IN BRIEF: DUE DILIGENCE FOR EUDR
EUDR OBJECTIVES AND SCOPE: AN OVERVIEW
The EUDR’s primary objective is to prevent products linked to deforestation and forest degradation from being placed on the market in or exported from the European Union. The regulation applies to seven “relevant products”: cattle, cocoa, coffee, palm oil, rubber, soybeans and timber. For timber, the EUDR requires that it be “deforestation-free,” meaning that wood must not come from land subject to deforestation after December 31, 2020, and must have been harvested without inducing forest degradation after that date. In relation to deforestation, the regulation specifies that deforestation is defined as “the conversion of forests to agricultural use, regardless of whether it is of anthropic origin or not”.
In relation to forest degradation this is defined as “structural changes in forest cover, which take the form of conversion of: (a) primary forests or naturally regenerated forests in forest plantations or other wooded areas, or (b) primary forests in reforestation forests.”
The regulation targets both the companies that introduce the relevant products into the EU market or export them (operators), and certain traders within the supply chain.
Before placing the relevant products on the EU market or exporting them, operators must submit a due diligence statement through the EUDR Information System. The declarations submitted in this system have legal value and their content can be subject to verification by the competent authorities. Failure to comply with the EUDR can lead to significant penalties, including fines proportional to the environmental damage and the value of the products concerned, up to 4% of the total annual turnover of the operator or trader in the EU in the previous year.
The EUDR’s primary objective is to prevent products linked to deforestation and forest degradation from being placed on the market in or exported from the European Union. The regulation applies to seven “relevant products”: cattle, cocoa, coffee, palm oil, rubber, soybeans and timber. For timber, the EUDR requires that it be “deforestation-free,” meaning that wood must not come from land subject to deforestation after December 31, 2020, and must have been harvested without inducing forest degradation after that date. In relation to deforestation, the regulation specifies that deforestation is defined as “the conversion of forests to agricultural use, regardless of whether it is of anthropic origin or not”.
In relation to forest degradation this is defined as “structural changes in forest cover, which take the form of conversion of: (a) primary forests or naturally regenerated forests in forest plantations or other wooded areas, or (b) primary forests in reforestation forests.”
The regulation targets both the companies that introduce the relevant products into the EU market or export them (operators), and certain traders within the supply chain.
Before placing the relevant products on the EU market or exporting them, operators must submit a due diligence statement through the EUDR Information System. The declarations submitted in this system have legal value and their content can be subject to verification by the competent authorities. Failure to comply with the EUDR can lead to significant penalties, including fines proportional to the environmental damage and the value of the products concerned, up to 4% of the total annual turnover of the operator or trader in the EU in the previous year.
CMPC's Sustainability commitments and governance
CMPC has integrated sustainability as a fundamental pillar of its corporate strategy. See the sustaintability section of the website. Our strategic approach is centred around the following: Risks to which we are exposed as a company, Material Issues related to the positive and negative impacts throughout our value chain; Risk Management Program; and our Contribution to global commitments.
CMPC’s sustainability strategy has been aligned with the United Nations Sustainable Development Goals (SDGs) and the principles of the UN Global Compact since 2018, demonstrating our adherence to international sustainability frameworks.
ENVIRONMENTAL POLICIES AND OBJECTIVES
CMPC has established various environmental policies, including a “Public Commitment to Biodiversity and No Deforestation”, which guide operations. The company also has a Sustainability Committee (see Integrated report 2024 – CMPC, Governance for Sustainability section, page 338) which ensures a strong commitment to the conservation and protection of forests. We have set concrete, measurable environmental targets with defined deadlines. For example, we have committed to reducing absolute greenhouse gas emissions (scope 1 and 2) by 50% by 2030, taking 2018 as the base year, and to reducing industrial water use per tonne produced by 25% by 2025.
In addition, in 2025, this transition plan will continue with identifying risks and opportunities related to climate change in the value chain, with a focus on mitigating impacts. CMPC also has a Nature, Conservation and Biodiversity Strategy, within which the Patagonia Project is framed. The Project seeks to conserve native forests, restore plantations to native forests and establish permanent preservation areas, valuing the ecosystem services that these areas provide.
