How To Prepare for the EUDR as a Furniture Brand (With Caroline Busse)

Below is a transcript of our discussion with Caroline Busse, founder and CEO of nadar.

We recorded this discussion as part of our Sustainable by Design podcast.

In this episode, we discussed with Caroline how furniture brands can prepare for the upcoming EUDR.

‍
So today I'm joined by Caroline Busse, founder of nadar, and together we're going to explore deforestation issues and how the EUDR aims to improve industry practices. It's a pleasure to have you, Caroline. To start, could you introduce yourself and share how you became involved in deforestation issues?

Yeah, hi, Greg. Thanks for having me. It's a pleasure to be here today. I'm Caroline. I'm one of the three co-founders as well as the CEO of nadar. And yeah, to give you a bit of insight of my background. So basically I was always interested or very interested in technology, specifically data science. So throughout my bachelor's degree, I loved analyzing patterns, analyzing problems, finding solutions through technology. But I also had this passion for nature and specifically forests. So I then went into the direction of earth observation science and remote sensing. So everything about satellite data and analyzing the natural environment through satellite imagery basically to bring these kind of two passions together. And yeah, during that period, I was very interested in or fascinated by satellite data and all the possibilities you have that you can really sit basically behind your desk and analyze a forest area anywhere in the world. And also detect patterns, analyze how deforestation, where deforestation occurs and how it changes over time. And that's also where the idea behind nadar developed, because I was using different data sources, data sets that are out there, but always saw the limitations that maybe on a global perspective, if you kind of zoom out onto the globe, the data works quite well. But if you really zoom into a specific region, then you always see issues and limitations of the data sets that are available. So we developed nadar really to bring high-quality insights into deforestation and forest monitoring and really build robust satellite models. And that's how the company nadar evolved.

That's very impressive. And what kind of clients do you serve today with nadar?

So right now, we're really focused on the EUDR. So the time is right now, to be honest. We're focusing or we started off a lot with clients in the cocoa and coffee sector. So mainly commodity importers or traders that have very direct or strong links into the origin countries. And now we see that we're also expanding across to the other commodities, but also a bit more downstream and also upstream. So really, yeah, expanding in all directions, I would say.

That sounds great and it's perfect because we're going to explore deforestation but also the EUDR and you know both topics very well so that's great. You know that in this podcast we explore sustainability in the furniture industry and I was wondering what's the connection between deforestation and the furniture industry and more specifically how significant a contributor do you think the furniture industry is in regards to deforestation?

I mean, I'm going to be honest, I researched it a bit.

That's going to be helpful.

Apparently, according to the WWF (the World Wildlife Fund) the furniture industry is driving around 15% of global deforestation. So most of it, I mean, is obviously due to illegal logging. Maybe in, for example, I mean, they're not just plantations, like plantations we would know in Europe, for example. But of course, you also have a lot of forest concessions where really natural or you're allowed to log in areas of natural forest. And of course, that's going to be a huge driver of deforestation at the end. So I think the important part is at the end to develop really sustainable logging or sustainable harvesting and management principles and really not just cutting the forests down, but also reviving them. And in our analysis, we see it actually a lot right now in Central Africa that there's a lot of forest being cut down. I mean, it's not just going to be for the furniture industry, obviously. It's also for cocoa. There's actually a lot of deforestation going on, for example, in the Democratic Republic of Congo. But I also know that there are a lot of huge forest concessions in that region, which is, of course, also a big issue. And also in Eastern Europe, in Romania, there are also a lot of old growth forests being cut down.

‍
I remember seeing an investigation by a media called Disclose, where I think they found deforestation problems with IKEA supply chain in Romania. NGOs claimed that IKEA was indirectly contributing deforestation because their suppliers are just cutting very old trees without any authorization or without any plans to keep this forest healthy, right?

Yeah, I think the largest issue is that you can kind of go through so many different steps in the supply chain to kind of greenwash or whitewash your wood to say that it's coming from another source. So I also heard in Poland, actually, they're kind of doing this with a lot of the timber that is coming from outside of the EU. And they're kind of relabeling that it's from the EU. So, of course, it's going to be a big driver of deforestation in other parts of the world.

That makes sense. And in terms of deforestation as a whole, how big do you think the problem is? Or is there anything that can help us grasp the size of the problem today?

