TRIPA, INDONESIA – JUNE 11: Fires burn off logged virgin rainforest spewing clouds of white smoke across tracts cleared to plant oil palm trees June 11, 2009 in Tripa, Aceh province, Indonesia. (Photo by Robert Nickelsberg/Getty Images)
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As EU member states debate another delay to the Deforestation Regulation, a recent investigation from Borneo reveals why confusion over compliance could soon cost companies more than reputation.
The intent of the EU’s Deforestation Regulation (EUDR) is to ensure that key goods entering the EU market are not linked to deforestation or forest degradation, and was due to take effect at the end of 2025. Instead, its launch has become the focus of a quiet but consequential tug-of-war in Brussels. After months of industry lobbying, Member States remain split on whether to stick to the current timeline.
The Danish Council presidency is reported to have proposed pushing enforcement to December 2026 from December 2025, and dropping the six-month transition period, arguing that more time is needed for customs and traceability systems to mature. Yet critics warn that each delay prolongs the very risks the law was meant to end.
Other alternatives are being suggested. Sweden, backed by several northern and eastern states, is said to have proposed a one-year delay combined with a review clause that could reopen the law in 2026, while easing documentation for downstream operators. Larger economies such as France and Spain oppose that approach, while Germany, divided internally, has yet to take a position.
The European Commission continues to resist any postponement, warning that another deferral would damage EU credibility and penalise companies already investing in traceability. With the Council still deadlocked and a mid-December deadline to reach agreement with Parliament, importers and investors face a moving target — unable to plan with confidence or shield themselves from the exposure the EUDR was designed to eliminate.
Deforestation: The Earthsight Investigation
The cost of that uncertainty is not theoretical. In early 2025, the investigative NGO Earthsight and its Indonesian partner Auriga Nusantara obtained nearly 10,000 government records tracing timber flows from Borneo, one of the world’s most biodiverse regions. Their 18-month investigation, published as the report Risky Business, paints a stark picture of how deforestation timber still enters Europe through legal channels.
The documents identify 65 Indonesian mills using wood from recently cleared natural forests and show that five major processors exported more than 23,000 cubic metres of finished products (including plywood, decking, and doorframes) to the EU in 2024. Every shipment complied with existing legality frameworks in Indonesia and Europe, yet much of the wood came from landscapes that were dense rainforest only a few years ago, including one of the last orangutan strongholds.
The report ties Europe’s imports to PT Mayawana Persada, identified as the largest single deforester in Indonesia, which cleared thousands of hectares in 2024 alone, part of the 129,000 hectares of forest lost across the country that year, roughly the size of Rome. All of it, technically, was legal. Under the EUDR, it would not be.
The Corporate Grey Zone
Earthsight and Auriga contacted dozens of European firms identified as buyers of Indonesian plywood. Their responses illustrate the compliance gap the EU’s regulatory delay now sustains.
In the Netherlands, Dekker Hout said it had “put all contracts and shipments on hold” with its Indonesian supplier and sent a manager to verify sourcing. The company emphasised that its logs were “FSC certified and marked as such” but acknowledged sourcing SVLK/FLEGT wood from PT Mayawana Persada and PT Tanjung Redeb Hutani, both flagged in the report. Dekker said it would accept only FSC and PEFC wood once the EUDR takes effect.
International Plywood BV, another Dutch importer, confirmed buying Indonesian plywood in 2024 when Russian birch became unavailable after sanctions. Managing director Henk Lozeman said the company was “already working to make our company EUDR compliant” and that its wood was FLEGT- and SVLK-certified, “what was considered the Green Lane.” Still, he admitted that verifying legality in Indonesia “is difficult.”
Belgium’s Seiton BV suspended collaboration with an Indonesian supplier after “some ISM logs were detected” in its shipments. Chief executive Lowie D’Hulst said the company had launched a new supplier code of conduct covering deforestation, waste, and emissions, aiming for full PEFC coverage. “With this new code,” he wrote, “we really want an extra tool to avoid unethical log supply in our business.”
German importer Impan GmbH denied purchasing Indonesian wood at all, despite customs data indicating shipments in 2024–2025. “Please cross-check with European and German authorities,” the company responded. “IMPAN has not imported / declared goods from Indonesia.”
Some firms emphasise certification and long-term relationships; others dispute the evidence entirely. What unites them is reliance on legacy legality systems such as SVLK, FLEGT, FSC and PEFC, none of which means automatic compliance with the EUDR’s upcoming traceability requirement. Aron White, Earthsight’s Southeast Asia lead said, “These cases show why the EU Deforestation Regulation must be implemented without delay.”
