Companies Need to Prepare for the European Union Deforestation Regulation Now

Article Highlights:

• At the heart of the EUDR is the requirement that companies provide precise geolocation coordinates for every plot of land used to produce covered commodities. Businesses are required to map their suppliers down to the farm level, including smallholders and indirect suppliers.

• While large and medium-sized companies face a December 2025 compliance deadline for the EUDR, the EU has extended a grace period for small and micro-enterprises, giving them until June 30, 2026. 
• Companies that fail to act now and work toward adherence with the EUDR face serious consequences, including loss of access to the EU market; harm to smaller producers; and reputational damage on a global scale. 

The European Union Deforestation Regulation (EUDR) is one of the most ambitious environmental regulations ever approved by the European Union. Adopted in June 2023, the regulation aims to ensure that commodities placed on the EU market—or exported from it—are not linked to deforestation or forest degradation anywhere in the world. It directly covers key commodities such as soy, palm oil, cattle, cocoa, coffee, rubber, and wood, along with many products derived from those materials. In practice, the EUDR requires companies importing or exporting these goods to prove that their supply chains are deforestation-free and fully traceable.

The regulation is not only about environmental stewardship, though. It’s also central to the EU’s broader policy framework on climate change, biodiversity preservation, and sustainable trade. By requiring traceability down to the plot of land where commodities are produced, the EUDR shifts compliance obligations onto businesses at every stage of the supply chain—from small-scale farmers to multinational corporations.

EUDR Deadlines to Know

While large and medium-sized companies face a December 2025 compliance deadline, the EU has extended a grace period for small and micro-enterprises, giving them until June 30, 2026. This extension makes 2026 a pivotal year for this demanding regulation: it marks the point at which all EU businesses, regardless of size, must demonstrate deforestation-free supply chains. 2026 will also serve as something of a tipping point for the credibility of the regulation itself.

Businesses that treat the next 18 months as a runway for preparation will position themselves favorably to thrive under the new system. Those that delay, on the other hand, risk exclusion from the EU market, reputational damage, and heightened scrutiny from investors and consumers.

EUDR Timeline and Why 2026 Matters

To understand why 2026 is such a critical year, it’s worth revisiting the regulatory timeline:

• June 29, 2023: The EUDR entered into force. From this date, companies knew that new obligations on deforestation-free sourcing and due diligence were coming.
• December 2024 (original application date): The regulation was initially set to apply to both large companies and small and medium-sized enterprises (SMEs) by the end of 2024.
• Postponed Deadlines: Following pressure from stakeholders, and in recognition of the challenges smaller businesses face, the EU staggered implementation.
• December 30, 2025: Deadline for compliance for large and medium enterprises.
• June 30, 2026: Deadline for compliance for SMEs and micro businesses.

The staggered rollout outlined above gives smaller businesses six additional months to reach compliance. In addition, it underscores the EU’s intention for 2026: by the middle of the year, all companies must be fully aligned with the regulation. There have been no new extensions announced.

The deadline is especially important for SMEs, which often form critical nodes in global supply chains but may lack the resources of larger companies to quickly implement compliance systems. For them, the 2026 date is not simply an administrative marker—it represents the last chance to maintain access to the EU’s massive consumer market.

What Businesses Must Prepare for by 2026

Meeting the EUDR’s requirements is not just a matter of documentation and paperwork. It also requires companies to build robust due diligence systems that lay the groundwork for end-to-end supply chain traceability. The core obligations include:

Meeting the EUDR’s requirements is not just a matter of documentation and paperwork. It also requires companies to build robust due diligence systems that lay the groundwork for end-to-end supply chain traceability.

Geolocation, Supplier Mapping, and Risk Assessment

At the heart of the EUDR is the requirement that companies provide precise geolocation coordinates for every plot of land used to produce covered commodities. This level of detail goes far beyond typical supply chain audits. It requires businesses to:

• Mapping suppliers down to farm level, including smallholders and indirect suppliers.
• Collecting and storing geospatial data to prove that no deforestation occurred after December 31, 2020.
• Conducting risk assessments based on factors such as country of origin, deforestation patterns, and supply chain complexity.

For companies with large, multi-tier supply chains, achieving this level of traceability represents a significant challenge. However, it also creates an opportunity to gain unprecedented visibility into sourcing networks.

Leveraging the EUDR Information System

In December 2024, the European Commission launched the EUDR Information System. This centralized portal will be the platform through which companies submit due diligence statements for goods entering or leaving the EU market. By 2026, SMEs must become adept at using this system, so that they’re able to produce a compliant declaration with every shipment they make. 

Utilizing Country Risk Classifications

The regulation introduces a system of country risk classifications, dividing regions into four separate categories:

• “Low risk”
• “Standard risk”
• “High risk”
• “No risk”

These classifications determine the level of scrutiny required:

• Low-risk countries may face simplified due diligence.
• High-risk countries will require intensive verification and evidence gathering.

Businesses must be ready to adjust their due diligence strategies based on these evolving classifications, which will be updated periodically by the EU.

