Timber Traceability: Pioneering Innovation to Eradicate Deforestation from Europe's Supply Chain

If a tree falls in a forest, how do we know when, where and how it happened? As the world continues to lose 10 million hectares of forests each year, tracking the origin of wood products imported by the EU is an ambitious challenge. Nonetheless, avoiding the import of illegally and unsustainably sourced timber into the EU is the goal of the new EU Regulation on Deforestation-Free Products (EUDR), which entered into force in June 2023.  

Currently, the EU positions itself as the second largest importer of products that cause tropical deforestation globally, second only to China. As a major economy, the block wants to lead the way in fighting deforestation and ensuring commodities consumed in its member countries – such as wood, cattle, cocoa, soy, palm oil, coffee and rubber, as well as their derived products – are no longer contributing to deforestation. Innovation and novel technologies can assist in making sure that European companies exclude deforestation from their supply chain and follow the new EUDR, but are they sufficient to break the link between the EU market, forest cover reduction and illegal practices?

What is the new EUDR legislation? 

In a nutshell, the EUDR requires operators and traders placing high deforestation-risk commodities (palm oil, soy, beef, cocoa, timber and rubber) in the EU market to demonstrate that no deforestation or forest degradation is occurring in their source locations. It can be seen as an evolution from the EU Timber Regulation (EUTR), a regulatory framework for tackling illegal timber harvesting.  

While the EUDR is an EU legislation, it has global implications. In the case of timber trade, it mostly affects five countries, which are the largest exporters of wood to Europe as of 2021: China, Russia, the United Kingdom, the United States and Brazil. For traders and operators exporting wood to Europe, the legislation means they will need to assess the risks of non-compliance with the regulation and mitigate them to negligible levels. In practice, they are required to report the geographic coordinates of the plots of land where the commodities were produced, ensuring they are deforestation-free and not associated with illegal practices. Companies harvesting wood inside Europe and placing wood products on the EU market must also comply with these obligations. In addition, European customs and law enforcement authorities will face the challenge of deploying identification, and monitoring techniques to detect deforestation and to verify the links between imported products and their declared locations of origin. 

To support traders, operators and authorities in their tasks, the EU set up the EU Observatory on deforestation and forest degradation, built on existing monitoring tools, such as Copernicus, to facilitate access to supply chain information for public entities, consumers and businesses.

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Monitoring from above: What are the uses for Earth observation technologies?

Earth observation refers to the use of remote sensing technologies, such as sensors or satellites, to provide information about the current state and changes to the physical, chemical and biological traits of the planet. The EUDR depends on data from these systems for detecting and recording land use changes after 2020.  

The EU Observatory on deforestation and forest degradation provides three remote sensing components: a global forest satellite monitoring system, additional EU forest monitoring tools and production and trade statistics. One of the global forest monitoring components, the global forest cover map created by the EU, combines global datasets on tree cover, tree height, land cover and land use into a single harmonized platform. Through repeated monitoring, they will develop a database of land cover and land use changes over time. 

To inform their risk assessments, actors are encouraged to use the best available information with a combination of different datasets. This is to deal with common remote sensing challenges, such as limitations linked to distinguishing human-induced from natural degradation(e.g. following storms and wildfires) and issues relating to the definition of forest degradation, specifically concerning functional damage (e.g. biodiversity and provision of ecosystem services). 

It is important to connect observed land changes and commodities and effectively combat deforestation. Traders must report the geolocation of the plots of commodity harvesting, and producers and businesses must mitigate any non-negligible risks of non-compliance to place themselves on the EU market or export their products.

How can innovation help? Wood identification technologies 

The EUDR, like the EUTR, requires a declaration of wood species and wood origin. Even for wood experts, naming a tree species may be daunting., for example, when visually indistinguishable species include both protected (CITES protected species) and unregulated species, enforcement authorities require additional tools to ensure effective implementation of trade restrictions. The legislation increased the number of wood identification analyses for private sector actors and public authorities, such as customs and other law enforcement. While the number of wood anatomists available to do this work is limited, new wood identification technologies may come to the rescue. These may be used, for instance, to obtain additional evidence regarding the exact tree species or the likely area of wood production. 

Currently, classic wood anatomy based on macroscopic and microscopic characteristics is the most common wood identification technique supporting legal supply chains. These optical methods are relatively cheap to apply as they require low technology to analyse wood attributes such as colour, texture, density, grain surface and visual patterns.  

For instance, pine and spruce are both softwoods but can be distinguished e.g. based on the manner in which the wood cells formed early in the growth season transition to the ones formed later in the season. In pinewood the transition is abrupt while in spruce wood there is a more gradual transition. One limitation of this method, however, is that it rarely allows identification beyond the tree’s genus level. Thus, more specific methods are needed to link wood to its geographic origin. 

