EU Regulation on Deforestation-Free Products

The enforcement of new EU regulations against deforestation may have a significant impact on Vietnam’s agricultural exports to Europe. Nonetheless, there are positive aspects to consider when examining the potential consequences.

What is it about ?

Under the new regulations, companies exporting goods to the EU are required to provide a due diligence statement and verifiable assurances that their products do not come from deforested land after December 31, 2020. Plus, Companies must also verify compliance with relevant legislation in the country where the goods are produced.

Even if a company’s manufacturing process meets international quality standards, it will still be evaluated based on the origin of its raw materials. This necessitates investments in implementing advanced technological measures.

Risk for companies

In order to ensure compliance with this new regulation, checks will be carried out by the competent administrative authorities of the Member States of the European Union. Failure to comply with this regulation will have the following immediate consequences for traders/operators:

  • correct the formal non-compliance ;
  • prevent the product in question from being placed or made available on the market or exported ;
  • immediate withdrawal or recall of the product in question.

On the other hand, there may also be sanctions:

  • fines proportionate to the environmental damage and the value of the basic products in question or of the products in question concerned ;
  • confiscation of the products in question from the operator and/or trader ;
  • confiscation of any income derived by the operator and/or trader from a transaction relating to the products in question concerned;
  • temporary ban on placing or making available on the market or exporting the basic products in question and the products in question in the event of a serious infringement or repeated infringements.

How to comply ? 

In order for products to be exported to the European market, they must meet the following three conditions: 

  • they must be “zero deforestation”; 
  • they must be produced in accordance with the relevant legislation of the country of production; 
  • and they must be subject to a declaration of due diligence.

The “zero deforestation” criterion means that the products in question must have been produced on land that has not been subject to deforestation activities after 31 December 2020, or have been fed with or manufactured from such products. Then, the laws of the country of production are also applicable. 

The obligation to declare due diligence consists of three stages described in articles 9, 10 and 11 of the regulation.

Stage 1 – Information Collection (Article 9)

When conducting Due Diligence (DD), it is essential for operators or traders to gather information, documents, and data confirming that the commodities or products in question do not contribute to deforestation and that the producers in third countries comply with their local regulations. This process involves several key steps: 

  1. Identifying the country of origin for the commodities. 
  2. Pinpointing the precise geolocations of the land plots where the commodities were sourced. 
  3. Recording the production date and time of these commodities. 
  4. Obtaining the contact details of the producers.

Stage 2 – Risk Assessment (Article 10)

After gathering this information, a thorough risk assessment must be performed to determine if the commodities or products are indeed free from deforestation implications. Operators are prohibited from marketing commodities or products that pose a substantial risk of deforestation. Additionally, operators and traders must maintain detailed records of these evaluations.

Stage 3 – Risk Mitigation (Article 11)

If a company is unable to confirm that its products carry no risk or only a negligible risk of non-compliance, it must implement risk mitigation measures. These measures could involve requesting further information, data, or documentation, conducting independent surveys or audits, or other relevant actions. Additionally, the company should provide its suppliers with assistance in meeting compliance standards. It is mandatory for companies to establish robust systems capable of effectively managing these risks, including subjecting these systems to independent audits. However, Small and Medium-sized Enterprises (SMEs) are exempt from this audit requirement.

Solutions for companies

In order to prepare for this EU regulation, there are a number of steps firms can take to prepare for the new EU regulations to limit deforestation. First of all, firms should ensure they have a clear understanding of the regulations, regulated product lists, and the implementation timelines of the legislation in order to respond proactively. 

Then, businesses need to have a tracking system in place to ensure that agricultural products produced in their supply chains are not linked to deforestation or ecosystem degradation.

Key dates: 

The implementation dates of the obligations for businesses are as follows:

– 18 months after the text comes into force for operators and retailers, i.e. 30 December 2024 ;

– 24 months after the text comes into force for VSES/SMES businesses, i.e. 30 June 2025.

*Targeted goods by the New EU Regulation combating deforestation: soy, beef, palm oil, wood, cocoa, coffee, rubber, and charcoal, as well as derivatives such as leather, chocolate, and furniture (this list can be updated over the time).

