As global markets implement stricter deforestation standards, South Korea and Japan are under increasing pressure to address the environmental impacts of their imports. New policies and corporate initiatives in these East Asian nations may play a crucial role in establishing more responsible supply chains.
The European Union’s Deforestation Regulation (EUDR), set to take effect for large and medium-sized operators in December 2026, will demand that businesses trading in certain commodities—including palm oil, soy, beef, and wood—prove their products are deforestation-free. This regulation reflects a growing focus on the environmental footprint of commodities, emphasizing that local climate progress can be undermined by consumption that drives deforestation internationally.
However, experts warn that if major importing economies do not adopt similar standards, enhanced regulations in one market may simply redirect commodities that fail to meet these new standards to regions with weaker safeguards. This phenomenon, known as sustainability leakage, risks perpetuating environmental damage rather than eliminating it.
South Korea and Japan, as significant importers of agricultural and forest products from Southeast Asia, face the challenge of aligning their market practices with these new sustainability expectations. With both nations wielding substantial influence over regional commodity trade, emerging policies and initiatives suggest a growing commitment to environmental safeguards.
Regulatory Initiatives and Challenges
The risk of sustainability leakage is substantiated by research, including a 2026 study that indicated increased forest loss in countries heavily reliant on timber exports to the EU, attributed in part to trade diversion. Furthermore, another analysis of the potential impacts of EU restrictions on palm oil and soybean imports found that such measures alone would have limited global effects without broader participation from key importing economies.
South Korea’s palm oil sector exemplifies potential vulnerabilities. A report by Solutions for Our Climate (SFOC) noted that over 90% of the palm oil entering South Korea was linked to companies with documented environmental and social governance issues. Despite this, recent legislative interest in corporate due diligence indicates a shift toward accountability in supply chains.
Japan and South Korea have established regulatory frameworks that can support tighter supply chain standards. South Korea mandates importers of designated timber products to prove harvesting legality, while Japan’s Clean Wood Act reinforces this by requiring legality verification for certain businesses starting in April 2025. Both systems aim to enhance oversight, though challenges remain in ensuring deforestation-free sourcing.
Corporate Initiatives
Corporate responsibility has also gained traction. Major Japanese companies like Fuji Oil and Ajinomoto have implemented sustainability policies, with Fuji Oil reporting that 95% of its palm oil supply was traced back to deforestation-free sources by fiscal year 2024. This reflects a growing commitment among businesses to enhance supply chain management, even amidst the absence of comprehensive regulations.
Despite these advancements, translating sustainability commitments into consistent practices is still difficult, especially when multiple intermediaries are involved. Investigations have hinted at continued environmental risks within established supply chains, underscoring the need for ongoing improvements.
Opportunities for Collaboration
There are several strategies that businesses can pursue to enhance sustainability efforts. Companies are encouraged to apply uniform due diligence across their supply chains, foster closer collaborations with Southeast Asian suppliers, and integrate ecological risks into financial decision-making. Additionally, governments can bolster these initiatives by enacting stronger regulations and fostering regional cooperation, thereby leveling the playing field against sustainability leakage.
As standards around sustainability continue to evolve, South Korea and Japan have a crucial opportunity to not only adapt but also to lead in shaping a more integrated approach to responsible commodity production and trading throughout East Asia.
