At the end of 2022 we released a report which looked at Timber importers’ attitudes towards the EU Deforestation Regulation (EUDR) and their understanding of traceability solutions to help meet incoming due diligence requirements.
We wanted to share some of the insights we have gathered following its release from our continued conversations with Timber and other forest risk commodity importers needing to adhere to the incoming legislation.
Over the next few weeks, we will release some of our top takeaways – starting with geolocation.
The introduction of geolocation
The EUDR requires companies to perform due diligence on the origin of all forest risk commodities. This means going beyond their immediate supplier and back to source. It also stipulates that supplier names and geolocation must be recorded: “Operators are required to collect the geolocation coordinates of all land on which the relevant commodities and products have been produced”. This can be in the form of GPS coordinates or polygons, depending on the size of the plot of land.
This is a new step in the due diligence process versus the EU Timber Regulation (EUTR), which was introduced in 2013, and a lot of organisations we are speaking with are coming to terms with what this means.
For instance, a question we’re often asked is: “If geolocation is required, does this mean that suppliers need to tell me where they source supply from? ”. We know that this is a challenge for companies, as whilst not directly affected by the EUDR we often hear from UK companies that their EU suppliers don’t wish to share this information with them. One UK importer told us that since the implementation of the UK Timber Regulation (UKTR) post-Brexit, they were unable to source from 50% of their existing EU suppliers because they were not willing to share the required supplier information.
This unwillingness can come from a number of places – lack of understanding about the requirements, not actually having the upstream information themselves to be able to share, being worried about being disintermediated, etc.
So what can be done to meet the new requirements?
Whilst we don’t claim to be experts on EUDR, our understanding is that the GPS coordinates or polygon of where the wood (or palm oil, or cocoa, etc.) came from needs to be shared as part of the new legislation. It isn’t an option. So in this sense, whilst not giving away the company name it was sourced from, suppliers are going to have shift mindsets towards sharing this information.
As an attempt to build trust into the system we have seen examples of standard legal contracts aiming to prevent solicitation between customers and suppliers, which is one mechanism to build trust into the system. Another which we’re deploying through Timber Chain, is around redacting particular data – invoice amounts, supplier names, etc. such that if EUDR doesn’t require these pieces of data, then they don’t need to be shared with anyone in the supply network.
In terms of how the European Union/European Commission plans on ensuring privacy, it states that: “Commercially sensitive information, such as the identity or location of operators’ suppliers, is only to be shared with authorities in EU Member States for enforcement purposes. It is not to be disclosed publicly.”
GPS coordinates or polygons?
The following text from the draft regulation published 21.12.2002 should help if you are unsure whether to use GPS coordinate or polygons:
‘Geolocation’ means the geographical location of a plot of land described by means of latitude and longitude coordinates corresponding to at least one latitude and longitude point and using at least six decimal digits. For relevant commodities other than cattle, for plots of land of more than 4 hectares, the geographical location shall be provided using polygons, meaning sufficient latitude and longitude points to describe the perimeter of each plot of land.
Tracking down reliable GPS coordinates or polygons is going to be very new to many organisations, big and small. It appears to be a commonly shared concern – how will we do this? Who will do this? How do we interpret the data? Etc.
One mechanism we are exploring with our Interu application, as well as the Due Diligence Management Platform project we are working on with verifier DoubleHelix, is linking to satellite imagery to enable operators to verify coordinates / polygons. There are numerous free and open source data sets available for operators to check against. In doing so, they can select the date of harvest, zoom in on the coordinates and look at what crop is growing there, what the land cover looks like and build confidence that the information they received was correct. For instance, if your supplier tells you the region of origin and coordinates, and you check it against a GSI (geospatial imagery) database, and you can see that there is still a lot of tree coverage at the supposed date of harvest, you might want to do a lot more due diligence on your supplier and reject the inbound shipment.
Finally, remembering why EUDR asks for this information, and what it is trying to achieve in terms of deforestation ambitions is really important.
If you are starting your journey in better understanding EUDR and its due diligence requirements and would like to chat with us or one of our partners, please do get in touch.