Dec 10, 2024
Implications of EU Deforestation Regulation for the Cosmetics Industry
Combatting Deforestation Through Consumption and Production
The European Union's Deforestation Regulation (EUDR) applies stringent rules to reduce global deforestation and forest degradation linked to EU consumption and production. The EUDR targets key commodities and then mandates robust due diligence to proves the commodities used in products do not originate from recently deforested land or contribute to forest degradation.
What does the EUDR Require?
The EUDR targets seven key commodities and their derived products:
Cattle
Cocoa
Coffee
Palm oil
Soya
Wood
Rubber.
Many beauty and personal care products contain ingredients derived from these commodities, such as palm oil, cacao, and various plant extracts. Under the EUDR, companies that use these commodities within the EU market, from export to product placement must ensure they are, “Deforestation-free”, meaning the commodities and products only contain or have been fed commodities produced on land not deforested as of 31 December 2020. These commodities will also have to be produced in accordance with relevant local legislation that is covered by a due diligence statement.
A Cacao Tree and harvested Palm tree kernels two commodities protected under the EUDR, whose raw products, such as cocoa butter and palm oil, comprise many health and beauty products
Due Diligence
Cosmetics brands and manufacturers must implement robust due diligence processes to comply with the EUDR. This includes:
Information Collection: Gathering exhaustive data on production, including geolocation of all plots of land and production dates.
Risk Assessment and Mitigation: Evaluating 14 assessment criteria covering the entire supply chain to ensure "no or only negligible risk" of deforestation.
Due Diligence Statement: Submitting a declaration confirming that due diligence has been carried out and that the products comply with the regulation.
Impact on Cosmetics Supply Chains
The EUDR will require cosmetics companies to have unprecedented visibility into their supply chains, potentially down to the farm or plantation level for certain ingredients. This may be particularly challenging for complex, multi-tiered supply chains common in the cosmetics industry. Companies will need to:
Trace ingredients back to their source
Verify that sourcing practices do not contribute to deforestation
Potentially restructure supply chains to ensure compliance
Invest in technologies and systems for improved traceability and data management
Timeline
The key compliance deadlines for cosmetics companies under the EUDR are:
December 30, 2025: Most companies' main compliance deadline. By this date, companies placing relevant products on the EU market or exporting them from the EU must ensure full compliance with the EUDR requirements.
June 30, 2026: This is an extended deadline specifically for micro and small enterprises which have an additional six months to become fully compliant.
Initially set for December 2024, the EU postponed the deadline for compliance, giving companies more time to ensure deforestation-free supply chains.
After these dates, non-compliant products may be prohibited from entering or being exported from the EU market. Enforcement will be carried out by competent authorities in EU member states, who will conduct checks using a risk-based approach. Customs authorities will verify due diligence statements before allowing products to circulate.
How Can Cosmetic Brands Prepare for the EUDR?
Like other growing EU regulation, the EUDR requires brands to begin implementing due diligence processes, traceability systems, and data collection now to meet compliance. This includes:
Penalties for Non-Compliance
The penalties for non-compliance with the EUDR can be significant. Companies that fail to comply could face fines of up to 4% of their annual revenue in an EU member state. Non-compliant products will be prohibited from entering or exporting from the EU market. Authorities may impose temporary prohibitions on dealing in the EU for non-compliant items. Companies may be prohibited from using the simplified due diligence process if found to be non-compliant. Competent authorities will have the power to suspend their placement on the market and export non-compliant products. Specific penalties for non-compliance will be laid down under national law in each EU member state, with potential variations in how penalties are applied across different EU countries. Breaches of the EUDR could even potentially lead to criminal sanctions.
While compliance with the EUDR presents challenges, it also offers significant opportunities for cosmetics brands:
Enhanced Sustainability Credentials: Demonstrating compliance can strengthen a brand's eco-friendly image.
Improved Supply Chain Transparency: The required due diligence can lead to a better understanding and management of supply chains.
Risk Mitigation: Identifying and addressing deforestation risks can protect brand reputation and ensure long-term ingredient security.
Market Differentiation: Brands that excel in compliance may gain a competitive edge in the increasingly eco-conscious EU market.
The cosmetics industry must navigate expanding regulations like the EUDR to maintain its market position and compliance in the EU and beyond.
A Significant Shift in Ingredient Sourcing and Supply Chain Management
While the EU Deforestation Regulation poses challenges, it also aligns with growing consumer demand for sustainable and ethically sourced beauty products growing consumer demand for sustainable products. Companies that proactively adapt to these new requirements will be well-positioned in the evolving regulatory landscape of the EU market. By investing in robust due diligence processes, engaging with suppliers, and leveraging life cycle technologies like Fairglow for improved traceability, cosmetics brands can ensure compliance and gain a competitive edge in the eco-conscious market.
Reach out to Fairglow today to see how we can help you boost your compliance with the EUDR and other growing regulations.
