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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)<\/p>\n
Getty Images<\/p>\n
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.<\/p>\n
The intent of the EU\u2019s Deforestation Regulation (EUDR) is to ensure that key goods entering the EU market are not linked to deforestation or forest degradation<\/a>, 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. <\/p>\n 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.<\/p>\n 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.<\/p>\n 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 \u2014 unable to plan with confidence or shield themselves from the exposure the EUDR was designed to eliminate.<\/p>\n Deforestation: The Earthsight Investigation<\/p>\n 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\u2019s most biodiverse regions. Their 18-month investigation, published as the report Risky Business<\/a>, paints a stark picture of how deforestation timber still enters Europe through legal channels.<\/p>\n 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.<\/p>\n The report ties Europe\u2019s 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.<\/p>\n The Corporate Grey Zone <\/p>\n Earthsight and Auriga contacted dozens of European firms identified as buyers of Indonesian plywood. Their responses illustrate the compliance gap the EU\u2019s regulatory delay now sustains.<\/p>\n In the Netherlands, Dekker Hout said it had \u201cput all contracts and shipments on hold\u201d with its Indonesian supplier and sent a manager to verify sourcing. The company emphasised that its logs were \u201cFSC certified and marked as such\u201d 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.<\/p>\n 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 \u201calready working to make our company EUDR compliant\u201d and that its wood was FLEGT- and SVLK-certified, \u201cwhat was considered the Green Lane.\u201d Still, he admitted that verifying legality in Indonesia \u201cis difficult.\u201d<\/p>\n Belgium\u2019s Seiton BV suspended collaboration with an Indonesian supplier after \u201csome ISM logs were detected\u201d in its shipments. Chief executive Lowie D\u2019Hulst said the company had launched a new supplier code of conduct covering deforestation, waste, and emissions, aiming for full PEFC coverage. \u201cWith this new code,\u201d he wrote, \u201cwe really want an extra tool to avoid unethical log supply in our business.\u201d<\/p>\n German importer Impan GmbH denied purchasing Indonesian wood at all, despite customs data indicating shipments in 2024\u20132025. \u201cPlease cross-check with European and German authorities,\u201d the company responded. \u201cIMPAN has not imported \/ declared goods from Indonesia.\u201d<\/p>\n 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\u2019s upcoming traceability requirement. Aron White, Earthsight\u2019s Southeast Asia lead said, \u201cThese cases show why the EU Deforestation Regulation must be implemented without delay.\u201d<\/p>\n Deforestation, Certification And Compliance<\/p>\n 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.<\/p>\n 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 \u2018sustainably sourced\u2019, yet the researchers found limited evidence of verifiable traceability such as plot-level origin.<\/p>\n 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 \u201cno deforestation\u201d pledges have failed to prevent habitat loss.<\/p>\n 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.<\/p>\n 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. <\/p>\n 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 \u2014 because regulatory hesitation rewards laggards and penalises early movers.<\/p>\n The Financial Exposure Of Deforestation<\/p>\n