The UK Government confirmed in June 2026 that businesses trading in forest risk commodities now require a mandatory due diligence framework to prove their supply chains are not contributing to illegal deforestation. This change is of particular concern for companies whose supply chains rely on timber, paper, and other fibre-based products, which are vital for the packaging industry.
For consumer goods businesses with supply chains in China, the ruling exposes them to legislative penalties from Chinese regulators under Decree 834, which places limitations on supply chain visibility. Conflict between the heightened due diligence observation obligations required by Defra and the limits on information gathering specified by Decree 834 will likely leave businesses struggling to achieve either policy.
Go deeper with GlobalData
Access deeper industry intelligence
Experience unmatched clarity with a single platform that combines unique data, AI, and human expertise.
The EUDR is already impacting consumer packaging companies who rely on forest and land-based inputs. Large UK-based packaging producers like DS Smith have already been affected by the EUDR, which required the company to adapt its supply chains and sourcing operations to achieve the new transparency standards required.
The new UK deforestation legislation will now pose a similar threat to companies with supply chains using timber, paper, and fibre-based products in China. The UK imports an estimated £777m ($1.03bn) of timber and wood-based items from China, which includes 53% of all plywood supplies according to the 2023 UK Forestry Research report. UK-based companies that rely on Chinese timber for packaging products will need to conform to both pieces of legislation to avoid sanctions.
Firms are stuck between British and Chinese regulation
The new level of insight required by the UK’s deforestation ruling into the intricacies of supply chains, if fulfilled by firms, could violate the Chinese State Council’s Decree 834, published in March 2026. Principally, the law prohibits investigations into supply chains and activities involving the collection of information if they violate Chinese regulations. This stipulation places significant pressure on consumer goods companies trying to perform ESG reviews and supply chain assessments. Changing systems and terms of supply chains due to deforestation concerns may also place firms under fire. Those that terminate previous trading relations or impose restrictions can, under Decree 834 Article 15, be liable to investigation by Chinese regulators.
Those operating packaging supply chains in China rely directly on commodities like timber and paper, which are now being regulated. They are faced with a serious conundrum: fulfilling the legislative requirement for one country exposes them to regulatory penalisation from the other.
Firms must reflect and strengthen their due diligence and compliance obligations
Conflict over British regulation converging with the EUDR, which presents the possibility of further threatening China’s national security, is a serious concern to the European economy. China controls over 30% of the supply chain of all forest products through its Belt and Road Initiative, according to ATIBT. It is a major supplier of both wood and paper, two commodities crucial to the packaging industry in the UK and EU markets.
Consumer goods companies that are likely to be impacted by this new legislation should conduct risk assessments of their supply chains. Remaining aware of guideline modifications will ensure firms can balance their ability to comply with British and Chinese legislative demands.
The need to redirect supply chains
Conducting risk assessments, monitoring guidelines, and adapting business strategies accordingly are all costly strategies. The enforcement of ESG legislation is increasingly requiring expensive structural changes and due diligence costs for packaging firms. Managing and implementing large-scale geographic information mapping systems either requires a large upfront capital investment or outsourcing oversight to another entity.
The EUDR on average only led to minor compliance costs. Large companies saw a compliance cost of around 0.10% of revenue, and for small and medium-sized enterprises this rises to 0.32%. As the UK’s deforestation regulation has stipulated that any businesses operating in Great Britain with an annual turnover of over GBP1 million are required to carry out investigations into their supply chains, more small businesses will be affected. Rising due diligence costs may be attainable for larger packaging firms, but smaller businesses will be put under greater strain.
This may encourage packaging companies to diversify their supply chains away from timber sourcing. Future-proofing supply chains from both environmental disasters and volatile legislation may reduce uncertainty in the packaging industry and give investors greater long-term confidence for the future of the industry.
Firms, to avoid rising due diligence costs, may choose to re-engineer their packaging systems. Using only recycled timber and paper would help to avoid the due diligence costs that they would have to bear if they continued to fell forest land. Such courses of action may be able to make supply chains more resilient in the long run and avoid the legislative conundrum the conflicting pieces of regulation have created.
