New EU Deforestation Regulation: Stricter requirements for supply chains - Energy suppliers should take action

With the EUDR, the EU is establishing another key regulatory framework for sustainable supply chains. The goal is to allow certain raw materials and products onto the EU market only if they do not originate from areas where forests have been cleared or damaged. Under current law, the new obligations will apply to large enterprises starting December 30, 2026, and to small and medium-sized enterprises starting June 30, 2027. The EUDR applies directly in all member states and thus takes direct effect in Germany as well without a separate implementing law.

The EU Deforestation Regulation (Regulation (EU) 2023/1115 – “EUDR”) introduces a comprehensive, mandatory due diligence system. Companies may only place affected products (including oil palm, soy, and timber) on the market within the EU, export them from the EU, or make them available if they can demonstrate that these products are deforestation-free—meaning they have no connection to areas deforested after December 31, 2020—and that they were produced lawfully, i.e., in compliance with the regulations of the country of origin. In addition, the products must be subject to a due diligence statement. At the core of the requirements for market participants is a three-step assessment:

1. Gathering information along the entire supply chain

2. Assessing the risk of deforestation

3. Identification of measures to eliminate risks

Market participants must demonstrate compliance with these requirements by submitting due diligence declarations via a central EU information system. At the same time, member states are required to establish and enforce risk-based inspection quotas. The focus here is particularly on comparing the submitted geodata with satellite data, especially for supply chains from high-risk areas (e.g., the Amazon region for timber imports or Indonesia for palm oil imports).

Why Energy Suppliers Are Particularly Affected

The EUDR has so far been associated primarily with agriculture and forestry. For energy suppliers, however, its relevance is often underestimated—unjustifiably so, as there is a significant need for action.

The use of biomass is particularly relevant in this context. Around 7–9% of electricity generation in Germany is based on biomass, and it also plays an important role in district heating. Companies that use biomass in the form of wood, wood pellets, or other biogenic fuels regularly fall within the scope of the regulation. The requirements pertain in particular to proof of origin and supply chain documentation for imported raw materials (e.g., from South America or Southeast Asia) as well as biogenic energy sources such as palm oil or soy. Energy companies often act as market participants or traders within the meaning of the EUDR. Responsibility for compliance with the requirements is thus increasingly shifting to the procurement department. Compliance therefore begins as early as the selection and vetting of suppliers. The result is significantly expanded due diligence obligations, increased documentation requirements, and the need to adapt contract structures.

For operators of biomass plants, there is also an immediate risk: non-compliant raw materials may no longer be used in the future. This can lead to restrictions on fuel procurement, economic risks for plants, and the need for strategic adjustments.

Furthermore, the EUDR is not an isolated “new” set of rules, but rather part of an increasing regulatory consolidation—particularly in conjunction with national and European regulations on supply chain compliance and sustainability reporting (especially the CSRD). Companies should therefore view and implement these requirements holistically. Practical implementation, however, poses significant challenges. Supply chains are often complex and opaque, particularly due to numerous intermediaries. At the same time, data quality is often inconsistent, and geodata on cultivation areas is frequently difficult to obtain or entirely missing. Furthermore, violations carry the threat of severe sanctions, such as market access bans or fines. The EUDR requires that these sanctions be effective, proportionate, and dissuasive, and may ultimately amount to at least 4% of annual EU turnover.

What Companies Should Do Now

As an EU regulation, the EUDR is directly applicable and does not require transposition into national law. Nevertheless, Germany is obligated to designate competent authorities and establish effective sanction mechanisms. The specific structure of national oversight is only now beginning to take shape. However, it is expected that a federal authority (e.g., the BAFA) will assume a central role in cooperation with customs and environmental authorities.

Under the current rules on transition periods pursuant to Art. 38 EUDR, the new obligations will apply as of December 30, 2026, to large companies with more than 250 employees or an annual turnover exceeding 50 million euros. For small and medium-sized enterprises, the new obligations will apply as of June 30, 2027.

Despite the transition periods, there is already a concrete need for action today. In particular, companies should systematically analyze their exposure, review existing supply chains for EUDR risks, implement processes to fulfill due diligence obligations, and expand existing ESG and supply chain structures accordingly.

How Oppenhoff supports you

The EUDR will bring about lasting changes to supply chains in key areas of energy supply. For affected companies, this involves not only additional compliance obligations but also operational and strategic adjustments in procurement and plant operations. Early and structured preparation is crucial to minimize risks and secure room for maneuver.

The EUDR’s requirements affect both legal and operational processes. We support companies—particularly those in the energy sector—in achieving efficient and legally compliant implementation, including through impact analyses and risk assessments, the development and implementation of due diligence systems, contract drafting and adaptation along the supply chain, the integration of the EUDR into existing compliance and ESG structures, as well as advice on regulatory issues and representation before authorities.

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