Some of the already available methods are genetic and chemical analyses. Genetic analysis is capable of distinguishing between anatomically similar wood species through their DNA and linking them to a certain origin based on genetic maps for wood species of interest. Chemical methods, such as mass spectrometry and near-infrared spectrometry, use different frequencies of light to analyse the chemical composition of wood, which –pending on available reference data-- can also be linked to tree species, as the chemical composition differs from species to species. Another possible method for wood identification is stable isotope analysis, used for the determination of geographical origin of wood. This method relies on the natural variation in isotopic composition—such as that of hydrogen and oxygen—within the wood. These isotopic signatures are shaped by local environmental conditions and are therefore characteristic of specific geographic regions. 

While it is likely that wood anatomy analysis will remain more common and even gain popularity with the use of machine vision, stakeholders in the field of timber trade believe that the use of stable isotopes and genetic analyses will also have a significant boost in the next 5–10 years. Still, all these technologies face technological barriers. 

Rapid diagnostics technologies such as wood anatomy analysis via AI-based image recognition and fast modalities of mass spectrometry (e.g. DART-TOFMS) are important in customs enforcement and due diligence testing to avoid stalling shipments and logistical costs. However, they are usually less accurate than slightly slower and more costly technologies such as genetic or isotope analyses. 

An additional and perhaps the most important limitation of all wood identification technologies is that they require reference material, the limited availability of which currently limits the species or geographical origins for which wood samples may be confirmed. While at first, reference collections are being developed for the most commercially used species and the most protected species (ref. CITES), it will take a long time to develop worldwide reference material for all species and useful for all methodologies. In the future, initiatives such as WorldForestID, a public-private entity creating a detailed library of geo-referenced plant samples worldwide, might increase reference data access for commercial and public analysis.

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Bypassing wood analysis with external identifiers.

Another approach that bypasses the complexities of wood identification or complex analyses is the application of external identifiers to wood. Radio Frequency Identification (RFID) has gained some traction in Scandinavian countries for wood-log monitoring in the timber industry, allowing the instant scanning of multiple tags with a distance of up to four metres. RFID tags can be placed on standing trees before harvest or on logs, and this unique identifier can then be maintained throughout the value chain for all resulting products. The tags, in turn, can be linked to the chain of custody and product information such as species, volume and location of each single tree or log.    

One of the challenges of this approach is the lack of resistance of RFID tags to humidity, moisture and high wood density, which reduces tag performance. More complex and expensive tags are best suited for long-term marking, but application on living trees requires specific solutions to prevent damage due to stem growth. Another weakness could be the high error rates of RFID readers, causing longer idling time in the process of scanning the tags. Also, RFID tags are prone to misuse, mislabelling, and they could make or break their effectiveness depending on whether the initial species identification was correct, and depending on how the tagging is handled throughout the chain of custody.

Blockchain applications to notarise wood transactions 

Last but not least, blockchain technology can be applied to create digital transaction logs of wood products, fulfilling the role of a notary: it reduces the complexity of due diligence regionally and internationally. Blockchains are distributed databases characterised by their traceability, decentralisation, verifiability, authentication and immutability.  

Blockchain technology can digitally record and process data at each step of the wood value chain, avoiding reliance on paperwork and establishing a decentralised registry where participants can find the source of timber in the supply chain. This is useful, especially in countries where corruption and illegal activities are widespread, as it may allow land ownership rights to be clarified. Yet it cannot exclude wrong-doing, and cannot replace the need for correct identification of the wood, especially at the beginning of the chain.  

Challenges in applying this technology encompass verifying the accuracy of data stored within the blockchain and fostering engagement from all pertinent stakeholders across the supply chain. The blockchain database would also enable checking product conversion efficiencies, thus allowing the detection of fraudulent insertion of non-legal wood into the flow of ‘legal’ wood. As blockchain technology is still incipient in forestry, additional research on the topic needs to prioritise uncovering potential risks that warrant attention.

Unleashing the EUDR’s full potential 

The implementation of the EUDR marks a significant step towards combating the impact of the EU market demand on deforestation, degradation and illegal logging worldwide. Leveraging innovative technologies such as Earth observation systems, wood identification methods, external identifiers like RFID, and blockchain technology will be important to unleash the full potential of the EUDR, enhancing transparency and traceability throughout the supply chain. While these advancements hold promise in addressing deforestation, challenges such as technological barriers and economic feasibility remain. Moving forward, research and collaboration are essential to overcoming these obstacles and ensuring the efficacy of sustainable forestry practices.