[Music] all right so welcome everybody to today's webinar uh mastering UDR implementation I'm joined today by two fantastic guests Sebastian runes who I think needs no introduction and uh Neil vard found and CEO from intelligence one of our partners on the UDR um so today really all about uh practical guidelines on implementation uh we are building on on part of the knowledge from the previous webinar where we went a bit more in depth on the legal requirements the scope of application how companies are affected we will have in the first part of the agenda a short uh uh rehearsal of these topics but then really um the Deep dive will be in the second part of the agenda on the implementation strategies and and guidelines I'm really looking forward to that a few logistical points before we dive in um we have the Q&A section available so you can already ask questions during the webinar we will have an eye on it uh and at least get them to the questions at the end of the webinar um the webinar is recorded uh we will share both the recording and also the slides with everybody who registered uh after the webinar and with that and without much further Ado I hand it over to Sebastian runs to tell us a bit more about the timeline scope and latest developments on the UDR yeah thanks Aral um let's uh get started right away so um at first we want to show you um the timeline again um we were talking about this in our last webinar already so um the eodr starts as of um 30 December 2024 for big and medium-sized companies and for small companies and micro companies half a year later on 30 June 2025 so there's a little bit more time for smaller companies um and um yeah um we don't know if there is going to be a delay we have spoken to EU officials and we didn't get a clear answer on that so we got the impression that there might be um um um delay or postponement of the eodr I mean not a delay in the sense of that there is going to be a change of the law itself but probably um um with respect to the point in time the authorities um actually assess whether companies comply with the eodr um but we don't know yet and of course that's unfortunate because companies don't have that much time left and they have to prepare and right now you have to prepare as uh the eodr would start uh by the end of the year um but um it seems when you look at the German Federal Council for example that already addressed the German government to uh to put more pressure on uh potential postponement on eodr or also the US government uh said we want a postponing because it's very difficult for our suppliers in the US to provide the data that is uh needed by uh by EU companies falling under the eodr so um yeah we will see um right now um we are talking about a start um by the end of the year and real uh quick once again what is required by the eodr um it is basically a product based regulation so you have relevant Commodities and products made out of those Commodities uh um that are relevant it's cattle cocoa coffee pal or rubber soy and wood and those products they must be deforestation free and must be produced in accordance with relevant local legislation and those two points have to be shown in a due diligence statement uh that companies those um products um when they are imported or when they are traded on the EU Market if that's not the case then um companies are prohibited to import those products or to place them on the market for the first time to trade them so to say to make them available or to export um to um outside the EU um this means that as a starting point it is crucial that you take a closer look whether you have any products that are in scope how does it work the eodr has an nx1 which shows HS harmonine system uh uh codes um of products falling under the eodr and um you have to assess whether your HS codes of your products match the HS codes in the nx1 um sometimes it's basically a product a product after a certain production process that still falls under uh the eodr because it has an HS code that is mentioned in nx1 sometimes the processing at a certain stage um leads to an HS code that is no longer under the eodr mentioned in nnx one of the eodr for example when you look at um Kettle then you would um um say Kettle has a relevant Edge escort cow leather also has a relevant Edge escort but um a leather back for example doesn't have a relevant HS code anymore so that's basically uh a work and from our clients we can see that's all already um not that easy to find out the HS code of your own products and verify whether they fall in scope but that's basically the first thing you have to do and uh we'll get to this in more detail later on what are the steps you need to take and um uh what you should do um over the next months so let's say you have a relevant product then you would need to find out the um product origin so the exact plot location where the commodity is coming from um and with respect to that plot location you have to assess whether the um commodity has been produced um deforestation free and in compliance with local legislation and in this regard you have to do a risk assessment and if you find out any risks related to your product then you would need to take mitigation risk mitigation measures um we also get to that later what that could be and what it actually means um if you receive the data if you assess the data then in the end um your goal would be to submit a due diligence statement that says okay those are my products that are relevant under eodr they are deforestation free they were produced in compliance with Lo local legislation and you file that due diligent statement to an information system of the EU when it's ready and before that to the um EU Customs authorities uh basically they would look when the products enter the EU whether um a um due diligence statement exists verifying the requirements of the eodr when we look at the scope there are unfortunately a lot of uncertainties um in the eodr so a lot of questions that are not explicitly answer by the Reg ation and when you look at the FAQ of the commission published so far um only some of those questions are um are answered properly so um this makes it difficult um some examples we provided to you on the next slides um we um looked at them in detail in our last webinar since we're talking more about a the Practical approach today we will go through them real quick um so one question is whether the eodr applies to companies sitting outside the EU because the wording of the eodr is not entirely clear on that um from our perspective in practice a lot of companies outside the EU they won't feel responsible to file any um due diligence statement so in the end um they they probably will not um um isue assume they fall under the eud because in the end the European authorities also have no no real enforcement mechanisms to those on on on those companies outside the EU so probably in the end they will provide you with information that you need but they won't file a due diligence statement themselves okay ah now it's going to the it's moving to the to the next slide um so second scenario um this makes it easier for you of course um if you are just a Trader and um you are buying a relevant product and let's say you're also selling this relevant product um then you um um are allowed to verify an already existing due diligence statement so um the company you're buying the relevant product from will probably um uh have already filed a due diligence statement so your obligations under the eodr a little bit less you don't have to file a due diligence statement yourself you just have to verify whether the due diligence statement issued by um your supplier um has been yeah issued properly and the process the the apprach the um uh this supplier took is comprehensible another example um would be if you're