CMPC has established various environmental policies, including a “Public Commitment to Biodiversity and No Deforestation”, which guide operations. The company also has a Sustainability Committee (see Integrated report 2024 – CMPC, Governance for Sustainability section, page 338) which ensures a strong commitment to the conservation and protection of forests. We have set concrete, measurable environmental targets with defined deadlines. For example, we have committed to reducing absolute greenhouse gas emissions (scope 1 and 2) by 50% by 2030, taking 2018 as the base year, and to reducing industrial water use per tonne produced by 25% by 2025.
In addition, in 2025, this transition plan will continue with identifying risks and opportunities related to climate change in the value chain, with a focus on mitigating impacts. CMPC also has a Nature, Conservation and Biodiversity Strategy, within which the Patagonia Project is framed. The Project seeks to conserve native forests, restore plantations to native forests and establish permanent preservation areas, valuing the ecosystem services that these areas provide.
RESPONSIBLE SOURCING PRACTICES
Responsible sourcing of raw materials is a high priority, as evidenced in our “Responsible Sourcing” section of the website. We have implemented an ESG Supplier Program that evaluates suppliers based on environmental, social, and governance criteria. This program seeks to ensure that suppliers comply with CMPC’s Supplier Code of Conduct and ESG requirements, avoiding conflicts with obligations in these areas. We evaluate strategic suppliers, giving preference to those with the best ESG performance when selecting and awarding contracts, incorporating ESG criteria with minimal weight in the evaluation process from 2023. Remote and on-site assessments of suppliers are conducted to verify their compliance with company standards and regulatory requirements. In addition, CMPC provides support to suppliers for the implementation of corrective actions through a Local Supplier Development Program, which includes stages of diagnosis, identifying opportunities, strengthening, accompaniment and measurement.
CMPC’s sourcing and chain of custody holds global certifications, including FSC® (Forest Stewardship Council®) and PEFC (Programme for the Endorsement of Forest Certification), as part of its commitment to responsible sourcing.
Responsible sourcing of raw materials is a high priority, as evidenced in our “Responsible Sourcing” section of the website. We have implemented an ESG Supplier Program that evaluates suppliers based on environmental, social, and governance criteria. This program seeks to ensure that suppliers comply with CMPC’s Supplier Code of Conduct and ESG requirements, avoiding conflicts with obligations in these areas. We evaluate strategic suppliers, giving preference to those with the best ESG performance when selecting and awarding contracts, incorporating ESG criteria with minimal weight in the evaluation process from 2023. Remote and on-site assessments of suppliers are conducted to verify their compliance with company standards and regulatory requirements. In addition, CMPC provides support to suppliers for the implementation of corrective actions through a Local Supplier Development Program, which includes stages of diagnosis, identifying opportunities, strengthening, accompaniment and measurement.
CMPC’s sourcing and chain of custody holds global certifications, including FSC® (Forest Stewardship Council®) and PEFC (Programme for the Endorsement of Forest Certification), as part of its commitment to responsible sourcing.
DUE DILIGENCE SYSTEM SUMMARY
The CMPC Integrated Business Report is a fundamental document for due diligence issues, collating the Report, Balance Sheet and Financial Statements for the year 2024, as well as the Sustainability Report, prepared in accordance with the guidelines of the Global Reporting Initiative (GRI) and the International Integrated Reporting Council.
This Integrated Report is also a Communication of Progress (CoP) for the United Nations Global Compact, a network that we have been part of since 2018.
In the event that a risk of non-compliance is identified, companies must take appropriate and proportionate measures to mitigate it to a zero or negligible level. These measures may include requesting additional information or documents, conducting independent surveys or audits, or other actions related to the information required. Decisions on risk mitigation are reviewed annually and validated by CMPC’s Sustainability Committee.
In the event that any risk is identified as non-negligible in the risk assessment, an action plan will be implemented to bring the risk to a negligible level and thus allow the products to be marketed on the European market.
CMPC has established “Corrective Action/Improvement Plans” and offers “Supplier Support”, which demonstrates our commitment to mitigating the risks identified in our supply chain. Implementing corrective action plans for non-compliant suppliers demonstrates a mechanism for addressing and resolving potential non-compliance issues. The Local Supplier Development Program and the support we provide to implement corrective actions highlight our proactive approach to risk mitigation.