Author: Camille

Editor: Annie

Check out our Knowledge Hub for more Sustainable Finance content


Regulation (EU) 2023/1115 of the European Parliament and of the Council of 31 May 2023 on the making available on the Union market and the export from the Union of certain commodities and products associated with deforestation and forest degradation and repealing Regulation (EU) No 995/2010

Voluntary Partnership Agreement Between The European Union And The Socialist Republic Of Viet Nam On Forest Law Enforcement, Governance And Trade, 05/06/2019 (Voluntary partnership agreements on timber legality)

FAQ – EU deforestation Regulation

European Commission, “EU rules to guarantee that the products EU citizens consume do not contribute to deforestation or forest degradation worldwide”, 

Binh Truong, “EU Regulations to Combat Deforestation and Impact on Vietnam”, doctrine, 15/05/2023

The EU Deforestation Regulation Analysis – March 2023 – Duncan Brack

By Marie Coupeau

Relevant legislation:

  • Corporate Sustainability Reporting Directive (CSRD) – 2022/2464/EU
  • EU Taxonomy Regulation – 2020/852/EU
  • Sustainable Finance Disclosure Regulation (SFDR) – 2019/2088/EU
  • Non-Financial Reporting Directive (NFRD) – 2014/95/EU

Corporate Sustainability Reporting Directive (CSRD)

Almost 50,000 companies expected to be impacted by CSRD (three quarters of business in the European Economic Area). 

CSRD will apply to:

  • Companies listed on regulated markets in the EU (apart from listed micro-enterprises), and large companies. 
  • Large companies, if meets 2 out of 3 of the following criteria:
    • +250 employees
    • turnover > €40 M 
    • > €20M total assets.
      • Will need to take into account information at subsidiary level.
  • Listed SMEs, but transitional period (SMEs can opt out until 2028). 
  • Non-EU companies with a net turnover of €150 million in the EU, and with at least one subsidiary or branch in the union.

Reports must cover:

  • Environmental matters – including science-based targets, EU Taxonomy and climate risk-related reporting. 
  • Social matters and treatment of employees.
  • Respect for human rights.
  • Anti-corruption and bribery.
  • Diversity on company boards (in terms of age, gender, educational and professional background).

Application of CSRD in 4 stages: 

  • 1 January 2024 – for companies already reporting in line with NFRD (reporting in 2025 on 2024 data).
  • 1 January 2025 – for large companies that are not currently subject to NFRD (reporting in 2026 on 2025 data).
  • 1 January 2026 – for listed SMEs, small and non-complex credit institutions and captive insurance undertakings (reporting in 2027 on 2026 data).
  • 1 January 2028 – reporting in 2029 on the financial year 2028 for third-country undertakings with net turnover above 150 million in the EU if they have at least one subsidiary or branch in the EU exceeding certain thresholds

Taxonomy Regulation

The Taxonomy Regulation established 6 objectives for European companies and some third-countries companies active in Europe to follow:

  • Climate change mitigation
  • Climate change adaptation
  • Sustainable use and protection of water and marine resources
  • Transition to a circular economy
  • Pollution prevention and control
  • Protection and restoration of biodiversity and ecosystems

The Taxonomy regulation allows to assess the companies’ performances towards the above objectives through 4 criteria:

The Taxonomy regulation will be implemented in Europe according to the following timeline:

Milestones (infographic Eurosif)

Sustainable Finance Disclosure Regulation (SFRD)

Due Diligence regulation proposal

Who needs to report?

  • EU large Limited Liability companies
    • Group 1: 500+ employees & net EUR 150 million+ turnover worldwide 
    • Group 2: 250+ employees & net EUR 40+ million turnover worldwide, and operating in defined high impact sectors, e.g. textiles, agriculture, extraction of minerals.
      • Rules apply 2 years later 
  • Third countries companies
    • Active in EU 
    • Turnover aligned with group 1 & 2, generated in the EU

SME and micro companies are not concerned


European Parliament needs to approve the proposal.

Once adopted, Member states have 2 years to transpose into national law.

Corporate due diligence duty:

  • Identify, bring to an end, prevent, mitigate and account for:
    • Negative human rights impacts
    • Environmental impacts 
  • Different levels:
    • Cie’s own operations
    • Subsidiaries
    • Value chains 


  • Administrative supervision:
    • Member state designate an authority to supervise and impose sanctions
    • Commission creates European Network of Supervisory Authorities
  • Civil liability: damages and compensations





Due Diligence