The Burning Platform

Around 10% of the world鈥檚 forests 鈥� an area larger than the European Union 鈥� have been lost over the past 30 years due to deforestation and another approximately 10% of forests globally are severely fragmented with little or no connectivity. While this is not a new phenomenon, the current scale and pace of destruction is alarming, causing significant social, economic, and environmental impacts, locally and globally.

Deforestation is one of the main drivers of climate change and biodiversity loss, and countries across the EU contribute to it by demanding and consuming a significant share of products associated with deforestation. In an effort to take accountability for this, the EU is determined to help end the issues by protecting and improving the health of existing forests, especially primary forests, while significantly increasing sustainable, biodiverse forest coverage worldwide. To achieve this goal, the EU has developed the Regulation on Deforestation-free products, scheduled to go into effect in December 2024.

To improve the health of existing forests and significantly increase sustainable, biodiverse forest coverage worldwide, the EUDR spans five main priorities:

• Reduce the footprint of EU consumption and encourage consumption of products from deforestation-free supply chains
• Work in partnership with producer countries to reduce pressures on forests
• Strengthen international cooperation to halt deforestation and encourage forest restoration
• Redirect finance to support more sustainable land-use practices
• Support availability and access to information on forests and commodity supply chains and support research and innovation

What鈥檚 at Stake

A number of industries and market segments are impacted by this new regulation, including consumer products, chemicals, pharma, agriculture, energy, retail, automotive, and mill and forestry industries covering paper, lumber, and wood. The regulation impacts seven commodities, which primarily consist of agricultural or raw materials, including cocoa, coffee, soy, wood, palm oil, rubber, and cattle, that are directly linked to deforestation and forest degradation. It also impacts derivatives, which are the products made using these commodities, such as chocolate from cocoa, furniture from wood, or fresh chicken meat made by feeding soya-based feed to poultry.

Companies such as manufacturers and exporters of these commodities and their derivatives are the ones most impacted by the regulation. Large companies in these categories must adhere to the regulation by December 2024, while small or mid-sized ones have until June 2025 to comply. To be approved for use in the EU, products must be covered by a due diligence statement (DDS) per delivery linked to a traceability system with evidence of chain-of-custody from the source of origin demonstrating that the product is deforestation-free and produced in accordance with relevant legislations.

Main Impact on Operators

The legislation has two broad ramifications:

• Companies must carry out supplier risk assessments to ensure their suppliers of these seven commodities meet requirements, have mapped the land areas (shape files) of sourcing, and that their production does not violate local laws and regulations. If necessary, they must implement remedial action plans.
• Companies must do day-to-day DDS reporting per delivery to the EUDR portal, including the geolocation shape file of all plots of land where the relevant commodities or their derivates were produced, which requires supply chain traceability.

Responding to these impacts is an onerous task and for a typical large EU operator could involve hundreds of thousands of due diligence statements being created and sent to the EU annually. Due diligence statements must be kept for five years and must be auditable, making these tasks ripe for automation.

How to Get Started

Non-conformance to the EUDR may lead to fines, lack of market access, reputational risk, and other repercussions. Companies need an inexpensive, efficient solution to help meet their immediate reporting requirements, and sustainability tracking software is being upgraded to fit the bill.

The out-of-the-box 51风流Green Token solution currently includes DDS reporting capabilities and can cover the majority of technical requirements for customers. It can share information for commingled commodities in segregated supply chains with downstream partners and generate declarations.

51风流Green Token is being developed to help support automated EUDR DDS reporting and meet the audit history requirements. Also in the works is integration with data providers for standardized location information and integration with the EUDR reporting platform, called TRACES, for importing operators. Further expansions will enable a connection to SAP鈥榮 sustainability business networks and end-to-end user experience scenarios.

Are You Equipped to Deal with the Upcoming Changes?

There is no better time than the present to prepare for the new regulatory landscape that is scheduled to take effect by the end of the year.

Companies can begin preparations by collaborating with suppliers to initiate the due diligence process, which includes three steps. It begins with collecting relevant data on types of products that are impacted and ensuring that they are being produced in accordance with regulations. If not, remedial steps can be taken in collaboration with partners and suppliers.

