Roots of Compliance: Southeast Asia’s Race Toward Supply Chain Transparency Under EUDR 

In the heart of Southeast Asia, where commodity industries such as palm oil, rubber, and timber fuel national economies and rural livelihoods, a new regulatory wave is reshaping the rules of global trade. The European Union Deforestation Regulation (EUDR), aimed at curbing the import of products linked to deforestation, has introduced a critical new standard: traceability. No longer is sustainability an abstract concept—it must now be proven, with detailed, verifiable data from origin to market. For ASEAN nations, this shift toward supply chain transparency poses a formidable challenge, particularly for smallholders and decentralized producers. Yet, it also offers a timely opportunity to modernize, digitize, and strengthen trust in Southeast Asia’s export ecosystem. As the region navigates this transition, the demand for transparent, traceable supply chains has become not just a compliance issue, but a strategic imperative for continued access to European markets. 

Figure 1: Global Timber Index (GTI) for Pilot Countries (%) 

Figure 2: Global Timber Index (GTI) Producers in January 2025 (%) 

In January 2025, ASEAN’s timber sector faced significant challenges, with Thailand’s performance dropping to 49.0%, Malaysia stagnating at 20.1%, and Indonesia maintaining a steady position at 50.4%. These declines were influenced by supply shortages in Thailand and weak demand in Malaysia, further exacerbated by holiday disruptions. The introduction of the EU Deforestation Regulation (EUDR) has added another layer of complexity, pressing companies for greater supply chain transparency and stricter sustainability compliance, which could impact export levels. This regulatory pressure is pushing ASEAN’s timber industry towards adopting more sustainable practices, but with weak global demand and production bottlenecks, the sector is experiencing heightened uncertainty. The need for sustainable sourcing and transparent supply chains has never been more urgent, as companies face increasing scrutiny from both regulators and environmentally conscious consumers. 

Table 1: Production of Selected Agricultural Products in ASEAN, 2021 

The table highlights ASEAN’s pivotal role in global trade for EUDR-regulated commodities, emphasizing the region’s dominance in key sectors such as palm oil, rubber, cocoa, and coffee. Indonesia, Malaysia, and Vietnam are major contributors to the global supply, driving economic growth in these nations. However, the increasing demand for sustainability and transparency in global supply chains presents significant challenges for these producers. As the EU tightens its regulations, particularly regarding deforestation, ASEAN countries must navigate these pressures while continuing to fuel economic growth. 

To secure ongoing market access and uphold their competitive edge, ASEAN nations must focus on enhancing supply chain transparency and adopting sustainable sourcing practices. The implementation of traceability systems and adherence to stricter environmental standards will be crucial for compliance with EU regulations. Balancing the need for sustainable practices with the region’s economic interests will require careful planning and collaboration among governments, businesses, and stakeholders. This critical crossroads presents both a challenge and an opportunity for ASEAN to lead in sustainable global trade while safeguarding its economic future.