I mean, I know that that was actually also the kind of driver or the force behind the EUDR, that it's around 10% of global deforestation that is actually caused by the EU or the consumption within the EU. And I mean, in total, globally, I think it's around 10 million hectares of forest every year, which is around the size of Portugal. So it is actually quite a huge number. And in some regions, of course, some hotspots, it's going down. For example, in the Amazon rainforest, it's actually been going down a bit. But then in other regions, it's going up again. I mean, even in Brazil, in the Cerrado, the Savannah ecosystem, it's actually been going up. So it's still maintained at a high level.

And so you mentioned the impact of EU consumers in the deforestation worldwide. Now, if we turn to the EUDR, could you explain a little bit the purpose of this legislation?

Yeah, of course. I mean, the goal behind it or the idea behind it was that the EU or the consumers in the EU, through their consumption of various products, are actually driving deforestation in other parts of the world, for example, in tropical countries mainly, because they're still the countries that have the most intact forests or even rainforests, and that the EU consumption alone accounts for 10% of the global deforestation. And then to decide upon which products would fall under the scope of the EUDR, of the EU deforestation regulation, they did an assessment of those commodities that are known to have the largest impact on deforestation. So, of course, there are obvious ones like palm oil or also cattle or soy, but then, of course, also commodities like coffee or cocoa where maybe you as a consumer wouldn't think directly that it's causing so much deforestation. or even the same with wood products. I can imagine a lot of people would think "oh, this is just wood coming from a plantation somewhere. It's going to be replanted. It's not that new forest would be cut down for my table or something." And then the goal behind the EUDR is really to stop this kind of imported deforestation or the importation or the importing of deforested products into the EU and make kind of through that make it financially less attractive to deforest new areas. And then instead of deforesting new areas, maybe use those areas that were already deforested historically, that already designated agricultural areas, and to revitalize those, let's say, or start investing again in those areas. And then, of course, you can also say or kind of argue that maybe the cutoff date of the EUDR is quite late compared to other cutoff dates, earlier cutoff dates on the market, for example, by Fairtrade or Rainforest Alliance. But, of course, you needed to decide on one certain point in time from where onwards now new deforestation would be punished by a regulation and there would be consequences to having kind of this one point in time. Of course, you cannot undo the deforestation that happened before, but try to avoid a new deforestation happening in the future.

Very clear Caroline. And you mentioned the kind of products that would fall under the scope of the EUDR. And this made me wonder which types of companies will be affected by this law.

Basically, the companies that are affected by the EUDR are, on the one hand, the companies that are directly affected. So mainly it's the operators and the traders per definition of the EUDR. So the operators are really those companies that are initially placing products on the EU market. So either they're exporting or importing a new product to the EU market or also just a commodity. Or they're more downstream traders that basically don't place them on the market for the first time, but rather distribute the products further on the market. So these are the ones that are directly affected. So, for example, an operator could be a commodity trader like a coffee trader that would, for example, import coffee beans into the EU or a downstream trader could then be, for example, a furniture company that is just maybe creating new products from existing wood that is already in the EU but not newly importing any wood into the EU, for example. And those are the direct ones. And then, of course, you have the companies that are indirectly affected so basically everyone from the producers really producing the commodities in the origin countries to the mills, the manufacturers everybody up to the first import or export into the EU and they of course, although they're not directly affected or named or mentioned by the regulation they still need to prepare the data of course because their buyers will be requesting this information from them

One thing I'd like to highlight is that it's a European piece of legislation, but it will apply to any company that places products on the EU market, right? Let's say I'm a company based in the US, I manufacture furniture in the US that I export to Europe, then I guess the EUDR would apply to the product that I export to Europe, right?

Yeah, exactly. Probably a lot of people think "okay, I'm not an EU company, it's not relevant for me, I'm in the US somewhere, then just exporting my furniture, it's the final product, I don't have anything to do with the raw material wood. Yeah, it doesn't affect me", but it still affects you. I mean, the EU is also one of the largest markets globally, also for furniture, of course. So it will affect almost all of the exports and the production, I would say.

That sounds great. And so we talked about which companies are affected by the EUDR. The next question is, what does the EUDR expect from these companies? What are the new rules introduced by the EUDR?