buying a relevant product but you're selling a non-relevant product so that's a question we receive uh quite frequently um meaning on the purchasing side you have a relevant product but on the sales side you don't have a relevant product anymore so from our perspective although that's not a rock solid because it's not written explicitly in the eodr there are arguments uh in favor um that the purchasing side is not the relevant side but the sales side is the relevant side meaning that um in case you're buying a product from another EU company you would not fall under the eodr as long as you are selling a non-relevant product um the same applies if you're buying something um you're just using within your company for example meat for your cafeteria or um furniture for your buildings again you could argue that you're not um supplying a product to a third party but you're basic basically just buying something and it stays within your company however this is more problematic um if your supplier is located outside the EU because then of course again you could argue okay the purchasing site is not the relevant side just the sales side but the problem is that you need to get the product into the EU and if the supplier outside the EU is not issuing a due diligence statement um itself then the products have to pass customs and they need to be accompanied by a due diligence statement meaning that you have to provide that due diligence statement and you couldn't argue well we're just purchasing it we're not selling a relevant product because Customs is just looking are the products accompanied by a due diligence statement and if that's not the case then they probably will not be um allowed to um enter the EU and they will be sent back uh for example so uh in that scenario purchasing a product from outside the EU from a factual standpoint you would also need to look at your purchasing side the example before purchasing a product from within the U You could argue okay I'm just looking at the Sal side not at the purchasing side and in that scenario it's easier because products are already in the EU don't have to pass Customs anymore but you can see there are a lot of questions bring with uncertainties and uh this is unfortunate because that's um uh one of the most important aspects uh already in the beginning for the companies what is my role which products fall under the eodr uh but yeah we experienced this uh uh under the German supply chain act as well there were a lot of uncertainties when uh you you were looking at the scope so um again in this regulation it's quite similar Sebastian there's a few questions again on the question of packaging so how is packaging wooden packaging treated um yeah so um there there is an exception in nx1 um of the eodr if you're using wood just for transporting for protecting a product then that um would U um is not considered to be a relevant product under the eodr um packaging could also be just paper for example then again you would argue that this is just for protecting the product for covering the product and therefore it is um not falling under the EOD so um in both scenarios either wood or paper there is um there is either an explicit exception in the UDR or there are arguments that you can use that these products are not falling under the eodr on this slide we collect Ed some interesting information more or less interesting information because not everything the EU or or authorities publish is really helpful uh most helpful um uh website we found is the one of with the FAQs of the uh of the bla blle bundus anal for and so the German Authority uh for responsible for the eodr but those those questions so you can find them there in German uh they those are basically the same fq um as published by the EU commission so you can also find it on the web them on the website of the EU commission beside um yeah um we um included some links here that may help I guess we are we will be speaking about the EU Observatory that's probably you Neil talking about that whether it's helpful or not uh but U yeah just out of convenience we included some some links here and I think that's basically already our overview because now we are um talking about how can you basically from a practical side implement the UDR go ahead Sebastian oh yeah okay so still me very good um so uh what have we done we thought about uh splitting this into different phases um and we know it's not that much time and hopefully there will be a um extension um in particular if you're um working in in a field in a business sector where you will simply not receive the information um you need from your suppliers because they tell you okay it's not possible um so but for now we um uh thought about these different phases until 30th December of 2024 first one would be a preparation phase um the second one uh Implement implementation phase one then implementation phase two and then as of 30 December 2024 a compliance phase uh meaning regular compliance with the UDR requirements okay so let's take a closer look what um falls under the respective phases so preparation phase we all already talked about this basically means you need to assess um the scope of the eodr with respect to your product and your own role so you have to um ask yourself the questions do any of my products fall within the scope of application um are you a Trader are you an operator um are you buying products from within the EU from outside the EU is it a long supply chain um where you basically just buying the product from your your direct supplier but the entire supply chain until the origin contains 10 different 10 more tiers for example or are you buying from the original source so that you get an overview um of the supply chain your role in the supply chain and the relevant products another question of course is are you anme or nonme because depending on your size um your obligations might be different small uh small and mediumsized Enterprises they have um um a little less obligations under the eodr and from our perspective because this questions come comes this question comes up quite frequently um we think that a Consolidated view is more realistic meaning that um it doesn't matter if you are one small legal entity uh with uh not that many employees uh in a huge group um then you would still be considered uh most likely would still be considered um a nonme company um because you're basically belonging to that group at least that's the case when you look at the um um opinion of um authorities in under different regulations where they they decided that anme is not a uh small company within a huge group so you have to be the entire group has to be small or mediumsized as a Next Step um you would need to think about um your organization so who is responsible for Gathering the information you need for doing the risk assessments for taking risk mitigation measures for submitting the due diligence statement for documenting and monitoring so um basically similar as to other supply chain regulations you um need to have uh people and processes and documents in place that tell you what to do and who is doing what and of course one of the most uh important question is the beginning is also uh um do you want to make use of external service providers to uh with respect to satellite data for example with respect to supply chain uh due diligence and supply chain transparency um again very similar to the German supply chain act for example where couple of companies did the risk analysis themselves and others they said okay we don't want to do it ourselves we um need support from a software provider um yeah people processes documents I already mentioned that um when you look at people the eodr mentions uh explicitly that you need an eodr compliance officer and you need an independent audit body to review the