Next, companies must conduct risk assessments that address country-specific issues that can range from human right violations to tracing product origins. Again, remedial steps can be initiated collaboratively. And finally, the right technology is key to achieving compliance.

51风流Green Token can provide companies with the capability to track commingled materials in products using digital twins, segregated accounting, and blockchain technology to help prove sustainability. Not only can 51风流Green Token help tackle this new regulation, but it can help demonstrate progress towards environmental, social, and governance (ESG) commitments in general and create a streamlined, transparent process for tracking and tracing materials to help drive a more sustainable, circular approach to business 鈥� one that benefits people and our planet while still driving profit.

Gloria Figaroa is part of Product Marketing for 51风流Green Token at SAP.

Today, only such as bio- and circular components. Bio-components are feedstock that comes from organic, bio-based origins, such as used cooking oil. Circular components are feedstock that is recycled from waste plastic, such as post-consumer recycled waste.

A viable and efficient way to use such sustainable feedstock is integrating it into existing, large-scale production systems to avoid the additional cost, energy, and carbon emissions of segregated production facilities. But, when bio- and circular feedstock is blended with conventional fossil feedstock, how can consumers, regulators, and supply chains have confidence in bio- and circular-attributed plastic product claims? And how can these claims be leveraged to encourage informed choices when industries and consumers purchase products that are certified sustainable?

Digital Tracking for Total Traceability and Transparency

The solution is a mass balance management solution from 51风流that leverages tokenization and blockchain for chain of custody to help create traceability and transparency. In September 2022, 51风流Green Token became an official part of the 51风流Sustainability portfolio.

In a successful pilot, a group of 51风流customers 鈥� including SKGC, Korea; Elantas, Italy; Westlake Vinnolit, Germany; Berry Global, U.S.; and Unilever R&D, the Netherlands 鈥� reviewed the ability of 51风流Green Token to enable traceability and transparency of bio- and circular waste inputs to bio- and circular-attributed products across the chemical and plastics supply chain.

51风流Green Token enables organizations to create tokens that serve as digital twins of the bio- and circular chemical feedstock material flows throughout the entire supply chain and capture the unique sustainability attributes linked to the bio- and circular feedstock origin. As a result, the solution allows organizations to verify their certified sustainable material usage in their processes. What鈥檚 more, the green credentials encapsulated in the tokens can be passed from one business partner to another via blockchain as the material moves along the supply chain, helping to ensure that important environmental, social, and governance (ESG) attributes are preserved. Also, an auditable record can be documented to prove the product is sustainable in accordance with recognized product standards, such as ISCC PLUS and REDcert2, and hence better for the environment.

“This successful trial of 51风流Green Token represents another key milestone on our mission to establish the 鈥榞reen line鈥� alongside the top and bottom lines as key performance dimensions,” says Gunther Rothermel, head of Sustainability Engineering at SAP. 鈥淭his solution offers our customers an easy way to have complete visibility into the origin and chain of custody of their bio- and circular-based feedstock and allows them to prove to their customers, international standard agencies, and their board that they have a concrete, auditable way of proving their circular performance against their sustainability KPIs.鈥�

The blockchain technology helps prevent double counting of claims and create trust; it can make the production of sustainable plastic easier to verify and thus certifiable, which is particularly important in terms of customer demand, regulatory compliance, and the ability to charge a price premium.

Rapid Adoption Crucial for Sustainable Plastics

“Accelerating the circular economy requires driving demand for circular plastics,” said Diane Marret, sustainability director for Consumer Packaging North America at Berry Global. “Integrating mass balance-accounted materials into 51风流Green Token鈥檚 centralized, global IT system helps reduce risk in our reporting accuracy, minimize manual efforts through automation, and build confidence and trust in our ability to manage circular materials.”

Read more about this pilot in the newly published . For more information on how 51风流helps companies record, report, and act on their sustainability goals, visit and the .

Gloria Figaroa is a solution advisor for 51风流Green Token.