EU Deforestation Regulation (EUDR) at a glance

Summary - EUDR at a glance

The EU Deforestation Regulation (EUDR/Regulation 2023/1115) replaces the previous EU Timber Regulation (EUTR) and goes significantly further: It requires companies to fulfill comprehensive due diligence obligations before placing seven raw materials on the market. Specifically affected are timber, cocoa, coffee, soy, palm oil, beef, and rubber, as well as all products derived from them. Large companies must fully implement the regulations starting in December 2026, while small and medium-sized enterprises do not have to comply until July 2027. The three-step process involves information gathering, risk assessment, and risk mitigation, with transparency and traceability all the way back to the farm level being crucial.

For the purposes of this regulation, deforestation is defined as the conversion of forests into agricultural land, regardless of whether it is caused by human activity or not. The cut-off date is December 31, 2020: Products must not originate from areas that have been deforested or damaged since then. The regulation establishes clear responsibilities, not only with regard to deforestation, but also concerning fair working conditions, human rights, and, in particular, the rights of indigenous peoples.

Companies need to analyze their supply chains, clarify responsibilities, record geodata correctly and keep a constant eye on legal developments. Although the regulation entails additional effort, it also offers real opportunities: those who act early can build sustainable supply chains, strengthen long-term partnerships and position themselves better in a competitive environment.

Update from 04.05.2026: FAQ version 5 of the EU Commission

In April 2026, the European Commission published the fifth version of its FAQ document on implementation. While not yet legally binding, it serves as an important interpretive guide for practical application.

New category "Micro or Small Primary Operator" (MSPO)

Micro and small enterprises, as well as individuals who produce their own goods (e.g., farmers or foresters) and place their products directly on the EU market, benefit from simplified requirements—provided they are based in a low-risk country. Instead of a Declaration of Due Diligence (DDS), a one-time simplified declaration (SD) is sufficient; a risk assessment is generally not required. Under certain circumstances, the mailing address may be used in place of geolocation. If a Member State provides the necessary data from national databases, the SD is not required at all.

Clear rules for online trading and B2C business

The EUDR applies to all deliveries “in the course of a business,” regardless of whether they are B2B or B2C. The party responsible is always the entity that actually delivers the product to the customer—whether it be the manufacturer, an online retailer, or a fulfillment service provider. EU consumers, on the other hand, are never considered operators, not even when placing direct orders from abroad. Pure online marketplaces without a delivery function have no obligations.

Re-import of previously exported goods

Anyone who re-imports products that were previously exported from the EU after undergoing due diligence may be considered a downstream operator, even if the products were processed in a third country. Instead of a separate DDS, a conventional reference number (format: 99EU9999999999) in the customs declaration is sufficient, provided that the earlier placing on the market can be clearly documented.

Specification of "substantiated concerns" (Substantiated Concern)

A report must be objective, verifiable, and specific to a particular company or supply chain; general references to problems in the country of origin are not sufficient. Upon becoming aware of such information, the following applies:

• Immediate notification to the competent authority and downstream stakeholders
• Non-SMEs: Sales suspended pending due diligence
• Member States shall ensure the protection of whistleblowers' identities

The EU Deforestation Regulation(EUDR): Definition, objectives & importance

What is the EUDR and why was it introduced?

The EU Deforestation Regulation (EUDR/Regulation 2023/1115) addresses an issue that affects us all: Deforestation is closely linked to global supply chains—and thus also to the products we buy and use every day in Europe. The regulation requires companies to demonstrate two things regarding certain raw materials and products: they must not contribute to deforestation, and they must have been produced legally in the country of origin. The definition of “forest” under the EU regulation specifies exactly what counts as a forest.

The focus is on seven raw materials that are particularly relevant for deforestation risks according to EU logic: Cattle, cocoa, coffee, palm oil, soy, wood and rubber. This also includes products made from these raw materials (e.g. furniture, leather, chocolate, depending on the customs/product categories specified in the regulation).

The Deforestation Ordinance is based on a clear triad of due diligence obligations:

• Collect information (including supply chain, suppliers, product data and, above all, geolocation data on the cultivation/production area),
• Assess risk,
• Reduce risk (if the risk is not negligible).

Background and development of the regulation

The Deforestation Regulation is not a hasty measure, but rather the result of a political process spanning several years: Following the Commission’s draft in November 2021 and the political agreement between the European Parliament and the Council in December 2022, the regulation formally entered into force on June 29, 2023. For companies, it is crucial to distinguish between entry into force and application. The latter was amended in December 2024 and again in December 2025 to make implementation more feasible without compromising the underlying logic.