internal compliance strategies um also comparable for those of you that for example fall under the German supply chain act um there you also had these two levels people that are implementing the German supply chain act and one or more persons in the company that are monitoring that implementation process here um you have a very similar approach um and um in that regard it would make sense let's say if you fall under the German supply chain act whether you could use those people already addressing the um human rights aspects and environmental aspects under the German supply chain act um and to um basically um adjust their positions so that they now also have to take care of eodr matters because the process the approach is very similar it's always a risk analysis you have to do it's always measures uh pre preventive measures and remedial measures you have to take in case of risks uh and always a reporting and documentation you need to do so uh this would be a strategic question of course uh who is doing what um with respect to responsibilities in the company um and processes documents um I think we will talk about this on the next slid slides a little bit more uh what it actually means um okay um oh I have some difficulties to use the C okay um yeah um this um assessment of scope of course needs um more more details so you basically have to gather uh internally probably as a first step uh the uh the the relevant inbound and outbound products you need information like the HS code suppliers Origins um you probably also have to prioritize because you may have products you definitely need to produce your produ the product you're selling and if it's crucial that you receive um a um um a product to manufacture your own product then of course uh this will be uh a high priority and um you have to start right away to get the information you need so that the worst case scenario uh uh doesn't kick in um and you are not able to um import for example that product into the EU and um then you wouldn't be able to produce your own product anymore so um this is also um an important aspect of the preparation phase to think about those um um those criteria and maybe uh yeah keep going with that so this is currently where we are also with many uh customers is that they have now understood their scope of application how are they affected um and they're now in the process of gathering this data internally uh because in order to get going with the D diligence processes and the risk assessments you need let's say in a system whatever that system may be a list of your relevant products on the inbound side on the outbound side in order to start these these processes and to give you a bit of a a guideline what do you need to gather and where could you typically gather this information we've prepared this illustration so if this is your company uh you're affected on the inbound and outbound side you only look at eodr relevant product um the first list you get is uh the relevant the products you import into the EU or that you buy on the EU Market that are used in the outbound products what you do not need together is the uh relevant products you buy that are not going into UDR relevant outbound products for instance um the leather uh you buy to produce the leather handbag because that is outside the scope as we showed in the initial assessment um but if you're affected on the import side on the inbound or the products you buy on the U Market that you are then using for UD are relevant products on the outbound side that is the first list you need to gather where can you typically gather this information internally um the import uh should be available from any Customs records you have so talk to your Customs Department um the added benefit here is also that the HS codes uh are a necessary part of the customs declaration um and this is exactly what you need to identify whether a certain product you buy is actually eodr relevant or not um on the second part here so the products you buy that go into uh UDR relevant product that is a bit difficult uh that you buy into EU because there often times you have no HS codes available so you have to assign these HS codes uh that is a process where um uh you need to work internally with the nx1 with the uh HS code definition on the EU it's also called the TN codes where you can look up based on product names whether they fall under this scope they are also service providers on the market uh we're currently looking to partner with some of them to also ease uh this setup so that's the first list which products you buy and their suppliers that are relevant under the UDR according to those two definitions the second list is the relevant outbound products so eud are relevant products that you export out of the EU or that you sell on the EU Market um and that list you can tip it together again as it relates to the exports from Customs records as it relates to the goods you sell on the EU Market based on your product catalog or inventory that also sits in oftentimes an Europe P system but also in other systems um again here the challeng is on the classification of the HS codes and then last but not least in order to set up uh the compliance processes you then also need the mapping of the inbound to the outbound side where they relate so which of these inbound products go into the outbound product because again the the data Gathering and you will see this in the next examples and the demonstrations the data Gathering and assessment you do on the products you buy where you need to retrieve certain information from the Upstream supply chain but you might also need to then generate diligence statement uh for a product you sell which might consist on several of several products you buy that are eodr relevant so that's why this mapping which you typically see from a bill of materials uh perspective is also necessary and to close the loop and this is bit of a preview we will show a demo shortly but this is also the way we structure the user interface within the pre-wave solution where we see this as an endtoend solution approach end to end in the sense that we um have the data setup so in this UI you see here the relevant products and the relevant suppliers we separate by inbound and outbound products so on the inbound product side you have the products you buy from suppliers or you import um into the EU that are UDR relevant uh the outbound products would be the ones you sell and for both of them uh you could be required to generate U diligence statements yourself and this is let's say the other end of the process and what we mean by end to end so you have the data setup you then have the view of gathering the origins we will show this in a demonstration in a few minutes you will then have the parts for the risk assessment on the deforestation risk assessment the legality risk assessment the risk mitigation and then the due diligence statement generation so this is let's say where it sits and to use the prev system or any other system you need to have this view on the on the products that are relevant that you need to set up the system and with that I hand it back to Sebastian last aspect of um the preparation phase would be to think of think about a supplier awareness campaign so uh to um start um the conversation with suppliers that um you are buying relevant products from and to make them aware of your uh new from from your new demands the information you uh you need so um implementation phase one um now that you know okay I have those relevant products I'm a Trader I'm an operator um I know more or less about the supply chain of the relevant product um then as a first step you would have to um gather the um origin information meaning um you have to communicate with your suppliers and see who is able to provide you with um in particular uh