In practical terms, this means SMEs must build flexible systems that can handle both routine declarations for low-risk commodities and detailed evidence submission for high-risk regions.

Strategic Opportunities of the Delay

While some businesses see the 2026 deadline as a reprieve, forward-thinking companies will recognize it as an opportunity. The delay is not merely extra time to push compliance legwork and related responsibilities to a future date. It can also serve as a window to strategize, prepare, test systems, and create a competitive advantage.

While some businesses see the 2026 deadline as a reprieve, forward-thinking companies will recognize it as an opportunity.

Pilot Systems and Deeper Supply Chain Visibility

The additional months allow businesses to pilot digital traceability systems, conduct supplier training, and establish protocols for geolocation data collection. This pilot phase is essential for identifying weaknesses before full compliance is mandatory. By 2026, companies that have tested and refined their systems will be able to submit due diligence statements with confidence.

Strengthen ESG Compliance and Brand Reputation

EUDR compliance is not only about avoiding penalties; it also aligns directly with broader ESG (Environmental, Social, and Governance) priorities. By demonstrating deforestation-free sourcing, companies can bolster their sustainability credentials, enhance their brand reputation, and position themselves as leaders in ethical trade.

For consumer-facing businesses, this alignment is especially valuable. European consumers increasingly demand proof that products—from coffee to chocolate to furniture—are not linked to deforestation. Demonstrating compliance can strengthen customer loyalty and open up new market opportunities.

Stay Ahead of Investor and Consumer Expectations

Investors are watching the rollout of the EUDR—and businesses’ path to adherence with the new directive—closely. With ESG reporting frameworks such as the Corporate Sustainability Reporting Directive (CSRD) coming into force, deforestation-free supply chains are becoming a financial materiality issue. Businesses that use the delay to achieve EUDR compliance and meet investor expectations will find it easier to secure capital, reduce risk exposure, and cultivate credibility in global markets.

Risks of Inaction by 2026

The flip side of opportunity is, of course, risk. Companies that fail to act now face serious consequences once the grace period ends. Potential hazards include:

• Loss of Access to EU Buyers: Noncompliant businesses won’t be able to place covered products on the EU market after the deadline. This exclusion could be devastating for SMEs that rely heavily on EU customers. Even indirect suppliers risk losing contracts if larger companies cannot trace their inputs back to deforestation-free sources.
• Disproportionate Harm to Vulnerable Producers: Smallholder farmers and producers in developing economies may be particularly vulnerable to noncompliant businesses. If SMEs fail to integrate these producers into compliant supply chains—through training, data collection, and support—entire communities could be excluded from EU trade. This risk underscores the importance of early preparation and supplier engagement.
• Damage to Credibility and Exclusion From Supply Chains: Beyond regulatory compliance, businesses that delay risk damaging their credibility with investors, consumers, and partners. By 2026, ESG expectations will be even higher than today. Companies that are still scrambling to establish traceability systems may be viewed as laggards, undermining trust and risking long-term exclusion from sustainable trade networks.

The Importance of Preparing for EUDR

The European Union Deforestation Regulation represents a seismic shift in how global supply chains are managed and monitored. While large companies must comply by the end of 2025, the extension for SMEs until June 30, 2026 marks the final deadline for universal compliance. After this point, all EU businesses—regardless of size—must prove their commodities are deforestation-free and fully traceable.

This means that the next 18 months are critical for SMEs. The grace period should not be mistaken for downtime. Rather, it is a unique opportunity to build supplier mapping systems, establish geolocation data collection, train partners, and integrate compliance into broader ESG strategies. Companies that prepare now will enter 2026 with confidence, solidify their access to the EU market, and strengthen their reputations—both in the EU and in broader ESG-minded circles. Those that wait risk exclusion, reputational harm, and the loss of competitive advantage.

Companies that operate in the EU market and want to stay on top of the EUDR—and other sustainability regulations like it—can extract a lot of value from supply chain risk management (SCRM) platform Z2Data. Z2Data features a powerful suite of compliance offerings, including but not limited to:

• Out-of-the-Box Compliance Analysis: The Compliance Manager database of FMDs and CoCs allows for 70-80% coverage for over 180 worldwide regulations.
• Custom Compliance Assessment: Users are able to assess their parts’ and products’ compliance with custom requirements. (For example, a framework that incorporates requirements from REACH, RoHS, and California Proposition 65.)
• Compliance Progress Dashboard: CM features a dashboard that monitors and regularly updates workflow, including progress working toward full compliance across all parts.
• Supplier Compliance Surveying: Customers can reach 100% compliance with the tool by utilizing Z2Data’s supplier campaigning.

2026 is going to be a pivotal year for regulatory implementation in the EU. Organizations that want to stay ahead of the curve and achieve the due diligence and traceability required to maintain compliance can benefit from the data visibility of Z2Data. To learn more about the software and how its compliance functionalities can help your business stay on top of EUDR, CSRD, CSDDD, and other directives, schedule a free trial with one of our product experts.