EUDR: Identification of Agri-Environmental Risk Drivers of Financial Risks and Implementation Readiness in Eastern European Countries

The EU Regulation on deforestation-free products (EUDR) introduces a new regulatory framework in which the agri-environmental characteristics of production become a prerequisite for access to the European Union market. In this paper, the EUDR is conceptualized as a regulatory framework that renders pre-existing agri-environmental risk drivers economically relevant and, in cases of non-compliance, may translate them into financial risks for agricultural businesses through identifiable transmission channels. The study aims to identify these risk drivers and to assess the institutional and technical readiness of Eastern European countries to implement the Regulation’s requirements. The methodological approach combines an analysis of trade exposure to the EU market, an assessment of countries’ spatial and digital capacities, and the construction of an Institutional and Technical Readiness Index for EUDR implementation. The results indicate an asymmetric impact of the Regulation across the region, driven by cross-country differences in the availability of geospatial data, the maturity of digital traceability systems, and the effectiveness of institutional coordination. The findings further show that broad indicators of digital trade facilitation are insufficient to explain variation in readiness to comply with EUDR requirements. Overall, the study identifies the key institutional and technical constraints shaping EUDR implementation readiness and demonstrates how these constraints translate into financial risks along agricultural supply chains.