geolocation data um and this really depends on the complexity of your supply chain if you're working if you're buying a product from the original producer then this makes it easy because he is probably able to provide you the exact plot the product is coming from but that's not the typical supply chain of an EU company so um probably you uh will have a lot of traders in between uh or different production steps in between until you reach the origin so this um unfortunately requires some work to do because in the end you have to uh receive the information you need and if it's not your direct supplier who is able to provide you with that information you would have either the direct supplier has to ask the pre-upper and so on or if that is not working um at all you would be the one who is responsible to communicate with different actors in your supply chain to re receive the um GE data um you actually need and um in that regard um you should think of addressing uh those um um information requirements in your agreements in your contracts with your suppliers because of course you could ask but in the end it's always better to have a um contractual right you can assess so um in particular with respect to um new suppliers you are onboarding you should think of including um Clauses on information um um obligations on cooperation obligations um potentially also audit rights or other um um other contractual obligations you include into the agreements again very similar to uh what you have to do under other supply chain regulation either uh German Supply check but also CS D um also require the same uh in the end this means that you probably will include eodr in your supplier um code of conduct or in other documents you are using in your supplier relationships um so that in the end you have something in the agreement that you can use if a um information is not provided to you of course of course I mean in the end if uh this is not worth a lot if the supplier is not um able to provide you the information then it simply won't happen but still um this is something you would have to think about um um uh sooner than later to to to include those um um those rights and obligations of suppliers in your contractual agreements okay so now to maybe give a a glimpse into how this Gathering of Origins can work in practice we have prepared a little demo of how this um supplier engagement interaction Works within the pre solution um we see here um the pre system where as we already saw earlier we separate between inbound and outbound products inbound products being the one you buy from suppliers we list them here we have here few Rubber products uh a leather products they are categories they're categorized by supplier we also see DHS codes uh we then automatically highlight the scope uh of these products is it an import is it a domestic purchase uh based on the supplier location um and the next step in the process that we just talked about is gathering the origin information and for that uh um I want to quickly demo this flow of first of all how you send the origin request to the supplier and then how the supplier can submit the origin information to you also while understanding that this will often times not be the direct supplier but an upstream supplier so in this case we request the origin information we can also link this request to a particular shipment number material number um in order to also give a reference number to the uh direct supplier so that they know what you want from them this is then an email that goes out to the direct supplier that they can respond to um they come into the um registration of the eodr supplier cockpit so this is the um entry point for the supplier where they can maintain origin information and also gather that from the Upstream supply chain so in that particular situation they would register here within this um supplier portal provide their contact details and then they live here uh in the cockpit where they see all of the various requests they have received from different customers in this particular case on these rubber fittings with the HS code for the relevant shipment number there's no Origins added yet um we can also add additional products uh in case let's say there are some products that we also selling to this company um in this particular case we're now answering this request the first uh question that we then are asked is do you have a due diligence statement or not if you do we will show this a bit later the workflow is a bit different in case you don't you need to actually enter the origin information either you have them available at hand or if you need to pass this Upstream in the supply chain you can generate what we call a deep link so this is a link that you can then pass to your supplier they can pass it to their supplier they can use this link to enter this exact portal where they can then add the origin information um by providing either the geojson or drawing the polygon on the map in this particular example G Json this is a format that is specified um this is a general format this is not an UDR specific format um for uh geo location data um the EU has however specified the format how they are accepting uh these geojson uh data points these are the polygons that are drawn on the map um in their information system and we are looking to align ourselves with these EU definitions to make sure we have the compatibility in this particular case um we add producer information uh the plot name a production date and this uh polygon so this is the location of the production site we have here the EU Forest base map but we will hear from from Neils this is not the one we use to check against deforestation this is just a guidance to show during data entry of highlighting where primary Forest is according to this EU classification in this particular case now we save and send these Origins we added to the system and then moving back to the um original user interface these Origins are now uh provided to us and we can continue with the risk assessment uh process but with that before we continue the demo I hand it back uh to Sebastian to explain then what's the next step that we have to do when we have gathered these these data points you mute Sebastian sorry so next step um um you need to take after you find out found out the geod data um would be to do a risk assessment um and in this regard we have to distinguish between the case that um there is no due diligence statement available and the case that there is a diligence statement already existing which you only have to verify so let's take a look at the first case there is no no due diligence statement available and your the operator you have to file a due diligence statement um and you received the information on geod Dat then as a first First Step you would need to verify whether the um data you received uh or whether the the the the product has been produced um has led to deforestation or not uh and I won't say too much on that because that's what Neil is talking about but you basically have to look at Satellite data uh and come to a conclusion uh has there been deforestation with respect to a certain cutof date 21st December 2020 um yes or no uh and you have a clear answer then in that regard and uh um hopefully the result is there hasn't been any deforestation then you can click that box then the other risk assessment part would be to assess whether the product has been produced in accordance with relevant legislation and that's probably even more difficult because there is no clear explanation how to do that so what you would need to do first is when you're looking at article 10 you find um different criteria for risk assessment yeah um and it from our perspective makes sense to take those criteria and to distinguish between um highrisk areas and medium risk areas