The current schedule (as of May 2026) is as follows:

• Large & medium-sized enterprises: Application from December 30, 2026
• Micro & small enterprises: Application from June 30, 2027
• Special case: micro/small enterprises that were already covered under the previous EU Timber Trade Logic (EUTR): December 30, 2026

The Importance of the EUDR for Environmental and Climate Protection

The EU Deforestation Regulation is more than just another compliance project: it directly links environmental and climate protection to market rules. Forests are not only a source of raw materials, but also carbon sinks, sanctuaries for biodiversity, and the basis of livelihoods for many communities. Deforestation destroys ecosystems and exacerbates climate change in equal measure.

The Deforestation Regulation is intended to ensure that only products not linked to deforestation since December 31, 2020, are traded within the EU. In addition, the products must have been produced legally in the country of origin, in compliance with the environmental and human rights standards in effect there.

The bottom line is that the regulation establishes a new minimum standard. Anyone wishing to trade within the EU must not only be aware of deforestation risks, but also demonstrate, manage, and document them.

Objectives of the EUDR

Reducing global deforestation through responsible sourcing

The goal of the EUDR is to ensure that deforestation is no longer profitable. To this end, market access is granted only to deforestation-free products. This reduces pressure to deforest, identifies high-risk supply chains through reliable data, and strengthens accountability throughout the supply chain, as risks should be actively managed rather than simply passed along.

Promotion of sustainable agricultural practices

In addition to protecting forests, the EUDR is also transforming agricultural supply chains. The EU market is redefining which products are still permitted for sale. Those who produce in a traceable manner, maintain accurate records, and avoid risks will continue to have access to the European market.

This means that sustainability will be easier to measure in the future, good supplier relationships will become more important, and making quick purchasing decisions without thorough vetting will become more difficult. What was once a voluntary commitment is now standard practice—for example, in procurement, quality management, and collaboration with suppliers.

Contribution to achieving the EU climate targets

Forests are important climate stabilizers: Less deforestation means more carbon storage, fewer emissions, and greater biodiversity. For companies, the climate impact is evident in two key areas: deforestation becomes a supply chain risk because it jeopardizes availability, prices, and reputation, and verification becomes crucial because the EUDR makes climate targets verifiable across the supply chain. The regulation is thus more than just a rule for forest protection. It is a building block of effective climate policy along global supply chains.

Sustainable development as a cross-cutting objective

The EUDR makes it clear: Sustainability is more than just being “green.” It’s not just about protecting forests, but also about legally sound supply chains and social standards, because deforestation is often linked to land conflicts, unresolved land rights, and poor working conditions. The regulation thus aims to achieve three things: responsible sourcing as the standard rather than an add-on, more secure supply chains through clear requirements, and greater credibility with the market, stakeholders, and regulators.

Obligations for companies

Introduction of due diligence obligations and risk assessments

In everyday life, this means above all that companies must set up their purchasing in such a way that deforestation and legal risks are identified early on and reduced where necessary. This requires a due diligence system that really works, not just as a document, but in the purchasing, quality, compliance and IT processes.

Since the amendment at the end of 2025, it has been clearly defined who plays which role in the supply chain: The company that first places the goods on the market in the EU submits the due diligence statement (DDS). Downstream actors use this information via DDS reference numbers or identifiers from the simplified declaration (SD).

However, they cannot simply sit back and relax: Disclosure requirements remain in effect in cases of justified concerns, and non-SMEs must also fulfill verification requirements to ensure product compliance.

It is fundamentally important that all steps in the supply chain are traceable. This is the EUDR basic requirement - complete traceability.

Requirements for the traceability of products

Traceability is the backbone of the Deforestation Ordinance. It is understood in much more concrete terms than traditional batch or supplier verification. It is crucial that a product can be traced back to the area on which the raw material was produced. To achieve this, companies must record the relevant information in such a way that it can be processed in the European Union's information system as part of the due diligence declaration.

