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Good to know Management board's role in ESG processes under the EUDR

Management board's role in ESG processes under the EUDR

Print Mail Rate-it

​​​​​​​​​​​​​​​​​by Aleksandra Buczak

7 February 2025​

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The responsibilities of management boards of limited liability companies are broad and wide-ranging. Management board members run the company’s affairs and represent it, often individually. Moreover, board members have to be loyal to their company and exercise due professional care.

In view of the new regulations imposing ever more obligations on businesses, we can assume that their fulfilment will rest on the management board yet again.


TABLE OF CONTENTS
  1. Which companies are covered by the EUDR?
  2. What obligations do management boards of limited liability companies have?
  3. ​What should you take care of at the beginning of 2025?
  4. Are management boards liable for not implementing EUDR-compliant procedures?


Which companies are covered by the EUDR?


The EUDR1 applies to companies which:

  • place and make relevant products available on the Union market;
  • export relevant products from the European Union;

containing commodities, such as cattle, cocoa, coffee, oil palm, rubber, soya and wood as well as products which have been fed with or have been made using those commodities. 

What obligations do management boards of limited liability companies have?


The obligations may differ depending on whether the company subject to the EUDR is classified as an operator or a trader. Moreover, obligations on small and medium-sized enterprises (SMEs) are less stringent.

Management boards of limited liability companies classified as operators (meaning a legal person who, in the course of a commercial activity, places relevant products on the market or exports them) should primarily:

  1. implement internal regulations that ensure exercise of due diligence to demonstrate that the products comply with the applicable laws;
  2. comply with the ban on placing on the market or exporting products without a prior due diligence statement which confirms the products’ compliance with the law;
  3. submit due diligence statements;
  4. comply with the ban on placing on the market or exporting products which are non-compliant or carry a high risk of non-compliance;
  5. report new information about the risk of non-compliance to the authorities;
  6. provide information necessary to demonstrate due diligence to entities further in the supply chain;
  7. exercise due diligence by implementing a relevant risk assessment and information collection policy;
  8. take measures to verify the risks, i.e. analyse the collected information and documents to assess the risk of non-compliance with the requirements before products are placed on the market or exported;
  9. implement and follow risk mitigation procedures and policies that may include e.g. model risk management practices.

SMEs have to follow less stringent rules, e.g. they do not have to exercise due diligence in respect of products for which a due diligence examination has been conducted already and a relevant statement has been submitted. They just need to provide the statement's reference number at the request of the competent authorities.

Management boards of traders (meaning any other person who makes relevant products available on the market in the meaning of the EUDR) will face similar obligations. 

Here too, SME traders face more relaxed laws, i.e.: 

  • the EU lawmakers do not require them to submit due diligence statements to the competent authorities; 
  • they are not required to demonstrate due diligence with regard to all relevant products supplied by each particular supplier in the supply chain.

​


What should you take care of at the beginning of 2025?


In view of the numerous new obligations that require management boards to take action, you should consider preparing for compliance with the EUDR in the following steps:

Screen your business partners


Check which suppliers provide you with relevant products that you place on the market. Above all, check if they include suppliers who deliver relevant commodities or relevant products from outside the European Union. A good practice is to talk with your partners and ask them to draw up due diligence statements. 

Authorised representative


Your company may decide to appoint an authorised representative, e.g. from among its staff. An authorised representative is a person who has received a mandate from the company to submit due diligence statements on its behalf. This will not release the company from liability for product compliance, but may take some work burden off the management board. 

Internal regulations


Although the EUDR will not enter into force until 30 December 2025, management boards may already start working on internal due diligence, reporting and document keeping policies. This means procedures and measures to ensure that the relevant products are placed on the market or exported in line with the EUDR. The EUDR names such internal regulations a “due diligence system”, which the company should generally review and modify as needed every year.

Are management boards liable for not implementing EUDR-compliant procedures?


Please note that board members are liable with their own property for damage caused to the company for reasons attributable to them. The damage may be done by an act or an omission in breach of the law or the company’s articles of association.
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Therefore, if the management board members fail to implement internal regulations to ensure due diligence, and thus expose the company to financial damage, they may expect claims from the shareholders. 

If you need support in getting ready for the new requirements or want to learn more about ESG reporting, contact us »​


Legislation:
1 Regulation (EU) 2023/1115 of the European Parliament and of the Council of 31 May 2023 on the making available on the Union market and the export from the Union of certain commodities and products associated with deforestation and forest degradation and repealing Regulation (EU) No 995/2010​​

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