How to conduct effective due diligence for raw materials at risk of deforestation.
If your company imports raw materials or products that may contribute to deforestation (such as cocoa, coffee, timber, palm oil, rubber, soy, or cattle), you need to know that under the new European regulation known as the European Union Deforestation Regulation (EUDR), due diligence becomes a mandatory step. In this article, you’ll learn:
- What due diligence means
- When it’s required and how it benefits companies
- How it’s connected to the EUDR and supply chain sustainability
- How Etifor can support you in managing this process effectively
What is due diligence?
Due diligence is a systematic process of collecting and analyzing information to assess the risks and opportunities associated with a business activity, production site, supply chain, or investment. At the corporate level, it’s often used to ensure that the company complies with current regulations and is not exposed to legal penalties or reputational damage.
There are different types of due diligence: environmental, financial, legal, tax-related, or real estate.
In this case, we focus on the environmental and legal aspects, which are increasingly crucial in the context of the ecological transition and new EU regulations.
When is it needed and why is it useful for companies?
So, when is environmental and legal due diligence mandatory?
It’s not always legally required, but in many cases, it’s essential to protect the company and boost its competitiveness. For example:
- During Mergers & Acquisitions, to ensure the target company complies with regulations and has no environmental liabilities
- In the management of industrial sites, to prevent damage and litigation
- In supplier relationships, to verify that purchased products meet environmental standards required by customers or the market (a typical example: supermarket supply chains)
ESG due diligence (which includes environmental, social, and governance aspects) is also increasingly requested by banks and investors in the context of sustainable finance.
Moreover, with the entry into force of the EUDR—EU legislation regulating the import of products at risk of deforestation—environmental and legal due diligence becomes a mandatory requirement for all companies importing specific commodities such as timber, cocoa, coffee, soy, palm oil, or beef.
Due diligence and the EUDR: What does the new regulation require?
Under the new European Deforestation Regulation (EUDR), companies placing certain products on the EU market will be required to demonstrate that those products are not linked to deforestation.
The regulation establishes a reinforced due diligence obligation, which includes:
- Full supply chain traceability back to the origin
- Collection of geolocated evidence proving no deforestation
- Risk assessment related to suppliers and sourcing areas
- Implementation of corrective actions in case of identified risks
In this context, environmental and legal due diligence becomes an essential tool to ensure compliance with the EUDR and to protect corporate reputation. It’s not just a bureaucratic requirement, but also an opportunity to make supply chains more transparent and sustainable.
If you want to learn more about the EUDR and how to comply, check out our services for deforestation-free supply chains.
How to prepare: Etifor’s support for effective due diligence
How can you carry out due diligence effectively? And more importantly, who can perform a due diligence?
Not all companies have the internal expertise to handle the complex environmental and legal aspects required by regulations such as the EUDR. That’s why it’s important to rely on specialized consultants.
Etifor supports companies with an integrated approach that includes:
- Preliminary risk analysis (screening of supply chains and products)
- Development of traceability strategies and EUDR compliance
- Digital tools for data collection and management
- Training for internal teams
- Support in dialogue with suppliers and stakeholders
Thanks to our experience in deforestation-free supply chains and Nature Positive strategies, we help companies turn due diligence from a compliance burden into a competitive advantage.
Rely on Etifor for your environmental due diligence
In summary, environmental due diligence is now a fundamental tool for any company that wants to:
- Prevent legal and reputational risks
- Ensure the sustainability of its supply chain
- Comply with the new EUDR regulation
How much does a due diligence cost? How long does it take? It depends on the complexity of the supply chain and the level of risk. Our team is available for a preliminary analysis and to design a tailor-made approach.
Contact us to request a personalized assessment and find out how we can help make your due diligence more robust, transparent, and sustainable.