EU deforestation law faces enforcement test over Indonesian palm oil

Some of the world's largest consumer goods companies may face compliance risks under the European Union's incoming deforestation law after investigations linked palm oil from Indonesian plantations to alleged illegal activity. The findings, published by Indonesian environmental organisations and government authorities, focus on plantations in Central Kalimantan province. They raise fresh questions about how the bloc will enforce the rules when they take effect on 30 December 2026.

The EU law requires suppliers of commodities including cocoa, coffee, soy, palm oil, wood, rubber and beef to show that their products are not linked to deforestation before they can be sold in the EU market. The regulation has already been delayed several times amid political pressure from EU governments and industry groups concerned about administrative costs, traceability requirements and the burden on businesses and trading partners. Several producing countries, including Brazil, Indonesia, Malaysia, Colombia, Ghana and the United States, have also pressed Brussels to reconsider the policy.

The Indonesian investigation was carried out by WALHI Kalteng, TuK Indonesia and Sawit Watch. It traced links between plantations in Central Kalimantan and major international consumer brands, including PepsiCo, Unilever, Ferrero, Mondelez and Procter & Gamble, among others. The groups identified signs of deforestation in 2024 at the palm oil plantation PT Karya Makmur Abadi, a subsidiary of the KLK Group, despite the EU's cut-off date of 31 December 2020.

Under the EU framework, commodities linked to forest clearance after that date are barred from the market. That makes the case significant not only for the companies named in the investigation, but also for the wider supply chains that feed Europe's food and consumer goods sectors. The issue is especially sensitive because palm oil is one of the commodities most closely watched under the law, and because the regulation is intended to reduce the EU's role in global forest loss.

The findings also come against a backdrop of repeated political setbacks for the legislation. The law has been criticised by some governments and industry representatives as too costly and difficult to implement, while environmental groups argue that weakening it would undermine its purpose. US Ambassador to the EU Andrew Puzder has described the measure as over-regulation, selective protectionism and an unnecessary non-tariff trade barrier.

What remains unclear is whether the companies named in the investigation will be found to have breached the EU rules, or whether the supply chains can be traced with enough precision to trigger enforcement action. The investigation did not establish that every named company violated the law. The key question now is whether the EU will keep to the planned start date and apply the rules as written, or whether further pressure will lead to more changes before December 2026.

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