EU Regulation on Deforestation-Free Products: Guidance and recommendations for corporates and financial institutions

The EU Regulation on Deforestation-Free Products (EUDR) mandates strict due diligence and geolocation traceability for specific commodities to ensure they are not linked to deforestation after December 31, 2020. While currently targeting operators and traders, the regulation may expand to financial institutions by mid-2025. The Climate Bonds Initiative is developing transition pathways and certification criteria to help agri-food companies move beyond legal compliance toward best practices in sustainability.

• The EUDR prohibits the sale of commodities in the EU if they were produced on land cleared after December 31, 2020, regardless of whether the deforestation was legal under local laws.
• The regulation covers specific commodities including cocoa, chocolate, coffee, soy, palm oil, cattle, beef, wood, and rubber, expanding upon the scope of the previous EU Timber Regulation (EUTR).
• Compliance requires a three-step due diligence system: collecting information on the commodity and its geolocation, assessing and managing supply chain risk, and implementing mitigation measures to reduce risk to negligible levels.
• The EUDR rejects the 'mass balance' approach, requiring that every single unit of a relevant commodity be geolocated and tracked back to its source.
• While financial institutions (FIs) are not currently targeted by the EUDR, a review clause scheduled for mid-2025 may extend regulatory coverage and obligations to them.
• The Climate Bonds Initiative is developing Agri-food transition investment criteria, expected for Certification between 2023 and 2024, to help companies align with EUDR and global net-zero goals.

APA

Pulido, M. A., & Hemingway, R. (2023). EU Regulation on Deforestation-Free Products: Guidance and recommendations for corporates and financial institutions. Climate Bonds Initiative. https://www.climatebonds.net/files/documents/publications/EU-Regulation-on-Deforestation-Free-Products-Guidance-and-recommendations-for-corporates-and-financial-institutions-Paper-I.pdf

Chicago

Pulido, María Alejandra, and Rachel Hemingway. EU Regulation on Deforestation-Free Products: Guidance and recommendations for corporates and financial institutions. Climate Bonds Initiative, 2023. https://www.climatebonds.net/files/documents/publications/EU-Regulation-on-Deforestation-Free-Products-Guidance-and-recommendations-for-corporates-and-financial-institutions-Paper-I.pdf.

Wikipedia

{{cite report |last1=Pulido |first1=María Alejandra |last2=Hemingway |first2=Rachel |title=EU Regulation on Deforestation-Free Products: Guidance and recommendations for corporates and financial institutions |publisher=Climate Bonds Initiative |date=September 2023 |url=https://www.climatebonds.net/files/documents/publications/EU-Regulation-on-Deforestation-Free-Products-Guidance-and-recommendations-for-corporates-and-financial-institutions-Paper-I.pdf |access-date=17 August 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{pulido2023regulation, author = {Pulido, María Alejandra and Hemingway, Rachel}, title = {{EU Regulation on Deforestation-Free Products: Guidance and recommendations for corporates and financial institutions}}, institution = {Climate Bonds Initiative}, year = {2023}, month = sep, url = {https://www.climatebonds.net/files/documents/publications/EU-Regulation-on-Deforestation-Free-Products-Guidance-and-recommendations-for-corporates-and-financial-institutions-Paper-I.pdf}, urldate = {2026-08-17}, note = {Indexed by Climate Insights Directory} }