As sustainability regulations continue to evolve globally, businesses who trade internationally must stay informed and adapt to new requirements, minimising their environmental impact. Here’s what your business needs to know…
What sustainability regulation has the EU introduced?
Since 30 December 2024, companies trading with the EU have been required to comply with the EU Deforestation Regulation (EUDR). This regulation mandates businesses to conduct more thorough checks on their supply chains, particularly for seven key commodities.
The EUDR, which has been phased in since June 2023, aims to reduce the EU’s contribution towards global deforestation, forest degradation and biodiversity loss. It further aims to limit greenhouse gas emissions, and protect human and indigenous rights.
Companies trading in seven key commodities (and the products derived from these) must prove that the goods they sell do not originate from recently deforested areas or contribute towards forest degradation. The seven key commodities include cattle, cocoa, coffee, palm oil, rubber, soya and wood.
What sustainability regulation is in place for trade with countries outside of the EU?
As the EU raises its climate ambition, and while less stringent climate policies exist in many non-EU countries, there is a risk of ‘carbon leakage.’ This occurs when companies based in the EU move carbon-intensive production to non-EU countries.
The Carbon Border Adjustment Mechanism (CBAM) places a fair price on carbon in imported goods, encouraging cleaner production in non-EU countries. By ensuring that the carbon price of imports matches that of domestic products, it safeguards the EU’s climate goals while complying with WTO rules. Reporting is required for six carbon intensive sectors: cement, aluminium, fertilisers, iron and steel, electricity and hydrogen. CBAM is expected to be fully implemented by 2026 and will include tariff charges and certification, impacting exporters other businesses in the supply chain globally.
The UK is planning to introduce its own version of CBAM in 2027, which will affect imports from trading partners around the world. Other countries have also begun steps to turn International Financial Reporting Standards (IFRS) and International Sustainability Standards Board (ISSB) sustainability standards for general and industry-specific financial risk disclosures into law.
How can businesses ensure compliance?
To ensure compliance with EUDR, businesses must collect detailed information on traded commodities, take mitigation actions and submit a due diligence statement. These measures help ensure compliance with environmental, labour, tax and human rights laws, while assessing the risk of deforestation or forest degradation, accounting for factors such as illegal logging and supply chain complexity.
During the transitional phase of CBAM (until 31 December 2025), businesses will need to submit CBAM reports on a quarterly basis to report direct and indirect greenhouse gas emissions and register in the CBAM Transitional Registry. Developed by the EU Commission to help traders prepare and submit the CBAM report, this registry also supports communication between the Commission, relevant authorities, national customs authorities and traders.
At Chambers Wales South East, South West and Mid, our trade team keep up to date with the latest developments, policies and announcements affecting importers and exporters to help businesses keep goods moving and ensure compliance at every stage. On 11 March, the Chamber partnered with the Global Trade Department to host a webinar on EU and global sustainability regulations, helping businesses in Wales prepare for compliance.
