Important recent developments make it imperative for us to return to the subject of EUDR. 

The European Union Deforestation Regulation (EUDR) still represents a major challenge to the leather industry in Europe and its suppliers around the world. High hurdles remain in place in the shape of the traceability, data collection and other requirements the regulation will impose, but leather manufacturers and their partners no longer face an implausibly urgent deadline for clearing them. They will now have an extra 12 months to complete their preparations for compliance.

This is because the European Commission has announced a year-long extension to allow the industries that have to comply with EUDR to prepare. EUDR will now come into force for larger companies on December 30, 2025, and on June 30, 2026, for smaller companies. This is subject to the approval of the European Parliament, which the Commission is confident of securing before the end of 2024. The European Council, which is also part of part of the executive of the European Union (EU), composed of the heads of government or other senior ministers from the 27 member states, has already given its approval for the extension. The parliament’s environment committee has approved an ‘urgency procedure’ for this and a final vote will take place at its November plenary.

Global partners express concerns

Announcing the proposed extension at the start of October, the European Commission said: “Given feedback received from international partners, the Commission proposes to give concerned parties additional time to prepare. The extra 12 months can serve as a phasing-in period to ensure proper and effective implementation.” It added: “Several global partners have repeatedly expressed concerns about their state of preparedness, most recently during the United Nations General Assembly week in New York [in late September]. Moreover, the state of preparations amongst stakeholders in Europe is also uneven.”

Throughout the year, the volume of the expressions of concern built up. A coalition of the agriculture ministries of 20 EU member states, led by Austria, asked in March for a delay and for the simplification of EUDR. In June, senior US government figures also wrote to Brussels to ask for a delay. In July, industry and trade organisations, through an advocacy group called BusinessEurope, asked for an extension to the deadline. Brazil added its voice to this call in September. Soon afterwards, the heads of government in the EU’s largest economy, Germany, and third-largest, Italy, also asked the Commission to press the pause button. Around the same time, the director general of the World Trade Organization, Ngozi Okonjo-Iweala, asked the Commission to take another look at the regulation and its likely impact on global trade.

From Poland to Paraguay

They were playing catch-up with leather. EU body COTANCE and Italy’s UNIC revealed in February that they had submitted a whole series of “key, unanswered questions” about EUDR. Both organisations have now welcomed the extra 12 months’ preparation time but it was clear at a seminar that they led at Lineapelle in Milan in September that they are under no illusions about how much work lies ahead. It is equally clear that they would rather see leather’s EUDR obligations removed altogether. “We have tried to get out of it,” says COTANCE secretary general, Gustavo Gonzalez-Quijano. “Tanners should not be stigmatised for something they are not responsible for. It is like something from the Middle Ages. How can the recycling of a residue drive deforestation?”

A vote on EUDR exemptions took place in the European Parliament in 2022. Leather industry representatives had lobbied hard to win an exemption and 277 members of the parliament voted in their favour; but 338 voted against.

“EUDR is The Big Bang,” Mr González-Quijano insists. “To meet its requirements, we will need to have control of all the hides in circulation. And if only traceable hides are allowed into the European Union, as EUDR demands, there will be a big difference between EU leather and the rest of the global market.” European operators offering hides, skins, semi-finished and finished leather to customers (inside or outside the EU) will be required to have documentation in place to show that their material has no link to land where deforestation has taken place since 2020. This applies as much to hides they source from Poland as it does to material from Paraguay.

He points out that companies that make and sell finished leather products may find themselves caught up in this too. EUDR does not apply to those finished products directly, but manufacturers of, say, handbags, who want to sell their surplus material to other companies will be affected by the EUDR. In the very near future a sale of this kind will require documentation to show that this leather is EUDR-compliant. The secretary- general’s advice to manufacturers of leathergoods is that they, too, will need to have good control of their stocks.

Standard practice

“Hides and skins obtain an identity separate from that of the animal at the slaughterhouse,” COTANCE says, “and, as by-products, information on the previous lifecycle of the hides and skins is lost in the vast majority of cases around the globe.” Finding ways of pulling the necessary data together and submitting it to the correct database in the correct way at the correct time will cost labour and money. This is a burden that competitors in other parts of the world will not have to bear. COTANCE says that in the end 20 of the EU’s 27 member states submitted formal requests for a delay of EUDR and that the World Trade Organization has warned that the requirements could represent a barrier to free trade. If all this pressure helped secure the 12-month postponement, it worked, but only up to a point. “We still need to prepare for EUDR,” the secretary general says.

