The leather industry is having to contend with a number of unanswered questions as it prepares to face up to new deforestation regulations. 

Life in the 2020s was tough enough for most in the European leather sector, even  before the impact of the new EU Deforestation Regulation (EUDR) added to the pain. A parting gift from the outgoing Von der Leyen Commission (pending new elections to the European Parliament in June), EUDR will saddle tanners and traders in finished leather products with a complex, new, bureaucratic burden. In some instances, it will try to force them to answer questions that are unfair and unanswerable.

It would be disingenuous to suggest that the European Commission harbours an overtly anti-leather animus. It is clear from the formal photograph of the most recent iteration of the Von der Leyen Commission, taken at the end of 2023, that these senior representatives of the 27 member states of the European Union (EU) all wore their best shoes for the occasion and that their best shoes are leather shoes. It seems much more likely that, in good faith, the Commission wanted to go out on a series of high ‘green’ notes. This has led to EUDR; the alarming pressure EUDR is putting on the leather industry is an unintended consequence.

The task in hand

EUDR’s official name is regulation 2023/1115. It is part of a wider commitment to making EU supply chains more environmentally responsible, the programme commonly known as the Green Deal. The good intention behind EUDR is to show that products from seven commodities coming into the EU marketplace have played no part in driving deforestation. The commodities it affects are cocoa, coffee, palm oil, rubber, soya, wood and cattle.

From December 2024, larger companies will have to comply with EUDR. Small and medium enterprises will have to follow suit from June 2025. The work they will have to carry out will include collecting data on the materials they use and, based on what that data shows, conducting risk assessments and risk mitigation measures. Operators will then feed this information into a dedicated information system that will act as a due diligence repository, with the operator responsible clearly identified by its Economic Operators Registration and Identification (EORI) number, VAT number, national company number or taxpayer identification number. 

Article nine of EUDR outlines the type of information companies need to gather. In the case of cattle hides and bovine leather, operators will need to collect the geographic coordinates of the plots of land where cattle were raised, starting from the birth farm. Of course, in the cattle supply chain it is common for cattle to move several times before slaughter.

EUDR demands the geographic coordinates of each location. Farmers can supply the relevant information, but operators in the EU, including tanners, have the responsibility of verifying and proving that the geolocation information is accurate. It makes no difference to the Commission if the raw material for leather and leather products comes from a place where there is little or no incidence of deforestation, or from inside the EU. “There is no exception for the traceability requirement,” it says.

Competitive disadvantage

After they compile this detailed information, operators will then have to carry out their own risk assessment “to establish whether there is a risk that the relevant products are non-compliant”. If there has been deforestation on any of the plots of land listed (after 2020), all the commodities involved will be “automatically disqualified” from coming into the EU or being exported from it.

European manufacturers of leather and products containing leather may not bring leather or raw or semi-finished hides into the EU unless they jump through all of these EUDR hoops. One concession the regulation seems to make is that finished products containing leather may be imported into the EU without being subject to the requirements of EUDR. The Commission gives as a specific example a car containing leather seats. But this is bad news for manufacturers in Europe. It means their competitors in other parts of the world will have the advantage of being able to ignore the Commission’s deforestation questions.

The secretary general of Europe’s main leather industry body, COTANCE, Gustavo González-Quijano, says people in the industry are still reacting with surprise on hearing or reading about EUDR. “But it’s not a dream,” he says. “It is real. A full traceability system will need to be in place in the cattle value chain by the end of this year. Yes, there are cattle ‘passports’ in place as traceability tools for food safety reasons, but not one of the systems that are in place today complies fully with EUDR. There is a gap to bridge. It is a big challenge.”

Unnecessarily stringent

National tanning industry organisation UNIC has called on the authorities in Italy and, more widely, in the European Union, to take urgent steps to mitigate the possible effects on the leather sector of EUDR. At the start of April, UNIC issued a statement calling these requirements “unnecessarily severe and stringent”. It echoed COTANCE’s contention that traceability tools that would be capable of capturing in the time available the information EUDR demands are unavailable, repeating that the tools that are available would be inadequate for the task in hand.

UNIC fears that the impact of EUDR on the leather industry’s ability to maintain current levels of employment and to ride out a challenging economic environment will be devastating if there is no “urgent intervention” from the authorities.

It insists Italian leather and leather products manufacturers are fully committed to sustainability and to traceability, but are in no doubt that the demands EUDR makes of them and their colleagues across the EU are unfair. 

