Building business resilience through EUDR due diligence

This article outlines what the EUDR now means in practice: how businesses can build robust due-diligence systems, assess and mitigate risk, and use compliance work to strengthen long-term resilience and transparency.

What is the EU Deforestation Regulation (EUDR) and where it stands in 2025

The EU Deforestation Regulation (EUDR) is the European Union’s main policy to halt global deforestation by regulating the trade of high-risk commodities such as soy, palm oil, coffee, cocoa, cattle, rubber, and timber. This regulation has faced growing uncertainty in recent months.

Initially set to apply from December 2024, the regulation was already postponed once, with the new application date moved to the end of 2025. In early October, the European Commission proposed an additional one-year delay, citing continued challenges in finalizing the central IT system needed to process the large amount of data required for EUDR reporting. However, this second delay proposal was not adopted.

Instead, the Commission has put forward a phased implementation plan introducing transitional periods. Large and medium-sized enterprises will remain subject to the EUDR from 30 December 2025, but enforcement and checks will only begin after a six-month grace period. Micro and small enterprises will have until 30 December 2026 to comply.

Despite these challenges, the EUDR remains a key element of the EU’s environmental agenda. Once implemented, operators and traders will need to demonstrate that their products are deforestation-free and compliant with local environmental and social laws before entering or leaving the EU market. For companies, the regulation continues to serve as a framework for building transparent and resilient supply chains.

Establishing an EUDR due diligence system

A robust due diligence system is the foundation of EUDR compliance and a core element of sustainable business operations. It enables companies to trace, assess, and document their entire supply chain, from source to shelf. There are three key steps to consider in this process:

1. Collecting product data and information
2. Conducting a risk assessment
3. Implementing risk mitigation procedures

Collecting product data and information

EUDR compliance requires proof of origin at the plot level. Businesses must collect:

• Latitude and longitude coordinates for every production site
• Verification through satellite or GIS systems
• Chain-of-custody documentation linking raw materials to finished products

This traceability data satisfies regulatory expectations, strengthens supply chain oversight, and helps detect potential supply chain disruption or reputational risks early.

Companies should also maintain a centralized database that includes:

• Supplier legal identity and operational details
• Documentation confirming legal harvesting or production
• Declarations of deforestation-free practices or sustainability certifications

All records must be stored for at least five years and be available for audit upon request.

Conducting a risk assessment

An effective due diligence process automates the identification of potential risks and flags inconsistencies that may affect compliance. Typical risk triggers include:

• Missing or inconsistent geolocation data
• Suppliers operating in high-risk regions
• Documentation discrepancies or expired certifications

Automated alerts help compliance teams prioritize high-risk suppliers and take corrective action before issues escalate. This stage is further detailed in the next stage.

Implementing risk mitigation procedures

When a supplier or supply chain is not classified as low risk, companies must implement mitigation measures to reduce residual risks. This typically involves:

• Conducting follow-up actions or audits
• Providing training or support materials
• Supporting supplier improvement plans

The objective is to lower the overall risk level to low, which is required for products to enter the EU market.

Simplified due diligence

If products originate from a country considered as low deforestation risk according to the official classification of the European Commission and there is no risk of circumvention or mixing with materials from higher-risk sources, companies are exempt from conducting a detailed risk assessment and subsequent mitigation measures.

Conducting an EUDR risk assessment: from data to decision

EUDR risk assessment requires evaluating multiple dimensions of risk to determine whether products are deforestation-free. The process involves assessing both country-level and supplier-level factors to identify where the highest exposure lies and how to manage it effectively.

Country-level risk factors

• National forest and land-use policies
• Levels of corruption and bribery
• Enforcement of environmental legislation
• Protection of indigenous and local community rights

Supplier-level risk factors

• Past non-compliance or deforestation incidents
• Complexity and traceability of the value chain
• Risk of mixing or circumvention
• Reliability and completeness of supplied data
• Use and credibility of third-party certifications

Developing a detailed, practice-oriented questionnaire can help structure this assessment and make the definition of mitigation measures more actionable. While templates and methodologies are still evolving, sectoral associations are beginning to develop guidance and examples to support companies in this process.

EUDR is a new and iterative regulation. Authorities acknowledge that the first year of implementation will involve ongoing adjustments and improvements. In line with this, a six-month grace period has been introduced for companies within scope, allowing additional time to strengthen data systems and refine risk-assessment practices.

Why EUDR work matters beyond compliance: the tangible upside

Here are a couple of ways you can view your EUDR exercises, beyond the “do-gooder” upsides that you might think are most apparent. Make sure to send these over to your CFO.

Geolocation data as a strategic resource

One of the most valuable assets generated through EUDR implementation is geolocation data, which unlocks a range of insights beyond deforestation compliance.

Accurate and consistent geolocation data provides a foundation for understanding broader environmental and operational risks across supply chains:

Climate risk insights: By linking geolocation data to climate datasets, companies can assess exposure to wildfire, heatwave, and drought risks—factors that directly impact long-term productivity, yield stability, and sourcing continuity.