What is particularly important in practice:

• Geolocation at plot level: The due diligence declaration shall indicate the geographical coordinates of the plots of land on which the raw materials were produced, with at least six decimal places for longitude and latitude. Responsibility for the accuracy of the data lies with the operator, even if it was provided by the supplier.
• Point or polygon, depending on the area: Polygons are mandatory for areas over 4 hectares, one point is sufficient for smaller areas. For cattle, one geo-point per holding is sufficient, but all holding locations must be recorded over the entire lifespan. Micro and small producers (MSPOs) from low-risk countries may be allowed to enter the postal address instead of the geo-coordinates.
• Technical format & upload capability: Geodata must be provided exclusively in GeoJSON format (WGS-84 / EPSG-4326). Manual input is hardly realistic for many areas, which is why the system supports file uploads.
• Time-Related Aspects of Production: In addition to “where,” “when” is also relevant. For most raw materials, this refers to the harvest date or production period; for cattle, it refers to the entire lifespan from birth to slaughter. Animals born before June 29, 2023, are generally not subject to the regulation.

Checking supply chains for deforestation risks

The regulation does not require a “zero-risk” guarantee, but rather an assessment and control process to ensure that, ultimately, only goods whose risk is negligible or has been sufficiently reduced are traded. “Negligible” means that, after a thorough review of all information, there is no cause for concern regarding deforestation or legality.

EU tools such as country benchmarking provide support in this regard but do not replace a company’s own risk assessment. Unlisted countries are automatically considered standard risk. And even when sourcing from low-risk countries, gathering information remains mandatory; only the comprehensive risk assessment and mitigation may be omitted, provided there are no risk warnings.

What the risk assessment typically boils down to:

• Structured assessment of risk drivers: country/regional risk (benchmarking), complexity of the supply chain, known hotspots, governance/legal enforcement, and plausibility of supplier data and area data.
• Think deforestation assessment in terms of area: In practice, much boils down to an area check, i.e. the question of whether and when forest loss/deforestation has taken place on the specified area. This is often supported by satellite/monitoring data and plausibility checks.
• Risk mitigation as "tangible" measures: If risks are not negligible, concrete steps such as additional evidence, tighter supplier requirements, independent audits, monitoring, segmentation of goods flows or, if necessary, the realignment of sourcing decisions are required.

EUDR in the customs process: What must be included in the declaration?

In practice, compliance is not only decided in the audit folder, but often very specifically at customs: certain information must be provided in the customs declaration for the import or export of EUDR-relevant goods, otherwise the goods will not be released. Important: The DDS (or, if applicable, the SD) must be submitted in the EU information system before the customs declaration is submitted and the reference number must have been received.

Important: The goods will only be released if the coding is complete (incl. reference number). If something is missing, the import/export cannot be processed in case of doubt.

Special cases that are often overlooked in practice

• Re-import: A conventional reference number (99EU999999999999) can be used instead of a separate DDS for products that were demonstrably previously placed on the EU market and exported.
• Export by downstream operator: When exporting, it is generally not necessary to specify a separate DDS reference number; instead, a dedicated TARIC certificate code is sufficient.

Reporting and documentation obligations

EUDR compliance is impossible without proper documentation. Companies must be able to demonstrate how they reached their decisions. This requires evidence that will truly stand up to scrutiny during an audit, as well as a reliable process that continuously creates and updates these documents and makes them easy to find.

Three levels are central to this:

• Due Diligence Documentation: Companies must be able to demonstrate what information was available, how risks were assessed, and what measures were implemented. The due diligence system must also be reviewed at least once a year and updated as needed.
• Record-keeping and Documentation: All documents, due diligence statements, risk assessments, supplier data, and reference numbers must be available for at least five years from the date the products are placed on the market or exported. Downstream operators and traders are also subject to this requirement: It is sufficient if the data can be compiled within a reasonable time upon request by the authorities.
• Annual public reporting (for non-SMEs): Non-SME operators must publicly report on their due diligence system annually. The first report is due after December 30, 2027 and covers the year 2027. Those already reporting under CSRD or CSDDD can integrate the EUDR-relevant information there to avoid duplication, which should be planned into governance and reporting structures at an early stage.

In practice, it is helpful to treat documentation obligations not as a filing problem, but as a design issue:

• What minimum proof must be provided for each product flow?
• Where are they stored in the system?
• How do you prevent different teams from working with different versions?
• And how can it be shown at the touch of a button that a process has been released in compliance with EUDR?

For many companies, the EU information system becomes the linchpin here, because due diligence statements are created and managed there, including references that are used further down the chain.

Cooperation with suppliers to comply with the EUDR

No company can comply with the EUDR on its own—the critical information almost always originates upstream from suppliers. That is why collaboration with them is a key to success: not as a communication measure, but as a structured, contractually guaranteed exchange of data. In effect, this creates a clear dependency: without data, there is no trade.

