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EUDR: Definition and overview
EUDR in a nutshell:
The EU Deforestation Regulation (EUDR) is a regulation that will come into force in 2024 and prohibits the import of products that contribute to deforestation or forest degradation. For procurement, this means the obligation to carry out comprehensive due diligence checks on relevant raw materials such as palm oil, wood, coffee, cocoa, cattle and soy as well as their derivatives.
Example: From 2024, when procuring 500 tons of cocoa beans, a European food manufacturer must use a digital traceability system to prove that the areas under cultivation have not been deforested since December 2020 and that the GPS coordinates of the cultivation areas are registered in the EUDR database.
Contents
Introduction to EUDR in purchasing
What is the EUDR in purchasing?
The EUDR (EU Deforestation Regulation) is a European Union regulation that aims to reduce deforestation worldwide and ensure that all goods imported into the EU do not contribute to further deforestation. The regulation requires companies importing certain goods such as timber, soy, palm oil, beef and cocoa to closely monitor their supply chains and prove that these products do not originate from deforested areas.
Main components of EUDR in purchasing:
- Emissions recording: Recording of CO₂ emissions generated during the production of imported goods.
- Purchase of certificates: Purchase of emission certificates corresponding to the CO₂ emissions recorded.
- Reporting obligation: Obligation to regularly report CO₂ emissions to the competent authorities.
- Transitional register: Establishment of a transitional register to track CO₂ emissions and the certificates acquired.
- Customs tariff numbers: Determination of the relevant customs tariff numbers for the categories of goods concerned.
Importance for buyers:
- Cost control: By taking CO₂ costs into account in procurement decisions, buyers can better control the total cost of goods.
- Transparency and traceability: Clear documentation of CO₂ emissions and the certificates acquired improves transparency in the supply chain.
- Legal certainty: Compliance with EUDR regulations minimizes legal risks and potential fines.
- Sustainability goals: Supporting the company's sustainability and climate protection goals by selecting environmentally friendly suppliers.
- Supplier relationships: Promoting a collaborative partnership with suppliers who also implement sustainable practices.
Areas of application of EUDR in purchasing
The EUDR affects a large number of industries and products that are imported into the EU. The regulation is particularly aimed at industries with high deforestation risks, such as agriculture, forestry and the food industry. For buyers, this means that they must select their suppliers carefully and assess their production processes in terms of their environmental impact.
Examples of areas of application:
- Agriculture: Use of the EUDR to procure soy and palm oil from suppliers that do not practise deforestation.
- Forestry: Application of the EUDR to select timber suppliers that practice sustainable forestry.
- Food industry: Use of the EUDR to procure food ingredients such as beef and cocoa from sustainable sources.
- Textile industry: Use of the EUDR to select textile suppliers that do not cause deforestation for the production of fibers.
- Electronics industry: Consideration of EUDR in the procurement of raw materials for electronic products.
- Pharmaceutical industry: Application of the EUDR for the procurement of natural raw materials without contributing to deforestation.
Strategies for the successful implementation of the EUDR:
- Data integration: Ensuring seamless integration of environmental and supplier data from different sources to optimize the use of EUDR requirements.
- Employee training: training the purchasing team in dealing with EUDR regulations and the use of sustainability data.
- Partnerships with suppliers: Working with suppliers to reduce environmental impact and ensure compliance with EUDR.
- Pilot projects: Implementation of pilot projects to evaluate the effectiveness of EUDR applications in purchasing.
- Continuous monitoring and adaptation: Regular review of EUDR implementation and adaptation to changing requirements.
Success factors:
- Clear objectives: Definition of clear objectives and requirements for EUDR implementation.
- Top-down commitment: Support and active involvement of the management level in the implementation of EUDR.
- Data quality: Ensuring the accuracy and completeness of environmental and supplier data to support precise analyses and decisions.
- Interdisciplinary cooperation: Cooperation between purchasing, IT, sustainability departments and other relevant departments to promote holistic implementation.
- Flexibility and adaptability: Ability to flexibly adapt EUDR strategies to respond to changes in the market or supply chain.
EUDR compared to other procurement processes
In addition to EUDR, there are various other approaches and methods in purchasing that can also contribute to optimizing the procurement strategy. A comparison of these methods helps purchasers to select the appropriate tools for their specific requirements.
EUDR:
- Benefits: Promotes sustainable procurement and CO₂ reduction; supports compliance with legal requirements; strengthens market position through sustainable practices.
- Disadvantages: Can be complex and resource intensive; requires accurate data and close collaboration with suppliers.
RFX processes (RFI, RFQ, RFP):
- Advantages: Offer a structured and systematic approach to procurement; enable a well-founded and objective evaluation of suppliers; promote transparency and competition.
- Disadvantages: Can be time and resource intensive; require specific knowledge and experience in dealing with different types of requests.
Strategic sourcing:
- Advantages: Long-term focus on optimizing supplier relationships and ensuring quality; integration of market research and supplier development.
- Disadvantages: High implementation costs; requires close cooperation and trust with suppliers.
E-Procurement:
- Advantages: Automation of purchasing processes, reduction of administrative effort and errors; improved transparency and traceability.
- Disadvantages: High initial investment in software and training; dependence on technology and possible technical problems.
Agile procurement:
- Advantages: High flexibility and adaptability to rapidly changing market conditions; promotion of innovation through close cooperation with suppliers.
- Disadvantages: Requires an agile corporate culture and well-trained employees; can lead to inconsistencies if there is a lack of discipline.
Decision-making factors for buyers:
- Corporate goals: Long-term and short-term goals of the company influence the choice of suitable purchasing approaches.
- Market conditions: The stability and dynamics of the market determine the flexibility and risk appetite of procurement strategies.
- Resource availability: Available financial and human resources influence the implementation and management of purchasing approaches.
- Supplier structure: Number and variety of suppliers as well as their performance and reliability.
- Technological infrastructure: availability and use of technologies to support purchasing processes.
The choice between EUDR and other purchasing approaches should be based on a thorough analysis of the company's specific needs and framework conditions in order to select the optimal procurement strategy.
Conclusion: EUDR as a strategic success factor for sustainable procurement management
The EUDR is an important tool for companies that want to make their procurement processes more sustainable and at the same time ensure compliance with legal requirements. By integrating the EUDR into procurement management, companies can reduce their CO₂ emissions, increase transparency in the supply chain and ensure the quality of procured goods and services. Despite the challenges, such as the complexity and high implementation costs, the benefits of EUDR offer significant opportunities for a sustainable and competitive procurement strategy. With clearly defined processes, the use of modern technologies and the promotion of a cooperative relationship with suppliers, companies can successfully implement and continuously improve EUDR. This not only contributes to the efficiency and sustainability of procurement, but also strengthens the competitiveness and sustainable development of the company. Overall, the EUDR is a valuable tool in any buyer's toolbox and helps companies to make their supply chains more efficient, secure and environmentally friendly.
