustainable tropical timber supply chains.
• Helps to develop tropical forestry capacity.