Deforestation, Certification And Compliance
Recent Commission discussions had revived hopes that credible certification schemes could play a supporting role in EUDR compliance, reducing the burden on smaller producers. Yet the Earthsight findings highlight a persistent problem: certification does not equal traceability.
Several of the companies profiled in the Earthsight investigation held Forest Stewardship Council (FSC) or Programme for the Endorsement of Forest Certification (PEFC) credentials, or marketed their products as ‘sustainably sourced’, yet the researchers found limited evidence of verifiable traceability such as plot-level origin.
Both FSC and PEFC rely on documentation and periodic audits rather than full geospatial verification, a weakness long criticised in high-risk regions. Similar breakdowns have surfaced in palm oil and cocoa supply chains, where corporate “no deforestation” pledges have failed to prevent habitat loss.
Once the EUDR enters into force, certification alone will no longer suffice. Companies will need to prove that every shipment is deforestation-free using location-specific evidence such as satellite imagery and digital chain-of-custody data robust enough to withstand audit scrutiny.
Market analysts say the problem runs deeper than the shortcomings of any single certification scheme. Barbara Kuepper, senior researcher at Profundo, notes that voluntary systems across commodities, from timber to palm oil, have long faced inconsistent audit quality, incomplete traceability, and transparency gaps that become more pronounced in high-risk regions. New EUDR modules offered by some schemes may help companies close parts of the documentation gap, but they also risk creating parallel tiers in which baseline standards remain weak while only select product lines meet higher requirements.
Investors, Kuepper adds, increasingly treat deforestation exposure as a material financial risk rather than a reputational one; when revenue or financing risks accumulate, the resulting valuation hit can be significant. For companies already investing in geolocation data and supply-chain mapping, she argues, the most important step the EU could take now is simply to avoid further delay — because regulatory hesitation rewards laggards and penalises early movers.
The Financial Exposure Of Deforestation
For some companies, deforestation risk has been treated as an ethical or reputational issue. It is about to become a financial one. The EU imports about €20 billion in timber products each year, a quarter originating from tropical regions with limited oversight.
The exposure extends to investors and lenders. Under the Corporate Sustainability Reporting Directive (CSRD) and the ISSB S2 standards, companies must disclose nature-related and supply-chain risks. The Taskforce on Nature-related Financial Disclosures (TNFD) goes further, treating deforestation as a systemic threat to asset value.
Delays in enforcement leave importers and financiers in a grey zone, subject to activist and consumer scrutiny without the clarity of binding rules. When enforcement begins, many may discover that legality is not compliance, as stranded inventory, renegotiated contracts, or revalued collateral hit balance sheets. As the Earthsight report notes, “Failure to implement the agreed law keeps European borders open to some of the very worst timber.
Veteran investors will recognise the pattern. For two decades, commodity sectors have cycled through the same arc: voluntary pledges, NGO exposés, investor pressure, and, finally, regulatory enforcement that forces a rapid repricing of risk. Palm oil, cocoa, and apparel all followed this path. Timber, long assumed to be a solved sustainability issue, may be next.
Preparing For The Traceability Era
The next phase of corporate accountability will be defined by verifiable data. Forward-looking importers and financiers are already investing in AI-assisted satellite monitoring, blockchain-based ledgers, and digital forest-risk dashboards that integrate with procurement and trade-finance systems. These tools allow real-time origin verification and can satisfy the EUDR’s geolocation requirements at scale.
Within companies, deforestation risk is migrating from compliance desks to the boardroom. Directors are beginning to ask whether they can trace every supplier to plot-level origin, what immediate enforcement would mean for inventory and reporting and who owns nature-related risk across the organisation. Firms that can answer those questions now will avoid the scramble when enforcement starts. Those that cannot risk discovering too late that legality is not compliance.
Europe’s Credibility Test
As Hilman Afif, campaigner with Auriga Nusantara observed, “The destruction of Borneo’s forests is not only an Indonesian tragedy, but also global.” With deforestation again dominating the agenda at COP 30, Europe’s handling of the EUDR will reveal whether firm ecological policy and practical implementation can finally move in step.
Europe’s credibility as a leader in sustainable trade will not be judged by new pledges, but by proof. When the deforestation regulation takes effect, only those who can trace their supply chains will retain trust, and market access. In the age of verifiable ESG data, transparency is not a slogan but a condition of solvency.