Since the simplifications, it is even more important that cooperation in the supply chain is properly organized. If the DDS lies with the first distributor and others work primarily with references, the supplier data really must be correct. This is the only way to ensure that reference numbers, batches and internal approvals match and nothing gets lost along the way. Attention should be paid to this with batches, deliveries and the DDS.

Many people underestimate the fact that the EUDR primarily affects data and systems, not just legal and procurement departments. The EU Information System is the central platform for due diligence statements and references. Establishing clear responsibilities early on and ensuring that data—such as proof of legality and GeoJSON uploads—is neatly structured will save a lot of effort down the road.

Country benchmarking

With country benchmarking, the EU has created a key tool for classifying the risk of deforestation by country of origin. Since May 22, 2025, an official classification into three categories has been in place: low risk, standard risk, and high risk. This classification determines the level of due diligence required and where simplified requirements apply.

The EU publishes explicit lists of low-risk and high-risk countries; all countries not included on these lists are automatically considered standard-risk. You can find more details on country benchmarking here.

Risk categories at a glance

Low risk: Countries in this category are considered to be at comparatively low risk of deforestation-related violations. Companies in this category benefit from simplified due diligence obligations: Information collection remains mandatory, a comprehensive risk assessment and risk mitigation is generally not required. Typical examples (excerpt) include

• Many EU member states (classified as low risk) and the USA
• as well as individual countries that often seem surprising but are explicitly listed as low risk (e.g. Laos or the Dominican Republic)

Standard risk: This category is the "default" classification: It applies to all countries that are not explicitly listed as low or high. For imports from standard risk countries, the full due diligence obligations of the EUDR Regulation continue to apply, including risk assessment and, if necessary, risk mitigation measures.

High risk: Countries in this category are subject to particularly strict expectations, not only because of the full due diligence requirements, but also because they are accompanied by a higher level of regulatory scrutiny. In the first official classification, only four countries were listed as high risk:

• Belarus
• Myanmar
• North Korea
• Russia

EUDR-relevant products and raw materials

List of raw materials concerned (e.g. wood, soy, palm oil)

For the EUDR (Regulation EU 2023/1115), the most important thing is how the raw material is legally classified. The decisive factor is whether it belongs to the relevant raw materials and whether the specific product is listed in Annex I. The goods concerned are defined there via CN/customs tariff codes, in some cases only for certain subgroups ("ex" codes). This applies to HS codes and TARIC codes under the Deforestation Regulation.

The Deforestation Ordinance is linked to seven raw materials:

• Wood
• Soy
• Palm oil
• Beef
• Cocoa
• Coffee
• Rubber (natural rubber)

Important in practice: As soon as a product contains one of these raw materials, was fed with it or was manufactured from it, it is worth taking a look at Annex I. Only if the product category is explicitly listed there does it fall within the scope. Composite products are also affected - this applies to composite products.

Product groups and their specific requirements

The regulation does not use industry categories but rather customs tariff codes for product groups. While this may seem cumbersome, it ensures clarity: Depending on its classification, the same material may be either in or out of scope. Correct tariff classification (CN code) is therefore a key step in every EUDR analysis. Two points are particularly important here:

• "ex" codes: If "ex" appears before a code in Annex I, only an excerpt of the product group is covered. For example, "ex 9401" only covers wooden seats, but not seats made of other materials.
• No quantity or value threshold: Even the smallest quantities of relevant products are subject to the obligations.

What has changed recently: In the course of the targeted revision, Annex I was technically adapted, among other things by removing certain printed products from the scope (Annex I adjustment "ex 49").

Exceptions and special regulations

In addition to the principle of Annex I decisions, there are a number of special cases in the EU Deforestation Regulation and the accompanying Guidance/FAQ that are regularly overlooked in projects.

Important exceptions and delimitations include:

• Purely recycled products (100% recycled): Products made entirely of recycled material are generally not subject to the regulation. However, as soon as virgin material is added (e.g., new wood to repair a pallet or virgin pulp in paper), the regulation applies to those components.
• Waste, used, or secondhand products: Products that have reached the end of their life cycle and would otherwise be disposed of as waste are excluded. This also applies, for example, to the casings of retreaded tires; only the new rubber tread is subject to this requirement.
• Packaging that merely “tags along”: Packaging materials or containers used exclusively for transportation or protection are out of scope, including reusable packaging such as pallet pools or returnable containers. The situation is different when packaging is traded as a standalone product.
• Printed matter (HS 49): Since the revision at the end of 2025, many printed products have been excluded from the scope of application. This also includes marketing and informational materials (e.g., user manuals, flyers, catalogs) that are included with another product or provided free of charge. However, if such materials are sold separately, the regulation continues to apply.
• Samples or specimens for testing or analysis purposes: Product samples of negligible value and in negligible quantities that are used exclusively to establish new supplier relationships or for testing or analysis purposes are exempt.

