How the EU Deforestation Regulation (EUDR) Will Affect Company Costs and Consumer Prices

A new report cited by FoodNavigator highlights how compliance with the European Union Deforestation Regulation (EUDR) is expected to impact both corporate costs and retail product prices.

What Does Compliance Involve?

The EUDR is set to come into force at the end of 2025, aiming to prevent goods linked to deforestation from entering the EU market. However, the regulation has sparked criticism, particularly regarding the potential compliance burden on industries.

Compliance with EUDR is a complex process, requiring companies to gather and verify data from suppliers on whether goods were produced on land free of deforestation or forest degradation, and in accordance with local laws. For products sourced from multiple geolocations, verification is required for each individual location. Companies must also mitigate risks where necessary.

How Much Will It Cost?

The report, prepared by consultancy firm Profundo, estimates costs based on interviews with geolocation data providers, forecasts from the European Commission, and prior due diligence studies by organizations like WWF and Chain Reaction Research.

By analyzing 12 companies of various sizes and revenues, the report predicts that EUDR compliance will cost, on average:

• 0.1% of revenues
• 1.45% of operating profit
• 1.89% of net profit
• 4.33% of employee costs
• 58.77% of top management remuneration

For SMEs (Small and Medium-sized Enterprises), some costs are proportionally higher:

• 0.17% of revenues, compared to 0.06% for large companies
• 5.28% of personnel costs, versus 3.7% for large firms

However, as a share of profit, SMEs may be better positioned:

• 0.91% of net profit vs. 2.38% for large companies

“Many of these smaller companies have relatively good profit margins,” noted Gerard Rijk, the report’s author.

Lower Costs for Big Players

The report offers specific cost estimates for several companies. For example:

• Barry Callebaut is expected to spend just 0.04% of revenue on annual compliance costs.
• Bunge may face 0.03% of revenue in ongoing costs.
• Touton, a cocoa processor, could see costs rise to 0.08% annually.
• Frostmeat, a smaller Brazilian meat importer, may incur 0.253% in ongoing compliance expenses.

Rijk notes that ongoing geolocation data collection is a key driver of recurring costs, especially if suppliers frequently change.

Purchasing certified commodities like RSPO-certified palm oil could help reduce compliance costs—but only if certification data is deemed acceptable by the European Commission.

“Complying with EUDR can enhance a company’s reputation and potentially its share price,” Rijk added.

Will Consumers See Price Hikes?

In most cases, companies pass on additional costs to consumers. So, will EUDR compliance make groceries more expensive?

According to the report, price impacts on consumers will likely be minimal. It analyzed how EUDR-compliant raw materials might affect the price of finished goods. The projected increases are:

• Chocolate (due to cocoa): +0.007%
• Coffee: +0.018%
• Palm oil products: +0.006%
• Beef: +0.066%
• Cow’s milk (from soy-fed cows): +0.001%

While the process of due diligence under EUDR will be costly for some companies, the direct impact on consumer prices is expected to be negligible. (Photo: Freepik)