Navigating the EUDR: A pathway to sustainable supply chains in the automotive industry

The EUDR: A compliance mandate with far-reaching implications

The EUDR mandates that companies placing products on the EU market must ensure their supply chains are not contributing to deforestation. This regulation impacts key commodities, namely wood, rubber, cattle, cocoa, coffee, soya and palm oil, or products made from them. Automotive companies must trace these materials back to their origins, ensuring compliance with the regulation's strict standards.

In case of non-compliance with EUDR, companies face, among others, financial penalties (up to 4% of the company’s total annual turnover), confiscation of the products concerned, exclusion from public procurement and access to public funding, temporary bans on the marketing of relevant products and commodities and more.

This regulation does more than just impose new legal requirements; it represents a larger shift toward sustainable practices across industries. According to Deloitte’s Sustainable Supply Chain Survey 2024, 74% of companies see regulatory pressure as a key driver for increasing their supply chain sustainability efforts. For the automotive industry, which is already navigating significant changes in areas like electrification and carbon footprint reduction, legislations as EUDR or CSDDD (Corporate Sustainability Due Diligence Directive) add a critical layer of environmental responsibility across the supply chain.

A New Approach to Supply Chain Management

With the EUDR’s stringent requirements, traceability and transparency are no longer optional—they’re essential. Companies now need full visibility over their supply chains, from raw material sourcing to final product, to ensure adherence to EUDR standards and address emerging environmental concerns proactively. Building trust from the start is crucial, as downstream partners will need to assess the risks associated with a company’s due diligence system. The same focus on trust applies to relationships with upstream partners as well.

The shift towards imposing traceability is being actively prioritized: Deloitte’s Sustainable Supply Chain Survey 2024 highlights that 68% of executives are expanding traceability initiatives specifically to address regulatory requirements like the EUDR. By integrating digital tools and data analytics, automotive companies can create a transparent supply chain that not only supports compliance but also minimizes environmental risks, ensuring a resilient and responsible path forward.

Embracing Sustainability as a Strategic Priority

While the EUDR presents significant challenges, it also offers a strategic opportunity for the automotive industry to lead in sustainability. Consumers and investors are increasingly valuing companies that demonstrate responsible environmental practices. By embracing the EUDR and embedding sustainability into their core operations, automotive manufacturers can strengthen their brand reputation and gain a competitive edge in a market that increasingly prioritizes ethical practices.

Conclusion: A New Era of Sustainable Supply Chains

The EUDR regulation marks a turning point for the automotive industry’s approach to supply chain management. By requiring companies to focus on the sustainability and traceability of their materials, this regulation paves the way for more environmentally responsible business practices.

With the implementation of the EUDR, automotive companies can seize the opportunity to enhance transparency, reduce environmental risks, and lead the change toward a more sustainable future. By prioritizing these efforts now, companies can ensure their supply chains are not only compliant but also resilient and ready to meet the demands of tomorrow's markets.

For C-level executives, the message is clear: the EUDR makes sustainability a critical priority, not just an option. Although the date of EUDR’s application has been postponed by additional 12 months to the end of year 2025 – this does not mean that companies can afford a slow-down in their compliance efforts. EUDR reshapes expectations around supply chain accountability and traceability, companies must take immediate steps to align with its requirements. Embracing the EUDR is about more than compliance—it's about safeguarding the future of the business. By prioritizing EUDR-driven transparency and implementing due diligence system, organizations can mitigate environmental risks and position themselves as leaders in a rapidly evolving regulatory landscape.

Implementation and adjustment of supply chain & legal processes in accordance with EUDR can be complicated. Hence Deloitte, as a trusted & experienced EUDR advisor with cross-functional team, is here to support companies in this journey. Do not hesitate to get in touch with our EUDR advisors, Colette Sladka from Deloitte Legal and Vendula Kulichova from Supply chain & Network Operations advisory and make sure to check out our webpage. 

Sources

1. Deloitte. "Sustainable Supply Chain Survey 2024" (https://www2.deloitte.com/cz/en/pages/strategy-operations/articles/sustainable-supply-chain-survey.html)

2. Deloitte. "The European Union Deforestation Regulation (EUDR)" (https://www2.deloitte.com/cz/en/pages/legal/articles/narizeni-o-odlesnovani-eudr.html)

3. European Commission. "Regulation (EU) 2023/1115 of the European Parliament and of the Council of 31 May 2023 on the making available on the Union market and the export from the Union of certain commodities and products associated with deforestation and forest degradation and repealing Regulation (EU) No 995/2010" (https://eur-lex.europa.eu/legal-content/EN/TXT/ uri=CELEX%3A32023R1115&qid=1687867231461)

4. European Commission. "FAQ - Implementation of the EU Deforestation Regulation" (https://circabc.europa.eu/ui/group/34861680-e799-4d7c-bbad-da83c45da458/library/e126f816-844b-41a9-89ef-cb2a33b6aa56/details?download=true)

5. European Commission. "Guidance on EU Deforestation Regulation" (https://green-business.ec.europa.eu/publications/guidance-eu-deforestation-regulation_en)