Yeah, so basically the obligations are that the companies that are now falling under the regulations, so either importing or exporting or placing the products on the EU market that they need to perform due diligence before they're allowed to place the products on a market. So basically they need to gather a certain information. That's kind of the first step. So gather information, for example, on the plots of land where the initial commodities were produced. So you really need to trace maybe the final furniture product that you're producing. You really need to trace it back to the plot of land where it was originally the raw material was produced. So the traceability on the one hand. Then you need to gather the geolocation data of that plot of land. So really to say the digital footprint or the digital coordinates of that plot of land. As well as further information on the products you're importing, the contact details of your buyers and your suppliers. So this is all the information gathering. Then you also need to provide or collect evidence that the products you're going to import or export are actually in accordance to the regulation. So that they were produced deforestation free, as it's the deforestation regulation, as well as they were legally produced. So in accordance with the laws of the country of origin where it was produced. So that's also, of course, an important factor of the regulation that maybe doesn't seem too obvious. That it's not just about the deforestation-free component, but also about the legal part. And then the companies need to perform basically before each import or export or each product they're placing on the market, they need to perform a risk assessment going through all of their suppliers, all of the products, all of the origin countries where they're sourcing from to assess if there's any non-negligible risk to be found in terms of deforestation, forest, corruption, any human rights violations, any legal aspects. So there's actually quite a long list of areas that need to be checked. And only if they find that there's no risk or negligible risk, then they're allowed to continue placing the products on the market. And if they find a certain risk in all these areas, then this risk needs to be mitigated. So you need to work very closely with your suppliers also to see is there a risk. Am I operating in a country maybe that is a higher risk country anyway so maybe I have to be a bit more careful also in the documents I'm receiving from my suppliers to really cross-check them is everything in order etc and only then I will be allowed to to continue with my my business let's say. And if I'm the one that will actually import or export into the EU place on the market I will also have to create a so-called due diligence statement where at the end kind of all this information goes inside including all the geolocation data, the proof that I've done my due diligence, my risk assessment and then this goes to the EU information system so this digital platform of the EU and then I get a code which I need for my customs clearance and then the products can actually go through into the EU.

Wow, that sounds a bit daunting in terms of how many things you need to implement. That's very interesting. And I have a very down-to-earth, maybe a bit naive question, but from my perspective, when you look at wood, like a piece of wood is a piece of wood, right? How can you actually prove that the wood that you're using, let's say in a chair or for a cupboard or any piece of furniture, how can you actually prove that it was cut where you said it was cut? Do you think there's any way you can trick the system and the new control measures that would be implemented? How can you really reduce the risk of illegal deforestation?

Yeah, I think that's a really good question. Because of course at the end I think there will be no 100% guarantee because as you already hinted at, of course there will always be a way kind of to avoid maybe the regulation even if you're thinking about gathering the geolocation data of the plots of land. I mean who at the end knows that this is actually the plot of land that you're sourcing from? I mean, it could be any other plantation in the region or even somewhere else. Of course, you need to gather further proof or, let's say, evidence, rather, that the product is really coming from this plot of land, for example, really coming from this origin, like any records, invoices on the transactions that you've performed with your suppliers, maybe contracts, legal agreements, or also further certifications that can provide another level of trust or truth. But yeah, I don't know if there will be 100% guarantee. I mean, the EUDR is really about showing that you've done your due diligence as far as possible in your means. So of course, if you just get the data, don't do any checks. And then, of course, I will trust my supplier I've never met in my life where are kind of 100 steps in between. I guess this would not be fulfilling your due diligence. But if you really go back on each step, ask for documents, have them cross-check, yeah, then I say it should be fulfilling your requirements.

That makes a lot of sense. So if I recap, we will never be 100% sure that there is no deforestation, but at least we're making sure that companies using wood or the other products that you mentioned that fall under the EUDR, we're making sure that at least companies using these products are taking all the necessary steps to avoid even involuntary use of wood from deforested places. So that makes sense. And the other, I think, benefit is, of course, it's going to be tougher for companies selling illegal products just to place them on the market. So that's very clear. Now, again, it's a very pragmatic question. We've covered the concepts of the EUDR. Let's say that I work for furniture companies and let's say that I'm a bit late on the deadlines. We haven't taken any steps toward EUDR compliance yet. According to you, Caroline, what would be the first actions that need to be implemented to prepare compliance with the UDR?

