Time is running out for packaging companies to ensure they are compliant with the new EU Deforestation Regulation (EUDR), with the deadline of 30 December now just a few months away, GlobalData has said.
The EUDR aims to accelerate global efforts to combat deforestation, in accordance with the 2015 Paris Agreement and the European Green Deal.
Most firms based in the EU, or those who supply goods to the EU, will be required to be EUDR compliant by 30 December 2024, with companies in areas such as agriculture, food and beverages, cosmetics and paper products particularly in the spotlight.
'Consequential and Wide Reaching'
“Arguably, the EUDR is one of the EU’s most consequential and wide reaching sustainability actions, as the impact will not just be limited to EU-based companies," commented Siddarth Sehgal, consultant and packaging analyst at GlobalData. "Non-EU-based firms exporting to the EU or with operations inside the EU will also need to comply with these regulations.
"For example, a cocoa farmer in Colombia will have to meet the EUDR requirements if selling to a company that uses their produce to make chocolate that is then sold in the EU. Therefore, any company, regardless of its location, that trades in the specified commodities and wants to do business in the EU will need to comply with the EUDR.”
As Sehgal notes, while the regulation does not directly target packaging materials, it can indirectly affect certain types of packaging that are derived from the specified commodities in the EUDR, including wood, palm oil and rubber.
Paper and board packaging is a significant packaging pack type in Europe, with 129 billion pack units sold in 2023 across consumer packaged goods sectors (including food, beverages, household products, beauty, and pet care), which is expected to grow at a compound annual growth rate (CAGR) of 0.16% between 2022 and 2028, according to GlobalData.
'Significant Implications'
“The EUDR has significant implications for companies trading in the EU, and time is running out for packaging suppliers to plan and implement their compliance strategies," Sehgal commented. "One implication could be increased compliance costs for companies already managing global commodity price volatility, which if passed onto consumers, could prove inflationary in some EU countries.
"The exact impact on consumers will depend on a variety of factors, including how companies choose to respond to the regulation and how the regulation is enforced. However, with recent news reports confirming that the world’s top climate scientists expect global heating to go well beyond the current 1.5C target, stopping and reversing deforestation remains an urgent priority for the planet.”
The commodities being targeted by the EUDR include cattle, cocoa, coffee, palm oil, rubber, soya, and wood as well as some of their derived products, such as paper/paperboard, leather, chocolate, tyres, and furniture.
Non-compliance with the EUDR could lead to fines totalling 4% of the company's annual turnover, the confiscation of products, a 'name and shame' exercise on the EU Commission website, and other potential punishments.