The organisation’s efforts to help the industry ready itself for the extra work continues. It has put in place a new Leather Traceability Cluster with all certification and audit bodies active in the leather industry. These are the Quality Certification Institute for the Leather Sector (ICEC), the Leather Working Group (LWG), Oeko-Tex and the Sustainable Leather Foundation (SLF). This group of organisations has formed a multi-stakeholder platform to act as a hub for centralising information on EUDR and leather traceability. The core group has been working to agree on “the essential requirements for leather traceability and the means of verification” for tracing leather back to its origin. They are developing a common standard for traceability requirements for the sector on which all certification and audit bodies will be aligned. This will mean mutual recognition of traceability assessments without the need for repeat inspections and related additional costs, but without impairing  competition in the certification market. Agreement on essential traceability requirements will be submitted before the end of this year to the fast-track adoption procedure offered by CEN, the European Committee for Standardisation. This could make EUDR more manageable.

But COTANCE and its partners remain hopeful of being able to extricate the leather industry from EUDR’s clutches sooner or later. Article 34 of EUDR foresees a formal European Commission review of the regulation in 2025, including a public consultation. One of the reasons the industry’s representative bodies set up the September discussion was to garner support for this new push to put across forcefully and clearly the arguments for lifting leather out of the deforestation regulations. Their commitment to taking part in this, and to encouraging companies and individuals with an interest in leather to contribute to the public consultation, is strong. This is in spite of the possibility that the review could go the other way. It could also bring about an expansion of EUDR to include material not under scrutiny at the moment, such as leather from sheep, goat and pigs. Wool, cotton and other materials that have not had to suffer the EUDR ordeal that bovine leather suppliers are facing, could also find themselves affected. More importantly, finished products such as shoes, bags or clothing could also come into EUDR’s scope.

Academic view

An important element of the industry’s effort to bring about a positive outcome from this review is a new academic study of the impact of leather on deforestation and, conversely, of the likely impact on the leather industry in Europe of being subject to EUDR. 

UNIC and COTANCE commissioned six academics from the Sant’Anna School of Advanced Studies in Pisa to compile the study. The resulting research paper, ‘Socio-economic and environmental analysis of the effects of Regulation 2023/1115/EU on the European leather sector’, is now available. A search for the school’s name on leatherbiz.com will quickly bring up a link to the full document. “The European Commission did not carry out an impact study before the regulation was adopted by the European Parliament and by the 27 EU member states,” says UNIC vice-director, Luca Boltri. “This is the study the Commission should have done before imposing EUDR on us.”

A member of the research team, Professor Fabio Iraldo, took part in the Milan seminar and presented the key findings of the study. The team spent six months poring over peer-reviewed academic papers covering the subject of deforestation. From this exercise, Professor Iraldo draws a clear conclusion: “No study connects deforestation directly to the leather industry. Meat is the primary output of cattle-raising in deforested areas. There is absolutely no robust data that can show a dependency between cattle-raising and the demand for hides. There is no cattle-raising taking place anywhere in the world to generate hides.”

Shock scenario

As mentioned, authors of the study also analysed the socio-economic impact of EUDR compliance on the leather industry in Europe. One harsh highlight from this is that EUDR could, in their opinion, lead to a price increase for finished leather. Material from the main EU leather-producing countries could go up by between 6% and 10% to compensate for the cost of implementing the required traceability measures.

This is likely to have a severe economic impact on the European cattle and hide supply chain. Professor Iraldo describes this a possible “supply-chain shock scenario”. Higher costs for leather manufacturers are already an issue in the current market situation, but that is not all. Extra-EU meat packers, for whom hides’ contribution to their coffers is so low compared to meat (which in the EU is a protected market), may not want to set up a costly cattle traceability system just for hides. These hides will be lost for European tanners. Tanners will be on their own, the professor warns. It could leave some unable to carry out the work the sector has been doing for millennia, forcing some businesses to close and people working across the supply chain to lose their jobs.The study suggests that, if such a shock did occur, a higher number of European hides would have to find their way to tanners in other parts of the world, but many will go to waste.

Hides will continue to accrue, of course, because farmers will continue to raise cattle and send them to slaughter to supply food companies who have no need of or interest in hides. Disposing of these hides and the knock-on effect of an increased use in Europe of synthetic materials to replace leather would create serious environmental challenges, the professor says. A separate article on page 32 explains the startling environmental impact of wasted hides.

That the Commission now accepts that there should be an impact assessment as part of its first review of EUDR is a source of encouragement, but Professor Iraldo insists that imposing the regulation on companies without first carrying out an impact assessment was a surprise. Previous regulations have focused on taking action against companies for poor practice, he explains. EUDR seeks, instead, to change the way companies manage their upstream supply chains. “I have been covering the work of the European Commission since the 1990s,” he says, “and I have never seen a change of approach like the one we have witnessed in the last three years. It wasn’t, as some have said, a rush to introduce policies before the 2024 elections to the European Parliament. This is about something more profound. It’s about developing top-down policies to change the way companies manage their businesses.”

Gustavo González-Quijano confirms that the Sant’Anna School study will feed into the review. Current COTANCE president and Valencia-based leather producer Manuel Ríos is greatly encouraged by the study. He says it could be a game-changer. Games are sometimes won in added time.

Buyers want detailed information about the leather they are sourcing but, under EUDR, the European Commission wants to know even more.
Credit: Lineapelle

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