Biodiversity considerations: Mapping suppliers’ production sites against high-biodiversity areas helps identify potential overlaps with ecologically sensitive zones. This supports both compliance and proactive biodiversity conservation strategies.

Water stress and resource efficiency: Geospatial overlays can reveal whether supply sites are located in water-stressed regions, guiding companies toward better water management practices and more sustainable sourcing decisions.

Strengthened supply-chain performance

Companies that map their supply chains to plot level often uncover inefficiencies. Think overlapping intermediaries, duplicate sourcing routes, or underperforming suppliers. This is a supply chain exercise in and of itself, with the added focus on nature behind it. Treat it as such and you might be surprised to uncover that your supply chain is far more robust as a result.

Measurable ESG value creation

EUDR-ready data directly feeds into Scope 3 carbon accounting, biodiversity impact reporting, and ESRS disclosures. We have plenty of content that demonstrates the value behind this, but there are few as powerful as our complete Sustainable Business Playbook.

Preferential access to capital and buyers

Financial institutions and retailers increasingly demand deforestation-free assurance. Companies demonstrating EUDR compliance gain access to sustainability-linked loans, green finance products, and supply-chain finance programmes. Not only are you less exposed as an organization, but you are much more preferable for loans than your peers.

Reduced volatility and risk exposure

By identifying high-risk sourcing regions early, businesses can hedge against regulatory and reputational shocks, avoiding shipment delays, product seizures, or brand crises. When enforcement tightens again in the coming years, leaders with live traceability systems will already be ahead.

Cross-functional integration and digital readiness

Building an EUDR system naturally breaks silos between procurement, sustainability, legal, and finance teams. The same data pipelines later streamline CSRD, EU Taxonomy, and TNFD reporting, creating real cost and time efficiencies.

In short, the value in EUDR work lies not in avoiding penalties but in embedding sustainability intelligence deep into decision-making. This is how companies turn regulation into resilience.

Case study: how EUDR implementation drives stronger governance and ESG data readiness

A recent stakeholder engagement project with a Position Green client demonstrates how implementing the EU Deforestation Regulation (EUDR) can act as a catalyst for better sustainability governance, data transparency, and ESG integration.

Step 1: Defining EUDR scope and coverage

The project began by clearly defining the client’s EUDR scope, identifying which commodities, subsidiaries fell under the regulation, and evaluating the client’s status under the regulation (i.e. whether the client is considered as an operator or a trader). Establishing this scope early helped the client:

• Map all affected business units and product categories.
• Clarify accountability between procurement, legal, and sustainability functions.
• Build a foundation for traceable data collection.

Step 2: Establishing a proactive risk classification framework

Before the release of the official EU country risk benchmarking, the project team developed a custom deforestation risk framework, deliberately stricter than the expected EU version. This proactive step allowed the client to:

• Prioritize supplier engagement in high-risk sourcing countries.
• Test internal due-diligence processes ahead of regulation deadlines.
• Build confidence with investors and customers seeking traceability assurance.

Step 3: Integrating EUDR and ESG data collection

To align compliance with broader sustainability goals, the team designed an integrated due diligence questionnaire that combined EUDR compliance metrics with ESG indicators.

• The EUDR section covered traceability, deforestation, respect of indigenous rights, respect of national laws and supplier declarations.
• The ESG section, based on VSME data points, captures broader sustainability performance indicators.

This dual approach ensures the client can respond seamlessly to investor, customer, and regulatory data requests, turning EUDR compliance into a foundation for ESG data governance.

Step 4: Building a dynamic EUDR risk-scoring model

The client’s risk-scoring model was structured around two main components that influenced the weighting of questions within the assessment questionnaire, and therefore the final scores:

1. Insights from their Double Materiality Assessment (DMA): The DMA results helped prioritize topics. Questions linked to higher materiality areas were assigned greater weight in the scoring process.
   
2. An evaluation of practice maturity across business units: The model also considered the level of maturity and consistency of methodologies, tools or practices (i.e. where a supplier lacked very common tools or practices compared to his peers, the corresponding questions carried greater weight, resulting in a more significant negative effect on their overall score).

This approach enabled the company to visualize deforestation and ESG risks in one model, supporting targeted interventions and progress tracking over time.

Key takeaways

• Early movers will gain strategic advantage through efficiency, access to capital, and brand leadership.
• The EU Deforestation Regulation (EUDR) mandates traceable, deforestation-free supply chains by the end of 2025.
• Building due-diligence and risk-assessment systems strengthens resilience and stakeholder confidence.

Is your ambition outgrowing compliance?

We service well over 750 businesses; helping them put compliance on autopilot so they can focus on aligning sustainability with their strategic ambition. Aligning with EUDR is just one example of how compliance-focused activities can yield additional, positive business outcomes.

If you want to explore how software can help you move towards this strategic-first sustainability mindset, we would love to chat.