The European Union wants to reduce global deforestation and halt the overall degradation of forests caused by, among other things, the industrial production of commodities such as cattle, cocoa, coffee, oil palm, rubber, soya and wood. Regulation 2023/1115 of the European Parliament and Council, which comes into force on 30 December, aims to reduce greenhouse gas emissions and better protect global biodiversity and the climate.
This means that further obligations will soon be imposed on those who place or make available on the EU market or export from the EU goods and products that may have an impact on the degradation of ecosystems. We look at what these obligations are and suggest what needs to be considered when developing good practice.
Diligence is key
Businesses will need to demonstrate that their goods and products:
- Are deforestation-free
- Have been produced in accordance with the relevant legislation of the country of production
- Are covered by a due diligence statement
According to the Regulation, due diligence includes:
- Collection of information, data and documents in accordance with specific requirements
- Risk assessment measures
- Risk mitigation measures
Due diligence system and statement
The Regulation recommends the implementation of an adequate due diligence system, i.e. a set of procedures and measures that are periodically reviewed and updated (at least annually), and imposes a number of new reporting and information obligations. Some companies will be required to appoint a compliance officer and have independent external audits.
Companies will have to submit due diligence statements via an IT system. The system should be available by 30 December 2024.
It is also recommended that existing contracts with suppliers of the aforementioned products or goods be reviewed and adapted to ensure compliance with the requirements of the Regulation.
It may therefore be good practice to provide support and professional training to staff to familiarise them with the new subject matter in an accessible way and to enable them to perform their duties in this area properly.
Rules and penalties
Penalties for infringement of the Regulation include, without limitation:
- Fines (in the amount of 4 % of the company’s total annual turnover in the financial year preceding the fining decision)
- Confiscation of the relevant products
- Confiscation of revenues gained from transactions involving the relevant products
- Temporary exclusion (for a maximum of 12 months) from public procurement processes and from access to public funding, including tendering procedures, grants and concessions
- Temporary prohibition from placing on the market or exporting relevant commodities and products
EU Regulation 2023/1115 – important deadlines
The new rules will enter into force on 30 December 2024.
It should be noted that on 2 October, the European Commission made a proposal to extend this deadline, but no binding decision has yet been taken.
The Commission proposes to give concerned parties additional time to prepare. If approved by the European Parliament and the Council, it would make the law applicable on 30 December 2025 for large companies and 30 June 2026 for micro- and small enterprises.
The Regulation is directly applicable, i.e. it does not require transposition into national law. Nevertheless, it obliges the Polish legislator to adopt, among other things, implementing regulations on penalties and checks, which have not yet been adopted. The same applies to the designation of the authority responsible for monitoring the correct implementation of the new obligations. The deadline for this was 30 December 2023 and we still do not know who will supervise this area.
Given the short deadline for compliance with the new rules, it is worth checking now who falls within the scope of the obligations, implementing a due diligence system and preparing for a possible check. We can help you with all of this.
Any questions? Contact us