and lowrisk areas and negligible uh risk areas and then to decide what steps you should take to assess the um accordance with national legislation meaning if your risk assessment leads to the result there is a low risk then probably you're doing Less in verifying the compliance with national laws you for example just ask for a contractual um Assurance of the producer if the risk is higher then your measures might be more far reaching then for example you could think of a questionnaire that um is more sophisticated that you're sending to the supplier and depending on the answers you come to the conclusion okay I assume there has been compli with national legislation if it's a high-risk area then you probably take even uh further steps like an audit for example unfortunately there is not one audit company that is uh at least to my knowledge that is currently saying well it's no problem uh we are located in Brazil and if you uh tell us we should conduct an audit we can just drive to the company and uh go there U do do our assessment for 2 hours and then come up with um a confirmation there has been compliance with national laws the laws mentioned in the UDR so but still that would be um important to to have an risk based approach in that regard at least that's uh that's that's our idea uh in in that case because otherwise it will be difficult to uh to to to to handle this aspect in particular if you have a lot of products uh for which you have to um assess the uh the legal compliance but that's basically uh what you would need to do in that regard um ah okay here the EU we all also mentioned the EU country benchmarking which unfortunately does not exist yet so the EU country benchmarking is also one of the risk factors mentioned in article uh 10 but right now every country is uh on normal risk because there is there is no benchmarking system um existing yet and um also um yeah interesting and we have to see whether the EU will have this ready by the end of the year uh if not that will be probably one of the arguments to to delay or postpone the entire eodr because this actually helps a company to uh to um to assess the risk and as long as this benchmarking system uh doesn't exist the company would have to do it on its own to find sources um to find um um indices that um basically tell you something about the risks with respect to deforestation with respect to compliance with national legislation um instead of the benchmarking system so that's the first case the second case would be then um if you have a um um um due diligence statement um existing already that you have to verify in that case it's much easier but again you would have to um think about a certain routine a certain approach how do I want to verify an existing due diligence statement and again this means that um you uh could think of a risk-based approach and depending on the like Ood that something could be wrong with respect to the existing Dent statement you decide on just double checking the Geo data you can see in the existing due diligence statement or whether you ask further questions to the supplier again depending on the risk level all right and so in this particular assessment now to make the bridge um again also to the status we are so we can now also the system request the deforestation assessment and this is now um if I request it here where I want to hand over also to Neil yeah because this is our partnership with the intelligence because when we request the deforestation assessment for pre-wave it is really a check uh through this intelligence system and with that over to you Neils to explain who you are who intelligence is and what's so special about you guys thanks so much I everyone uh so I'm Neils um CEO at intelligence and for the past 25 years I dedicated My Life um to monitoring tropical forest areas I'm a Forester with a background in uh GIS remote sensing um I also was an adviser to the European Commission on the um renewable energy directive and uh remote sensing sence initiative um I founded Stell in uh 2016 based on all the previous years of experience and uh we were happy to partly get funding from European union and European Space Agency to develop kind of the systems that are needed for for UDR so if we talk about risk assessments and and and satellite checks there one key thing is of course what is Forest and what is agricultural crop because the regulation says that um it's about the conversion of forest or agricultur use in many cases it can be that if a forest area is converted to um houses it it doesn't matter because that's not related to your commodity or product um not all the treover loss detected is deforestation and that makes uh the satellite checks a bit tricky and uh you must map where the planted crop grows so you need a couple of ingred you need to know where the forest is you need to know where the deforestation placees takes place and if there's a crop that is related to your product is growing and unfortunately the European commission uh Forest Observatory uh produced a forest Baseline to use as a guidance but there's kind of uh some issues with that one um which I can show you here and of course the difficulty is which you see at the left that is satellite imagery not all what is green is Forest that's kind of the key issue open data is not safe for use because even uh an authoritative uh Institute like European uh commission joint Research Center when they map Forest there are not completely clear whether something is a plantation of rubber or whether it's a cocoa aggro forestry or something else or forest and we show that here in for an area where clients are operating in codir uh in the center you see this European map uh with where all the green is Forest and on the right you'll see um the different kind of of colors which mean that it's actually not natural Forest it's cocoa or rubber or or palm oil palm oil in yellow and the rubber in pink that's kind of an issue and and how can we know that well because we have a lot of clients uh who are uh Plantation companies and we have um also the presence on the ground in many of these places we've been so we know that actually all these areas are not natural Forest um the same is an issue for coffee and soy in in Brazil where where coffee has not been mapped very well and uh what this means actually uh for you is that if a farmer over here uh clears his all uh Plantation uh because it's not productive anymore and you just wants to replant is mistaken for deforestation and you can get a fine for something that's a perfectly uh sound uh management activity so uh this is why we are working with uh EU institutes and in particular are many uh industry clients from producers Traders consumer good brands to get this right um how do we do that there's several satellites circling around the globe the imagery of which is available uh free of charge and that is nice to get alignment in the industry on what kind of data SES are used however you'll notice that it's very cloudy um around the world especially in tropical production area so all the white fluff that you see here that's all clouds so you can't use that but we use radar technology to see through these clouds which you can see here um and also several techniques um processing all the imagery available for the past 30 40 years and getting new imagery every day to make pieces of the puzzle and get like the most complete and most uh actual oversight of what's happening so these pixels we turn into like for example here in the green colors what is actually Forest according to the UDR definitions and if we see the changes over time we can also say ah but that signal is the signal of soy or a rubber Plantation or a mining area or whatever where where minerals come from and if we do that every day we can also see hey here Forest is