Forests cover over 31% of the earth’s surface and are important ecosystems for people and the planet. The United Nations estimates that the world has lost roughly 100 million hectares of forest between 2000 and 2020, threatening rural livelihoods and accelerating carbon emissions. The EU Deforestation Regulation (Regulation (EU) 2023/1115), set to enter into application by the end of 2026, aims to minimise the EU’s contribution to deforestation and forest degradation worldwide.
However, doubts remain as to its practical implementation: how feasible is true supply chain traceability given the many layers and actors involved? And, wouldn’t deforestation-linked products simply be redirected toward non-EU markets instead?
The potential impact of the Deforestation Regulation
As part of the European Union’s (‘EU’) effort to act on global deforestation, the EU’s Deforestation Regulation aims to boost the consumption of ‘deforestation-free’ products. These are goods which are produced on land that has not been subject to deforestation or degradation since December 2020.
The EU Deforestation Regulation covers seven “key deforestation-linked commodities”: cocoa, coffee, cattle, palm oil, rubber, soy and wood as well as certain derived products. Companies must trace products back to their plot of origin via geocoordinates and prove compliance, regardless of whether goods are sourced within the EU or imported from outside, and placed on or exported from the EU market.
In practice, this Regulation is expected to have a substantial impact on companies' business operations, as it shifts responsibility onto companies to prove their products are deforestation-free by using the EU single market as leverage to drive global environmental change.
IKEA, one of the world's largest furnishing retailers, illustrates how the new Deforestation Regulation affects large companies reliant on these commodities. The Swedish company processed nearly 15 million cubic meters of wood during the 2025 financial year, and its 2024 sustainability report acknowledges it will need to expand its existing due diligence systems to meet the Regulation’s new geolocation and reporting requirements.
However, the Swedish company has already faced a turbulent start following some investigations into its Romanian supply chain. It has been accused of illegal logging and clear-cutting in Natura 2000 protected areas and fraudulent wood transport documentation, even involving timber certified by the Forest Stewardship Council (FSC) which is meant to guarantee that wood comes from responsibly managed forests. This further highlights the limitations of voluntary certification schemes. By introducing mandatory due diligence and stricter traceability requirements, the EU Deforestation Regulation goes beyond voluntary certifications, effectively enforcing its deforestation-free and legality standards.
Certification limits: When a green label isn't enough
Both the FSC and EU Deforestation Regulation share a common objective of reducing deforestation. However, where FSC focuses on responsible forest management broadly, the Regulation narrowly targets legality (i.e. that the deforestation-linked commodities are produced in accordance with the relevant laws of the country of production) and deforestation-free sourcing for EU-market products.
Taking the example of IKEA, although most of its wood is FSC-certified or recycled, past incidents clearly show the need for stricter oversight beyond existing voluntary certification systems. According to the so-called Environmental Investigation Agency (‘EIA’), an international NGO, the FSC label alone cannot ensure compliance with the EU Deforestation Regulation. A 2026 EIA investigation found evidence of illicitly produced rainforest timber still entering multiple EU member States.
This is precisely where the potential of the new European Regulation lies. The EU Deforestation Regulation introduces a stricter compliance regime than its predecessor, the EU Timber Regulation, requiring greater traceability through stricter due diligence, together with verifiable proof of deforestation-free sourcing. Unlike voluntary certification schemes, it is legally binding and imposes penalties for non-compliance. In doing so, it allows to level the playing field across the industry, rewarding companies that have already invested in sustainable sourcing practices rather than allowing them to be undercut by competitors relying on “weaker” voluntary standards.
Cold feet in Brussels?
Following pressure from industry actors and governments who argued they lacked sufficient time and resources to implement the traceability systems, the Regulation’s entry into application has already been postponed twice, with its scope narrowed and reporting simplified for smaller operators. Large operators will need to comply from December 2026 and smaller ones as of June 2027 (the Regulation already entered into force in 2023).
These repeated delays undermine the Regulation’s objectives as well as reduce incentives for compliance among corporations preparing to meet the new standards. In the meantime, timber and other products linked to deforestation continue to enter the EU. Last October 2025, several companies and NGOs urged Brussels to avoid further delays warning of “considerable uncertainty and stakeholder disengagement”.
A Regulation ahead of the supply chains?
While the EU Deforestation Regulation represents an ambitious environmental trade law, significant doubts remain about its practical execution.
The Regulation demands geolocation coordinates for every production plot behind an export, yet many commodities typically pass through several layers of cooperatives, aggregators and traders before even reaching an EU-facing exporter, meaning that between those layers data can go either missing or be falsified.
Furthermore, enforcement naturally operates only at the EU border, meaning producers can still sell their goods (regardless of their contribution or not to deforestation), to non-EU markets. However, because compliance forces global operators to build traceability and monitoring systems, this infrastructure can, to some degree, spill over into other markets as well (i.e. something of a “Brussels effect”). Whether this happens in practice, though, depends on companies’ willingness to voluntarily extend EU-required diligence to markets with weaker standards.
The overarching question remains whether sustainability can truly be traced. Whilethe EU Deforestation Regulation advances the enforcement of sustainable production through mandatory due diligence backed by penalties, its traceability requirements presuppose a clarity of supply chains that often does not exist. Still, it does represent a shift in the economics of compliance, using the access to the European single market as leverage. Whether the Regulation ultimately helps bend the curve of global deforestation, or simply reroutes it, will depend in part on whether other major markets adopt similar standards.
Ultimately, the EU Deforestation Regulation highlights the tension between economic growth, industrial interests, and environmental protection; competing priorities that require a coordinated and long-term response.
