About 9 million hectares of forest are lost to new agricultural use every year —an expanse the size of Portugal. The benefits of agricultural commodities such as soy, cattle, palm oil, wood, cocoa, coffee, and rubber are easy to calculate through sales figures along various supply chains. The costs of deforestation—biodiversity and ecosystem-services losses, water-cycle disruption, erosion and desertification, the displacement of indigenous communities, and the contributions to climate change among them — are harder to quantify. But they are exceedingly high.

The European Union’s Regulation on Deforestation-free products, a.k.a. the EU Deforestation Regulation (EUDR), takes aim at those costs, and supply chain managers are going to bear the brunt of addressing them. While EUDR compliance goes beyond technology, technology can relieve much of the burden. 

The EUDR in a nutshell

The EUDR went into force on June 29, 2023; starting Dec. 31 (and, for SMEs, on June 30, 2025), it will require any business in the supply chain that places any of the seven deforestation-linked commodities mentioned above into the EU market to provide auditable proof that its products didn’t come from recently deforested areas, didn’t contribute to forest degradation, and don’t fall foul of local laws. 

Trillions of euros in trade encompassing industries including agribusiness, food and beverage, furniture, mill products, chemicals, pharmaceuticals, cosmetics, consumer products, and even automotive (rubber in tires; leather on seats) are affected. While the general state of EUDR readiness still appears to be low, some industries are better prepared than others. Those dealing in palm oil have experience with International Sustainability & Carbon Certification (ISCC) and Roundtable on Sustainable Palm Oil (RSPO) certificates. For others such as automakers, EUDR-type mandates may be less familiar. 

Regardless, companies found to be non-compliant will risk fines of 4% or more of annual EU revenues; product seizure and confiscation of revenues associated with them; temporary prohibition from marketing, offering, or exporting the goods in question; temporary exclusion from public tenders; and the risk of damage to public relations arising from the public posting of offenders and sanctions imposed by the European Commission. The reputational damage may well prove to be the most costly for many companies. 

While some of the burden of EUDR proof involves classic supplier risk analysis, that’s only the start. Compliance will require detailed data regarding the provenance of each EU-bound delivery, down to geolocation-verified plot level. A due-diligence statement including data and documents about the products and country of production (the EUDR takes country/region-specific deforestation risk into account) must be filed for relevant products entering the market, and then stored for five years. One of our EU-based customers estimates that they’re facing a deluge of 150,000 EUDR due-diligence statements each year. 

There’s more to it (the regulation’s .pdf is 42 pages long), but that’s the gist. So, what are the keys to complying with it?

What to do to comply with the EUDR

Compliance will take on-the-ground legwork, some of it involving field reps visiting farms and plantations. Companies must build closer relationships with their suppliers in order to explain the consequences of all parties being EUDR compliant, conduct comprehensive supplier assessments using proven tools, and, if needed, work on mitigation strategies, which are also part of the EUDR mandate.

The knottier aspects of EUDR compliance center on the need for an extreme degree of traceability throughout often long and convoluted supply chains further muddied by the reality that many EUDR-targeted products can be sliced and diced, combined and mixed many times over between farm and consumer. Add to that the sheer scale and multinational nature of the markets involved and the regulation’s thorough reporting requirements, and you have a clear need for technological tools to tackle EUDR.

What do these tools do? The general idea is to bring the sort of traceability and supply chain transparency to bulk raw materials that comes with scanning a barcode on a consumer product. They accomplish that in a few ways. They integrate with ERP systems, because that’s where supply chain data related to procurement, manufacturing, and sales live. These systems then create blockchain tokens that represent the products, product volumes, and their origins, thereby producing digital twins that persist through intermediate and finished products and are accounted for using segregated or mass-balance accounting as appropriate. 

More than just EUDR compliance

At the same time, the systems track geographic information system (GIS) shapefiles — a data storage format for storing the location, shape, and attributes of geographic features — from specific product origins, concatenating those shapefiles as products get mixed, combined, refined, and converted through the supply chain. They then automatically place the amassed shapefiles into their proper EUDR due-diligence statements, and upload them straight to the EUDR reporting site. These systems enable up-to-date audit reports that include raw-material provenance, chain of custody, material movement, and net balances. Those help companies monitor status and also inform annual reports that EUDR requires.

