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

This report by the Climate Bonds Initiative provides guidance for corporations and financial institutions on complying with the EU Regulation on Deforestation-Free Products (EUDR). It details the regulation's mandatory due diligence and geolocation requirements for specific commodities, the potential future expansion of the law to include financial institutions, and the role of transition plans and third-party certifications in achieving compliance and broader sustainability goals.

• The EU Regulation on Deforestation-Free Products (EUDR) prohibits the sale of commodities in the EU if they were produced on land cleared after December 31, 2020. This applies to both legal and illegal deforestation and covers specific commodities including cocoa, chocolate, coffee, soy, palm oil, cattle, beef, wood, and rubber.
• Compliance with the EUDR requires a three-step due diligence system: collecting information on the commodity and its production location, assessing and managing supply chain risk, and implementing mitigation measures to reduce deforestation risks to negligible levels. The regulation mandates plot-level geolocation and forbids the use of a mass balance approach.
• The European Commission will implement a country benchmarking system, categorising countries as low, standard, or high deforestation-risk. This classification determines the level of scrutiny required; for instance, risk assessment and mitigation steps are generally not required for commodities sourced from low-risk countries.
• While financial institutions (FIs) are not currently targeted by the EUDR, a review clause scheduled for mid-2025 may expand regulatory coverage to include them. If included, FIs would likely need to integrate deforestation due diligence into risk management and report on principal adverse impacts under the EU Sustainable Finance Disclosure Regulation (SFDR).
• Climate Bonds Initiative is developing an agri-food transition programme and investment criteria, expected for Certification under the Climate Bonds Standard between 2023 and 2024. These tools aim to help companies move beyond legal compliance toward best practices, including the development of transition plans covering Scopes 1, 2, and 3 emissions.
• The EUDR is part of a broader EU sustainability framework, including the Green Deal, the Corporate Sustainability Reporting Directive (CSRD), and the proposed Corporate Sustainability Due Diligence Directive (CSDDD). While the CSDDD is broader and not limited to specific commodities, the EUDR's strict requirements are seen as contributing to the future applicability of CSDDD obligations.

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} }