Yeah. So, of course, I would first of all say that you're a bit late, but of course not too late. Luckily, you have the one-year delay or the 12-month delay that gives you some more time to better prepare. But to say where to start, I mean, of course, you have to start off with the product scope. So checking which products or which of your products are really falling under the scope of the EUDR. So in the regulation text, look through the annexes, which of your HS codes of your products are really listed there. What are exemptions also? I mean, there's been a lot of guidelines also published through the EU Commission, through all the meetings. They had the FAQs, etc., the guidance document. And for example, for wood products specifically, there are some exemptions from the regulation, like the bamboo products or ratan products or also recycled products. So to be aware of that, of course. And then really get in contact with your suppliers, of course. So not just your direct suppliers, but also the indirect suppliers through the chain. Because what I see, and we're also speaking to different companies in the timber sector or the wood sector, that for them, getting the geolocation data is really one of the hardest parts. So comparing it to other markets like cocoa or coffee, where I guess it's more a consumer-facing market anyways, more with the focus from the consumer side on sustainability, a lot of certifications already been going on, there it's much easier to get this data. But for timber supply chains, apparently it's quite a tough task. So there should be definitely enough time to prepare on that side. And I would also say it's good to help or support your suppliers with guidelines, maybe even some templates, best practices, how to gather this data, how to store it. That it's also directly in a much more cleaned format and you're not just getting wild data and all kinds of formats being sent in via email. And ideally, maybe also think about using the software. Of course, there's nadar.

Of course.

Speaking for a software company, but I think for all the information you're going to get in or getting in, it's a lot to handle or to deal with. So either you need some sort of in-house software or work with a software provider. And what is also important is really have somebody who's either also outsourcing this to a provider who is really an expert in EUDR or having somebody in-house that really follows all the developments and requirements. Because I'm still getting a lot of, I don't want to say fake news, but still some stuff that I'm hearing that is just not correct because that person didn't follow the newest update in the third FAQ version or so.

It's really a full-time job to follow updates from EU regulations. So I can understand that. There's something, so you mentioned geolocation data. I heard that in the furniture industry, one of the main worries from furniture brands was about China because a lot of wood used by furniture brands comes from Southern Eastern Asia and China in particular. And I heard that there was a concern that Chinese suppliers would never share their geolocation data. Is that something that you've heard about? And do you know if anyone has found workarounds or if we've been able to find a solution with Chinese suppliers for that?

I mean I've also heard of it. I think that's always the case kind of with China that they're not willing to share all the data. But actually, I've also been in contact with companies that have received some data. We had the issue that the data was in a specific format, a specific Chinese format that they didn't know how to read it or bring it into the EUDR format that you need. So that's then also the next challenge, that they're using their own coordinate system, basically. But apparently, it is possible to get data.

That sounds encouraging. And you might know, in the furniture industry, a lot of companies haven't waited until the EUDR to start improving their wood sourcing policies. And I know from exploring a lot of furniture brands that a lot of them are using, for example, the FSC certification for the wood or the PEFC. And I would say that in most sustainability reports that I read from furniture brands, most of the furniture companies have FSC certified sourcing targets for the wood. I was wondering if there is any intersection between the EUDR and the FSC and PEFC. Let's say you've been a good citizen, you've invested in FSC certified wood. Is it going to cover everything you need to do to comply with the EUDR or do you need to go even further?

Yeah, it's also a good question. I mean, unfortunately, it will not provide you a full EUDR compliance. That's also directly mentioned through the documents that the EU Commission has provided for the EUDR. But of course, it can be a supporting mechanism. And I would say it probably puts you already a bit or gives you a bit of a head start. I mean, if your, let's say your plantations are really FSC certified, you will at least know where your wood is coming from, who are your suppliers. So you will have a stronger link already also to get all the further information and documentation that you need. And I know that these certifications are also working on specific EUDR targeted modules or offerings. I think mainly in regards to the risk assessment part of the EUDR. So helping you to get an overview of maybe what are the risky countries, very targeted towards the industry, of course. What are the risks you need to be aware of in which areas? And perhaps also which documents you need to gather to prove you're compliant or to mitigate your risk. So I think this can be a big help already but of course it's still a task of your own specific supply chain so you won't just be able to say "okay I'm certified, my work's done". That's unfortunately not going to be like this.

Yeah, so the takeaway is even if you're using FSC certified you still need to be worried about the EUDR and you still need to do your work. That's very clear. Of course, you know, furniture brands are businesses like other businesses. And I was curious to understand also if there are any estimates of, you know, the cost of EUDR compliance. First of all, like, do you know if furniture companies must anticipate a specific budget for compliance? Or do you know if it's going to have an impact on the cost of the wood that they purchase? I'm just curious to understand the impact on the economics for the furniture industry.