Vice-director of UNIC, Luca Boltri, explains that Italian tanners, at the moment, import raw material from more than 100 countries. Aside from the complexity this entails, he makes the point that there are developing economies with no links to deforestation that benefit greatly from being able to export hides to Europe. “They could face exclusion now without any valid reason,” he says.

Returning to the question of complexity, he illustrates it by saying that, as things stand, the Italian tanning industry will have to produce 200 million due diligence statements per year.

Another doubt that UNIC has centres on existing inventory that tanners and their customers have in stock already and for which the required traceability data does not exist and cannot now be sourced. Mr Boltri says: “There is stock worth millions of euros. We cannot let it go to waste and we have been asking how we will be able to sell it after the application of EUDR begins.” This has led to an understanding that hides and leather from animals born before EUDR came into force in June 2023 will be excluded from the due diligence obligations when application begins at the end of 2024. But what about animals born between the two dates? The systems for collecting the necessary data were not in place in July 2023 and are still not in place today. 

Work in progress

Gustavo González-Quijano says there is currently no choice but for the industry to try to become compliant. He says it looks to COTANCE as though, in the immediate term, European hides and skins will be “the easiest to make compliant”. But he also makes the point that the European leather industry is going to try “to escape the EUDR mechanism in future”.

COTANCE is a participant in discussions at an official EU platform on deforestation. This platform is holding regular meetings to try to help the Commission and member states implement EUDR. “It’s a work in progress,” the secretary general says. “A big element of this is the development of a leather traceability standard and since September 2023 a leather traceability cluster, involving Italy’s ICEC, the Sustainable Leather Forum, the World Wildlife Fund and others has been working on this.”

Another initiative that began in 2019, launched in partnership with the meat industry, aims to establish traceability of hides to the abattoir by 2025 and to the farm by 2030. “We still want to do this, but we need more time,” he says.
He points out that there are still important questions to answer. For example, operators can manage some of the seven commodities that are subject to EUDR in batches. Industry leaders have told World Leather that the Commission has “confirmed verbally” that it will be possible to manage the traceability of hides and leather in batches. But it is still far from clear how this will work in practice and what details operators will need to put into the information system.

Escape route

As things stand, there seems little the leather industry can do to avoid facing up to EUDR when it starts to apply. However, impact assessment studies are scheduled to start as soon as 2025. Some want to extend the regulations’ scope and apply them to more products. “That could happen,” the COTANCE secretary general accepts, “but it could go the other way too. COTANCE is going to work with UNIC and with Lineapelle on our own impact assessment and we aim to show that our leather is not a driver of deforestation. It seems clear to me that applying EUDR to leather is not going to save a single tree. It is the worst piece of legislation to come from the Von der Leyen Commission, the worst for us at least.”

He argues that impact assessments could and should have taken place before the European Commission adopted the proposals for anti-deforestation regulations. However, the Commission did not ask companies operating in the affected supply chains about the idea and did not hold a public consultation.

The impact assessment the industry is working on now should be ready to present to the newly elected European Parliament soon after the June elections. 

One source of optimism is an important comment in the EUDR guidelines that the Commission has published so far. It is the suggestion that the new regulations should not apply to goods that are produced “entirely from material that has completed its lifecycle and would otherwise have been discarded as waste”.  

Distance learning

A previous attempt to secure an EUDR exemption for leather failed when the European Parliament in Strasbourg voted it down in September 2022. While 277 members of the parliament voted in favour of an exemption for leather, 338 voted against it. Now, Luca Boltri looks at this set-back in the wider context of the Green Deal. This programme has created considerable concern, he says, across a number of sectors. He is certain the Commission does not want Europe to become deindustrialised, but he fears that deindustrialisation in some sectors in some regions of Europe could come about as a consequence of the Green Deal as it stands.

“The Green Deal has to be feasible if it is to be a success,” he explains. “We would like the Commission to re-model some parts of it to make it possible to put them into effect. If there is a distance between some of the politicians and us, we have to try to shorten it to be able to put our message across.”

If he is animated about this, he explains that it is because UNIC has been working hard for years to make it clear to the Commission, to the Italian government, to the public and to mainstream media that leather has an exceptionally sustainable supply chain. “It can improve further and it is improving further,” he concludes. “But ours is already one of the most sustainable supply chains you could imagine.”

Italian tanners import raw material from more than 100 countries. Because of EUDR, the country’s industry there faces having to produce 200 million due diligence statements per year.  Credit: Lineapelle

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