Forest Law: Not a Single Tree Should Fall Because of Someone’s Ice Cream

In April, the European Parliament voted on a regulation against deforestation – the Regulation on making certain goods and products related to deforestation and forest degradation available on the Union market and exporting them from the Union, and repealing EU Regulation No. 995/2010, which came into force on June 29.

It obliges companies, as part of the fight against climate change and biodiversity loss, not to incorporate raw materials that have caused deforestation (reduced forest cover, most often due to fires or logging) and forest degradation (reduction or loss of biological or economic productivity and complexity of forest ecosystems, resulting in reduced overall supply of benefits from forests, such as timber or biodiversity) into their products sold in the EU. Cattle, cocoa, coffee, palm oil, soy, timber, rubber, charcoal, and printed paper products are covered by the new rules.

Deep Dive

However, it should be noted that Articles 3 to 13, 16 to 24, and 26, 31, and 32 will apply from December 30, 2024. Companies need to pay attention to this because, for example, Article 3 states that relevant goods and products may only be placed on the market or made available on the market or exported if all the following conditions are met: (a) they are not linked to deforestation; (b) they are produced in accordance with the relevant legislation of the country of production; and (c) they are covered by a due diligence statement. This actually means that these obligations are postponed until the end of next year, but companies should certainly analyze other articles that prolong the application of these parts of the Regulation.

Although no country or goods will be banned, companies will be allowed to sell products in the EU only if the supplier of the product has issued a so-called due diligence statement confirming that the product does not come from deforested forests or has not caused forest degradation, including irreplaceable primary forests, after December 31, 2020. According to the assessment by the UN Food and Agriculture Organization (FAO), 420 million hectares of forests (an area larger than the EU) were converted to agricultural use between 1990 and 2020. Consumption in the European Union accounts for about ten percent of global deforestation, with palm oil and soy accounting for more than two-thirds.

Lessons for Candidate Countries

The Acting Head of the European Commission Representation in Croatia, Andrea Čović Vidović, explains that the European Commission (EC) submitted the proposal for this regulation on November 17, 2021, to minimize the consumption and production of products originating from supply chains related to deforestation or forest degradation. She states that the main cause of deforestation and forest degradation is the expansion of agricultural land for the production of timber and palm oil, soy, cocoa, or coffee, and cattle breeding.

As Čović Vidović states, Brussels decided to adopt a regulation that has the highest legal force in the EU to avoid the simultaneous existence of different standards in member states. This means that it ensures that obligations are implemented simultaneously and equally in all 27 member states. Financial penalties are also foreseen for those who do not comply, confiscation of revenue, suspension or prohibition of relevant economic activities, or exclusion of these actors from the public procurement process. Čović Vidović says that the new regulation also obliges potential EU member states.

– Enlargement is an opportunity for candidate and potential candidate countries for EU membership to align with the acquis communautaire in the field of the environment. Future membership provides a framework for development and concrete goals to be achieved. By the date of accession to the European Union, candidate countries will have to be able to effectively implement all its legislation and policies, which would then include the aforementioned regulation – says Čović Vidović.

Management of Croatian Forests

The Ministry of Economy and Sustainable Development believes that this regulation has created an additional opportunity for the Croatian industry to turn as much as possible to the use of its own raw material resources in final products. The Ministry of Agriculture also welcomes the Regulation, considering that deforestation is a global problem because unsustainable management driven solely by profit logic completely excludes the ecological and social components of sustainable development and management, consequently depleting and destroying the soil, causing erosion and disturbances in the water-air regime, destroying biodiversity, and relentlessly negatively impacting climate change.

– Due to centuries of responsible and professional forest management based on the equal role of ecological, social, and economic components, such management of Croatian forests is mostly natural and well-preserved, extremely biodiverse. In fact, as much as 95 percent of forests in Croatia are natural, and annually in those owned by the state, managed by Croatian Forests, and in private forests, less timber is harvested than is grown, thus ensuring the future of sustainable management – say the Ministry.

This has been confirmed, they continue, by the long-term international FSC (Forest Stewardship Council) certification, which guarantees economically sustainable, socially aware, and ecologically acceptable forest management of the highest level. It guarantees that timber and all forest wood and non-wood products from Croatian forests are obtained legally and according to the highest international standards.

– We note that during the acceptance of the Regulation, the Ministry of Agriculture participated in the joint preparation of positions with the Ministry of Economy and Sustainable Development, which, given the wide range of products it covers and especially in relation to the main goal of the Regulation, is primarily relevant for its economic aspect. The newly adopted document of the European Union is a welcome legal instrument for combating deforestation at the EU level and, due to the aforementioned facts, should not have too great a negative impact on the Republic of Croatia – say the Ministry of Agriculture.

Greetings and Challenges

We asked many Croatian companies that use raw materials obtained from logging what this will mean for their products. For example, if they import animal feed grown in former forest areas that are now deforested or use timber as a raw material. However, the latter should not be massively imported into Croatia due to Croatian natural resources, but one never knows, as some domestic wood processing companies believe they should have the right to buy more raw timber from Croatian forests than they currently do.

Therefore, it is not excluded that timber raw materials will also be imported from those deforested areas. Furthermore, as already mentioned, palm oil and soy are the most represented from those areas in the EU, so it is clear that the Regulation will affect many processors in the Union. However, companies remained silent on our inquiries, perhaps because they did not want to respond or because they do not yet know much about the Regulation as it is new – or because very few of them are even aware of it. Only Podravka sent a response stating that the company supports the adoption of the regulation to combat deforestation as part of a broader EU action aimed at protecting forest areas.

– The Podravka Group recently presented a Sustainable Business Strategy, and some of its directions include the use of renewable energy sources, reducing CO₂ emissions, and promoting biodiversity. The Regulation may pose a certain challenge in sourcing raw materials such as wood chips, which are used as fuel in Podravka’s biomass boiler. Each producer will have to prove that they have a product that is not a result of deforestation or degradation of forest soil, but we believe that most producers will adapt in a timely manner and that no significant obstacles will arise in the supply chain – they say from the company in Koprivnica.

Problems with Biomass

The Croatian Chamber of Commerce (HGK) also welcomes the Regulation. The business secretary of the HGK Renewable Energy Sources Association, Danijela Jemrić, an association that includes the HGK Biomass Group, says that biomass power plants, i.e., cogeneration plants, are already having problems sourcing raw materials. The mentioned regulation will certainly further burden the entire system. She reminds that according to the MRR – Implementing Regulation of the EU Commission (2018/2066) and its amendments (2020/2085 and 2022/338) on monitoring and reporting greenhouse gas emissions – sustainability criteria and greenhouse gas emission savings must be met. Otherwise, if the biomass used for combustion does not comply with this regulation and the RED II Regulation, EU Directive 2018/2001 on promoting the use of energy from renewable sources, it will be considered fossil carbon.

Although the application of key articles of the Regulation for companies is postponed until December 30, 2024, which means they have almost a year and a half to prepare, member states must fulfill their obligations earlier. No later than December 30 of this year (Article 14), they must inform the Commission of the names, addresses, and contact details of the relevant authorities that will have appropriate powers, functional independence, and funds to fulfill obligations.

The negative side of the Regulation is certainly the increase in administrative obligations for companies as they will have to pay attention to everything stated in it. Otherwise, they could risk financial penalties or, worse, in some cases, a ban on placing products on the EU market. Therefore, if companies have not taken the latest obligation seriously until now, it is time for them to start preparing as the end of 2024 will come very quickly.