Yes. Interesting questions. It's very hard to say or give an estimate on the budget required. That depends on a lot of factors. I mean what is the extent that you're doing in-house. Do you need provider support by a service provider. How are you affected by the regulation? What is the scope of your product? Is it your entire supply chain that is covered? Or is it just one to two products? So, of course that varies quite a bit. Also, but I mean, what I know, what I've seen and what I've read is there is a report by Profundo on the EUDR cost. So they compare different companies, also some companies from the wood sector. And they found overall that the EUDR compliance costs are negligible and on average around 0.1% of annual revenues. They did, in their report, look more at larger companies. So I think even the smallest company had a revenue of 16 million annual revenues. And they already found that the costs are higher on average for SMEs. So roughly three times higher compared to larger companies. So it still varies. So I think, of course, the larger the company, the more resources you also have internally to offset the costs. Maybe regarding your second question, if it will affect the price of wood. I mean, I don't know about wood specifically. But I've been hearing it from other commodities, for example, rubber, that the importers and the traders are willing also to pay a higher premium price for EUDR compliant or said to be EUDR compliant rubber. So I'm guessing it might be similar.

That would make sense. Another question that is very important for furniture companies is to understand the timeline and the deadline for the EUDR. As you mentioned earlier, the initial deadline was, I think, January 1st of this year, 2025. What is the new deadline? And do you expect this new deadline to be met? Or do you expect further delays for this regulation?

Yes, so actually it was the 30th December 2024. Very weird date. So not the 31st, not the 1st of January, but really the 30th December. And now it was postponed by 12 months. So it's now going to be the 30th December 2025. So this year for larger companies and then for the SMEs, the small and medium-sized or also micro-sized companies, it will be half a year later. So the 30th of June, 2026. But of course, if your supply chain is part of a larger company supply chain, they will already be asking you for this information up front before the actual deadline. So this will also be a bit earlier. And regarding your question on whether the EUDR might be postponed again or amended again, I think regarding the postponement, I think it's not so likely. Because if they postpone it again, then they can just leave the whole thing. Why bother now with preparing all the further information material that they prepared? Why bother with preparing the EU information system, the new model for EUDR and traces? I don't think they will postpone it again. What I could imagine, to be honest, is that they water it down a bit if the lobbying continues. What we've heard was that there might be a fourth risk category of "no risk" for countries like the United States or European countries where there just is apparently no deforestation according to the countries that want this new category. I think something in that direction could happen, that there might be lower requirements for certain regions if you can somehow prove that there's a lower risk. But as far as the postponement goes, I don't think it will be postponed again.

Very interesting, Caroline. And there's something, I think there's another clue that the law will probably stay as it is. I think when the decision to postpone the law was voted, some members of the parliament argued that the law needed some edits as well. And I think other MPs opposed and they said, "no, we're going to keep the law as it is". There was some debate, I think, at the end of last year, and I think they confirmed the law as it was. So it's a further clue that they would probably keep the law as it is now with maybe some slight edits, but the likeliness of the law to be implemented as is, is very high, right?

Yeah, I agree.

Okay. I'm mentioning that because in the current context where CSRD is being massively watered down, I think it's important to understand that the context for the UDR is very different. We're very likely to see it implemented as it is, and you shouldn't bet on the law being edited and watered down in any way. Caroline, what's also interesting with your profile is, so you know the EUDR and thanks for sharing all your recommendations and guidance, but you also have a broader knowledge of deforestation. And I was wondering if you had any other recommendations for furniture companies when it comes to reducing their impact on forests and nature in general.

Yeah, sure. I mean, maybe these are a bit general, But I would say really focus on where your wood is coming from. I mean, if you know that your wood is coming from a region or a high-risk region where there is a lot of illegal logging, for example, or there is a lot of deforestation, maybe try avoiding these regions and go into other regions where there are already more secure systems, let's say, in place to avoid these unwanted effects, let's say, voluntary deforestation occurring in regions where it shouldn't occur. So that would be the one hint. And then, of course, an idea could also be to focus on other sources of your products, potentially using recycled wood, refurbished wood, or even waste products, or also materials like ratan that have less of an impact on deforestation, for example. That would be what I would recommend.

Very clear. And Caroline, I stumbled upon your LinkedIn profile because you, I think, one of the persons who share the most about the EUDR regulation. For our audience, where can they find your content? Is it on LinkedIn? Is it somewhere else?

Yeah, most of it is really on LinkedIn, on my LinkedIn profile, and also on our company's blog. We also have a newsletter with some more detailed information.

‍