disappearing and then a few months later we see this kind of crop so that's the essence of uh what we do built on Google Cloud hug processing of the whole world uh at 10 met resolution pixels now the key of course is to combine this with the plot data of the origins so here you see an area in Brazil the bluish area in in the center that's a river and you can see that on the right side of the river there's in this whole picture a lot of uh black lines those are all the plots from the cestal system of Brazil so those are all farm plots imp Plantation plots and the blue color means it's sugar cane but on the other side of the river on the left you'll see a lot of red areas you will also see some green areas the green areas where still Forest the red areas is where we detected deforestation this is also very interesting because on if you would export soy and sugar came from the from the the right area area on the right we know that this is actually didn't have any Force for 30 years so it's very safe to Source there anyway this is kind of the kind of information that we get uh from these data sets um how we build confidence which is on one part by working with VY University working with NASA European Space Agency to build the scientific basis for the algorithms that we use don't be fooled by pretty Maps anyone can build pretty Maps but they have to be validated very well and that is a crucial thing that we do thanks to our network of clients thanks to our network of scientists around the world and our own field teams what you see here on the top is is 1.2 million labels that we get from field visits trying to understand what actually is this green stuff we see in the satellite image is that the plantation or is that the natural forest and that's the basis for our our our Baseline and um it's absolutely critical to to be in the field and to have years of experience of understanding in the green uh and that's this is an example of the kind of pictures we take using the GPS and which is in our database to make sure that we can do this analysis with confidence so if we look at the whole soy sector and we did the we do entire Brazil uh for example for for companies like uh Cargill and other uh industry Giants um we find that in Brazil just five % of the plots is non-compliant since the cut date of 2020 um those are over a million uh soy plots and and uh over 61,000 are non-compliant um legality issue is a kind of different thing but in terms of planted area that's just 1.5 uh percent so we know that it's it's kind of uh you need to look very carefully the good news is that for several Commodities we know that actually the deforestation risk is very very low and thanks to the satellite informations you can know where that is uh where the risk is lowest where your suppliers are lowest and that's why our cooperation with pre-wave is is great uh putting uh all the the dots together um yeah the reality check what we hear and I'll wrap this this up soon what we hear mostly from our clients is that the the key problems that they struggle with is gaps in traceability data open data as I showed is not safe there can be disagreements leading to arguments with a competent Authority that just doesn't know what's going on in producing countries uh legality problems of obviously and also the the system is not user friendly but looking into uh the subject of today of this this deep dive into into the data yeah now what well many of you will think okay Panic we're all doomed but that's not the case fortunately um Partnerships like our partnership with pre-wave is but also in the sector partnering with your suppliers looking for long-term Solutions uh to make sure that uh what is known about the origin is increased field verified and certified uh commodity layers what we need these crop Maps it's very important also working with with the you what we're doing to make sure that they don't make mistakes and then there's a couple of other things that we can go into later um wrapping up hiring a trusted Elite provider is is very critical not only uh for achieving it skill uh which is the pre-wave is is is excellent that but also for making sure that the input data as I showed today uh that matters a lot it can make a difference between a 4% turnover fine and uh being just fine uh relations matter so having a lot of uh other clients for us means that we can have have efficiencies between suppliers and buyers who are both clients for us after all seeking efficiencies also with EU joint Research Center and competent authorities that will be very important so relations matter a lot experience obviously matters uh when I started this work uh for decades ago a very few people were doing this kind of thing and now there's over 200 service providers so I understand it's very difficult for you to to find out who's doing what um experience matters look for for those kind of things in your engagement um yeah and don't have an empty shell a nice looking dashboard with with no substance in data um so and that's also why who are our current clients those are the top five Global food companies Unilever and such as well as the biggest biggest Trader so uh we we are very grateful for them also to co-develop our our services and again it's all about collaborative efforts in the supply chain that will be a critical thing and we're happy to build on this also together with pre-wave that thanks so much Neils um and we're really excited uh to be working with um uh with intelligence um because I think the accuracy around the deforestation checks is will really be a critical Factor you don't want to have false positives here yeah um in this particular case the risk assessment turned out green negligible risk um in this uh situation then uh we are glad to work here with the intelligence to power these deforestation checks as the elite provider for this information as as new just presented moving then on from the deforestation assessment uh we can still see in the system we are not yet able to generate a due diligence statement ourselves for instance if you're importing this particular product or placing it on the market for the first time um we still need to run through the legality assessment and the legality assessment is the one that is um run using prev traditional approaches where we follow a risk-based approach using various country level uh subnational industry commodity risk indicators uh that we combine then also with a uh risk screening approach so we actually screen the producers that are provided during the data Gathering whether they have any particular issues around these um relevant uh legislations and and risk topics that are named in the UDR ranging from labor rights to uh Community rights of indigenous peoples human rights uh uh regulatory topics anti-corruption so all of these things are covered in this legality risk assessment and in casee we identify as Sebastian mentioned earlier on a risk-based approach and non- negligible risk we will recommend to uh Place additional measur measures such as self assessment questionnaires uh all the way then up to audits the screening so this is the uh uh dat some of the data sources we use uh for the uh Regional risk assessment uh based on the location of the plot and the producer but of course there's also the prev risk screening based on media data which also brings up a lot of information here we have a large cap uh uh meat packaging that is also related to to cattle farming uh in Brazil um where they have actually been linked to Illegal farming um we see here corporate wrongdoing accusations based on media data in in Uruguay also as it relates to um the leather industry here um we have chemical leakage or pollution incidents in Vietnam relating to the rubber industry so these are an additional topics we can bring up add to the risk