The benefits of these systems go beyond EUDR compliance. They streamline risk mitigation by boosting transparency and raw-material traceability, and they minimize manual effort. They also demonstrate a seriousness about environmental commitments, and enable a boost to both reputational benefits and revenue through green price premiums. 

The EUDR is making life harder for supply chain managers across an array of industries. It asks a lot of suppliers of some of the world’s most in-demand agricultural commodities. It threatens heavy penalties for non-compliance. The good news is, a combination of local collaboration and digital innovation can satisfy the EU’s mandate, and it’s hard to argue that saving fast-disappearing forests that no human system can recreate isn’t worth the effort.

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The raw material every papermaker is uniquely and critically dependent on is fiber. In an integrated mill there can be relatively tight control over the fiber quality, yet swings in pulp quality lead to paper machine breaks and other production and quality problems. The blame game between pulping and papermaking has been around since Ts’ai Lun.  For non-integrated mills, the fiber quality depends on who you are getting it from. The increased role of recycled fiber has a huge impact of fiber quality. Therefore, todays mills often have bigger and more frequent swings than ever.

In the 4^th industrial era, getting the data we need where we need it is the name of the game. Yet, most mills only know the quality of their most valuable raw material from lab tests once a shift. The results of these lab tests can depend upon who performed the test and when it was done. While lab tests are the standard means of obtaining this information, some tests have inherent uncertainty even when the technician is careful.

Fortunately, today we have online means of measuring fiber quality in realtime. Properties such as freeness, fiber length, fiber width, species, shives, dirt, curl, crill, and many others can be obtained automatically and continuously.  

If you have that data, you are not running blind. You will be able to see swings and respond to them. This can stabilize your quality and production.

However, getting ore data creates a problem. Mills are swimming in data already. Most of this data goes into a digital landfill. What will you do if you have more data?

This is where could deployed data analytics platforms really pay off. The ability to handle “big data” and turn it into useful information requires connectivity, visualization, pre-processing, analysis, and collaboration (see “Building I4, Level 2: Data Analytics” from the December 2023 issue).  

The best way to use data is automation. When you have fiber data used to predict final product quality, you can use the predictions as virtual online analyzers (VOA). We have no online sensors that can measure strength properties at the reel, but with fiber data we can have accurate VOAs for these strength properties. Keeping these VOAs within their quality target ranges allows us to optimize automatically, meaning we can meet our quality targets with the lowest costs and highest production rates.

Particularly with recycled fiber there can be swings in ash. Ash content can also be measured online and used in control loops to mitigate the impact downstream. This can mean fewer sheet breaks, leading to higher profits.

If you don’t know your raw material, swings will hit the machine and hurt profitability. If you know fiber quality, you can determine the relationships to quality and production to stabilize and maximize profit. The 4^th industrial era is about getting data and using it where it is needed.

I have been speaking about EUDR (see the SAP opening article for a while now.

It makes sense. As our scientific technology becomes more sophisticated, as our international trade and marketing become more sophisticated, we learn what we are doing to plants, animals and people. Corrective action is now not prohibitively expensive.

Thankfully and simultaneously, our recording, tracking and control systems, such as SAP and its partners, rendered in myriad forms, help manufacturers and stakeholders stay current with developments.

Not only can we now stay current with developments through developing protocols such as Industry 4.0, we can now add more predictability to our efforts with technologies such as AI.

Does this make our manufacturing world more complex than it was in the past? Certainly. But more importantly, it makes a better living world for our children and grandchildren.

I say embrace EUDR because it is the right thing to do.

Despite the clear benefits of IIoT, the path to its full integration isn't without hurdles. Given the interconnected nature of IIoT devices, they are potential gateways for cyber threats. The essence of IIoT, built on openness and interconnectivity, can, paradoxically, introduce new vulnerabilities to illicit information harvesting, data leaks, and intellectual property theft.

As the semiconductor industry transitions to Industry 4.0, the connection between production equipment and factory networks has expanded the attack surface.

I’m no expert, but I’ve learned plenty from the people I’ve interviewed and the stories I’ve put together. I remember a good deal, too, though it’s largely involuntary and mostly random-access. Think of it as a clunky, editorial data acquisition (DAQ) system and historian.

Industry 4.0 Market is set to grow from its current market value of more than $114.3 Billion to over $555.1 Billion by 2032; as reported in the latest study by Global Market Insights, Inc.