By actively engaging with suppliers to improve their practices, CMPC seeks to reduce the risk of non-compliance throughout its value chain. The CDP Forests 2023 report also indicates that CMPC requires its suppliers to comply with its commitment to “no conversion/no deforestation” and to verify the legality of our wood, which reinforces risk mitigation measures.
Companies subject to this legislation must assess the risk that the product will not comply with EUDR standards. This assessment involves analyzing the information collected and comparing it with the risk criteria, considering factors such as the complexity of the supply chain, the presence of indigenous peoples and the risk classification of the country or region of production established by the European Commission. The assessment should document how the information was verified and how the level of risk was determined. The European Commission operates a benchmarking system that ranks countries based on deforestation risk, which influences due diligence requirements.
CMPC carries out the evaluation within the framework of its Corporate Risk Management Program considering internal compliance parameters, at the national and international levels.The EUDR defines risk as negligible (low risk) or non-negligible (high risk). Among the criteria considered by EUDR is the gathering of information on raw materials in the supply chain, legality of the wood, risk of deforestation, presence of and consultation with indigenous peoples, among others.
The “ESG Assessment of Suppliers” section of our website describes how CMPC assess risks related to environmental issues and legality in its supply chain. CMPC‘s participation in the Carbon Disclosure Project (CDP) reports and its recognition as a leader in transparency and action in forest matters, obtaining a double “A” rating in 2022, indicate a commitment to the assessment and disclosure of risks related to deforestation. The CDP Forests 2023 report, B_8] reports that CMPC monitors the conversion of natural ecosystems and has a due diligence process in place to verify the legality of forest ownership and harvesting plans. This report also mentions our commitment to eliminate deforestation in our operations. We have implemented a responsible procurement program that stipulates that suppliers must undergo a due diligence process to verify the legality of forest ownership, management, and harvesting plans. The ESG assessment process for suppliers includes the assessment of risks related to environmental issues and labor practices, which can serve to support Due Diligence.
As part of our processes, we collect detailed information that allows us to demonstrate that our products are deforestation-free. This includes the geolocation coordinates of the plots where the raw material was produced, the quantity, the country of production, and details on compliance with relevant legislation. The European Information System is a specialized online tool that allows the creation of these due diligence statements and requires operators or their representatives to indicate the exact origin of materials, providing coordinates individually or in bulk. Accuracy in geolocation information is essential to ensure traceability of product origin.
CMPC also collects information on the traceability of raw materials use in production processes, which includes the supply chain of suppliers, the legality of the wood and its geolocation and verification of deforestation, among others. CMPC details its adherence to rigorous sustainable forest management standards through various global certification initiatives, including FSC® (Forest Stewardship Council®) and PEFC (Programme for the Endorsement of Forest Certification). This commitment requires compliance with strict principles in our direct forestry operations and the requirement of full compliance in indirect operations. We aim to maintain all our current certifications and achieve 100% sustainable forest management, production and consumption of certified raw materials by 2030. Currently, 100% of the raw material has some type of certification. This high certification rate illustrates a robust system for tracing the origin of your timber, a fundamental requirement for information gathering under the EUDR. In addition, we use Chain of Custody (CoC) and Controlled Wood certifications in all business areas to ensure the traceability and quality of the fiber.
SUMMARY
CMPC has demonstrated a significant commitment to sustainability and responsible management of forest resources, which is reflected in the information available on our website and in our integrated report. We have a well-established sustainability framework, with clear environmental policies and targets, as well as responsible sourcing practices that incorporate ESG criteria when evaluating suppliers. The high rate of certification of our forest assets under recognized schemes such as FSC® (FSC®C110313) and PEFC (PEFC/24-31-500), together with the implementation of traceability systems such as the Chain of Custody, reflect a solid infrastructure for the collection of information on the origin of our wood products, a fundamental requirement of the EUDR.
CMPC’s active participation in transparency initiatives such as the CDP, where we have been recognized for our leadership in forest-related risk management, is evidence of our commitment to the assessment and disclosure of these risks. In addition, the existence of programs to evaluate and develop suppliers, including implementing corrective actions, demonstrates a proactive approach to mitigating risks in your supply chain.
CMPC will hold an annual meeting to review compliance with this standard in our operations, as well as review due diligence procedures and review associated risks, in order to ensure correct alignment with what is requested in the Standard.