assessment and if they pop up recommend a risk mitigation action to be taken um and with that um we want to quickly touch upon uh what we just outlined is the process you run through if you are yourself the operator you yourself place the product on the market import you need to you're not getting a due diligence statement yourself if you're getting a due diligence statement yourself the process is uh slightly different and maybe Sebastian you can again quickly touch upon uh these two boxes below here yeah so in case um you don't have to submit a due diligence statement yourself um you um can or you would have to verify whether an already existing due diligence statement issued by one of your suppliers um um has been um has been issued correctly or at least verify whether the approach your supplier took Mak sense and again the eodr unfortunately is not 100% clear and doesn't tell you okay that's uh that's the way you need to take uh that's the way you have to assertain whether um the DU diligence statement of your supplier is okay so uh that's why I said in the beginning uh it makes sense to again also think of a risk-based approach depending of course on how many due diligence statements you have to verify and if it's quite a huge number difference suppliers then um you think of a scheme or you develop a scheme on based on a risk-based approach um and um then decide okay how do I want to conduct this verification so are there suppliers where I can simply because I have information on them I screen them I know the information I received is trustworthy uh there's not much that I need to do and then I probably have other suppliers where you um receive only poor information and where where you have other um information based on public sources for example that this is a high-risk product or that the supply chain leads to a high-risk region and in that cases you probably ask your suppliers further questions um via questionnaire for example or take other measures to basically verify this existing due diligence statement and this is really a very important point that we quickly have highlighted here also with a um short illustration is that this risk assessment process really splits depending on whether you have a due diligence statement available or not here we've indicated by Red in that uh scenario we are highlighting here on the supplier level we're not receiving a due diligence statement that means it's also not that relevant how a direct suppliers eodr maturity uh is currently aligned we need to um check deforestation risks On the Origin ourselves we need to check the legality risks ourselves um if the legality risk for instance is red we get um a higher risk in some area we need to launch a mitigation action and in these conditions we can generate the due diligence uh statement ourselves um and this logic is also now implemented in the pr W system meaning if these conditions are met then you can generate a du diligence statement if for instance we serve as a high risk based on the legality check and you have not planned a mitigation action you will not be able to generate a due diligence statement so this logic is really now implemented the the big difference is now if we have a due diligence statement available meaning our Upstream direct supplier has already performed the risk assessment has gathered the origin provides us with a due diligence statement and if we can ensure based on an assessment of the direct supplier that they have done their job right and they are a trustworthy supplier they have the right processes in place they have the right U diligence systems in place then we can skip all of the other risk assessment steps and still produce a due diligence statement by referencing the due diligence statement we receive and uh this is really a um a situation that from the perspective of a Trader and this is only possible if you receive the due diligence statements really reduces the effort significantly um and this is also what we've implemented in the pre system and I quickly wanted to show this to you in the last demo here so here we've highlighted a scenario uh for the second uh products and suppliers where we have received the due diligence statement uh from the supplier in that case we can then again on our own launch a deforestation assessment or legality assessment but the system is actually recommending us to assess the maturity of our supplier who is providing us this due diligence assessment uh statement so in that particular case we can request uh a maturity assessment this is a a self assessment that touches upon the topic of the due diligence system of that supplier so how are they checking deforestation how are they Gathering origin information how are they checking the legality this is what we sending through the previous uh through the pre-wave self assessment mechanism to that supplier uh they are now answering and if they have answered the supplier maturity is green the devestation assessment and legality assessment is now optional and we can actually um also already generate the due diligence statement ourselves so we have a due diligence statement the supply maturity is high we can then move towards the generation of the due diligence statement uh and this is uh what we have aligned with the EU system we will show a few screenshots of the EU system right now and this is also where we want to obviously integrate through an API so that um this information we have here is what will be provided to the EU system so we can save this information and submit it to the EU system and then through an API we procure a reference number and this is then the due diligence reference number that we ourselves have based on the origins we submitt and the other information we submitted and then we are basically finished from this perspective of an endtoend approach uh for the UDR compliance and with that I hand it back to um Sebastian to tell us about um implementation phase two and that is uh again the due diligence statements and what actually needs to be done to to hand those in so I forgot in the beginning to mention the the timeline you can see above so the preparation phase was basically from now on until September the implementation phase one was September to November and uh now this implementation phase two would be from no would be November to December or only December depending how fast you are uh implementation phase two basically means that you get familiar with the due diligence statement and you know how to submit it what needs to be included in there so right now there's only a pilot phase of the um um system where you um have to issue the due diligence statement but still um Annex two of the eodr already contains information on what has to be included there is in the due diligence statement there is information also online uh we included one link on this one slide with all the links where you can find information on uh how this um um uh issuing how the submission of the due diligence statement Works uh but that would be something where and that's why we said implementation phase two is probably one month uh where you have all your data ready and where you get familiar uh with how to submit it to the authorities and then as a last step of course compliance phase as of 30 December 2024 means uh that um you have to generate the due diligence statement you have to submit the due diligence statement you have to keep the records um for at least 5 years on the information uh provided in the due diligence statement you have to uh verify whether your processes are working on a regular basis once a year you have to monitor your diligence system and you have to um um report reporting is basically um also once per year but the eodr as the csle D is aligned with the csrd so if you are falling under the csrd there is no need to issue an eodr report it's basically um the cs3d where you provide all the information on your compliance with eud r with cs Tri D so that's uh that's all harmonized and those are some considerations and um of course um don't they are generalizing a bit Yeah because uh of course those are strategic thoughts that don't apply to every sector to to to every supply chain but just just some ideas uh um how to uh what kind of uh strategic questions you should ask yourself so for example um does it make sense to Source from within the EU because the risks Associated to deforestation are lower in the you than probably in some other countries in the world but of course with a lot of products or Commodities that's potentially not possible so that's so just an idea working with larger suppliers is also generalizing but probably you will figure out in this process of gathering information who are the suppliers um I can work with who are the suppliers that are delivering the information to me and if there are suppliers that are simply not able to do that but on the other hand there are other suppliers they do that easily you should think about uh uh your supplier base whether it uh uh doesn't make sense to to work with the suppliers that make make it easy for you to get the information you need under the eodr um another strategic thing already mentioned the eodr supply onboarding process that so that you with respect to relevant products think of eodr when you are entering into new relationship with suppliers that you learn of your mistakes uh where uh it was difficult for example to receive Keep information you include Clauses in your agreements uh with your suppliers to make this easier uh shifting sourcing to low risk countries that's basically what we already had uh uh uh were already saying and another aspect the last one is building up inventory also um something it's basically so just something that buys you time because the products Commodities that uh are imported into the EU EU before 30 December 24 uh when you're buying them before that uh date and you're selling them in course of the next year they don't have to be accompanied by a due diligence statement uh because they are were basically imported into the U in the implementation phase so before 30 December 2024 so um then with respect to those products uh you don't have to issue a due diligence statement and this probably buys you some time if you are able to uh to to to to um build up stock uh then you have more time um because only the products you're buying and selling then after 30 December have to be uh accompanied by an due diligence statement and with that um we are at the end uh only 16 minutes over time I think this less than last time no thanks to Sebastian and Neil I think there's already a bunch of questions um that we want to address there's a few asking again with the slides will be shared yes they will be shared as well as the recording um I have a first question to Neil um satell is very accurate and in many regards as you already presented more accurate than maybe even the system the you will use internally and maybe some of the competent authorities will use internally to to check and they they are actually OB to check also on on on on some schedule what can be done if uh their system says deforestation and celligent says no no deforestation uh what what what are strategies then to to to argue what what should be done yeah so yeah we we expect that tsunami of uh false alerts it's inevitable because that already uh happens with for example Green Peace uh who accuse companies of deforestation while in facted was like a a rubber Plantation was being cleared so this is a reality um what can be done about it is what we're already doing and that is engage uh on behalf also of the industry of all our partners to make sure to get alignance uh alignment between uh the the forest maps and to make sure that we will be able to improve the European map um we need governments to work work with producer countries because another thing is that many of the national government data sets Forest maps are not aligned with the UDR uh definition so engagement that is like the the main thing that we're uh working on right now and uh a very practical approach that we have is that if there's dispute um then we can record in which area it is so which is like the disputed plot and then in our network of on theg ground uh clients Partners including ngos we work with WWF rainforest Alliance and you name them uh there there can be a check on the ground to verify and get additional data in addition to having reference data from very high resolution satellites that you can see the trees on um the idea there is to have um a digital system that is like a complaints register to resolve these kinds of issues um so yeah that's my my answer how aware I mean you're engaged a lot with the authorities also on on various levels so you are also probably assuming that um awareness with selligent will build that at some point you also become more and more you are already to some extent but more and more of a trusted provider as well right and that let's say company saying we use intelligence that might be considered as also a trusted Source at some point yeah in food and Agri it's clear that we are the market leader so that we have a critical mass uh of high-profile producers uh clients who are already using this data uh of course that matters uh in in discussions um so yes that that's very important all right Sebastian if you identified any questions uh themes that you would like to address I already answered 16 I'm scrolling through and uh so there's a few one that um I notied that I think pertain to some of the demos I I I presented today is data entry done on batch level um yes it can be done on batch level I this was requesting information from the supplier for instance with a shipment number uh with a pre number so that is that is a possibility um is it possible to plug information from internal systems to pre-wave yes so for all of the process steps you've seen today there's a corresponding API so you can uh set up the products using an API you can trigger an information request using the API you can trigger deforestation assessment or legality assessment and eventually the um generation of a due diligence statement through an API so we see really the need to have a very operationalized system that links to your e um systems um to run really a smooth a smooth process here yeah Neil did you see any questions that you might want to tackle there's still a lot that relates to the um well I I answered quite some of them yeah so we will share also the answers obviously of Neils and Sebastian um is part of the documents so the this the slides and the video we will also share the uh yeah 16 answered questions uh already nice I think um yeah there's there's no particular theme or individual questions um this will not have been the last webinar and um most likely also not the last one with Neil and Sebastian um in the future we would like to uh maybe before September um so the summer will be heavily still on the development side and the running projects we hope to bring then as a next webinar already some customers sharing first experiences using the systems um and yeah happy to continue the topic thanks Neils for sharing the insights I think much appreciated and also yeah good to see that uh this is a topic you've been working on long before there was any regulation um so really a yeah building the expertise for years thanks again Sebastian for the the great explanations and with that um yeah we have already taken 23 minutes out of the Euro game that you might want to watch already so with that we end the webinar and say thank you and also again thanks to news and Sebastian next time thank you bye bye bye bye [Music]