In practice, these special cases often lead to misclassifications. Here are the most important distinctions.

• EUDR & packaging, instructions and displays: when does what apply?
• Correspondence vs. advertising material (letters, brochures, flyers)
• Used goods under EUDR (e.g. tires, pallets)
• Bamboo & cardboard packaging: classification and typical stumbling blocks
• EUDR for paper products and disposable aprons

Affected companies & timetable

Scope of application according to company size and activity

Whether a company is subject to the EU Deforestation Regulation depends less on the industry and more on its role in the flow of goods. The regulation makes a rough distinction between "operators" and "traders". Since the amendment at the end of 2025, an additional distinction has been made between initial distributors, traders and downstream market participants:

• First Placer on the Market / Exporter (Operator): Anyone who first places a relevant article or product on the EU market or exports it from the EU falls under the “operator” role—for example, an importer of cocoa beans or a cattle farmer in the EU. Operators bear full due diligence responsibility and must submit a DDS.
• Trader: Anyone who resells a relevant product after it has already been placed in the EU is considered a trader. No own DDS obligation, but information and retention obligations to suppliers and customers.
• Downstream Operator: Companies that place relevant products on the market or export them, provided those products are already covered by a DDS or simplified declaration—for example, following processing that results in a change in HS code. Example: a chocolate manufacturer that produces chocolate from imported cocoa beans. Core obligations are similar to those of traders: no requirement to submit a DDS, but information and record-keeping obligations (registration required in the EU Information System for non-SMEs).

Whether own import, own consumption or intermediate trader - our article Own consumption, own import, intermediate solution - When does the EUDR apply and when does it not?

These are the due diligence obligations for market participants and traders in detail.

Two special cases that often occur in practice:

• Non-EU operator (Art. 7 EUDR): If a company based outside the EU places relevant products on the EU market, the first company based in the EU that passes on the goods is also deemed to be an operator. There are therefore two operators with full obligations.
• Dual-role operator + downstream operator: A legal entity can have both roles at the same time, e.g. if it imports raw timber (operator) and processes it into sawn timber itself and sells it (downstream operator). In this case, DDS reference numbers do not have to be passed on within the same legal entity.

A separate sub-category of operators is the Micro or Small Primary Operator (MSPO), micro and small producers from low-risk countries with significantly simplified obligations. Details can be found in the update section above.

Transition periods and timetable for implementation

One point is crucial regarding the timeline: Although the regulation has been in effect since 2023, it will not become mandatory until the effective dates. Following the changes in December 2024 and December 2025 and the EUDR postponement, the current applicable timeline is as follows:

• Large and medium-sized companies (large/medium operators): from December 30, 2026
• Micro and small enterprises (micro/small operators): from June 30, 2027
• Special rule for “EUTR products”: For market participants who were established as such as of December 31, 2024, the later start date of June 30, 2027 generally applies. This does not apply to products covered by the Annex to Regulation (EU) No. 995/2010 (EUTR). In this case, the regulation takes effect as early as December 30, 2026.

EUDR and the cut-off date: Find out how to deal with goods in stock and later placing on the market here.

Differences between large companies and SMEs

The regulation deliberately differentiates between company size and role. Large and medium-sized companies usually have to fulfill more formal obligations. SMEs are relieved in some cases. This applies in particular where the rules are intended to prevent the same work being done more than once in the supply chain. These thresholds apply in detail to corporations and SMEs.

This is typically more significant for large and medium-sized companies:

• More formal governance and more transparency: For non-SMEs, this includes annual public reporting on the due diligence system, with the first report due after December 30, 2027. In addition, the system must be reviewed at least once a year. Non-SME downstream operators and traders are also required to register in the EU information system.
• Greater expectation of systematics and scalability: Large organizations must set up due diligence in such a way that it functions consistently across product groups, countries and business units, including audit capability.

Where SMEs are typically relieved:

• Extended transition period: For micro and small enterprises, the EUDR will only apply from June 30, 2027, half a year later than for non-SMEs.
• Less reporting burden: SMEs do not always have the same public reporting obligations as non-SMEs.
• Simplifications throughout the supply chain: The obligation to submit DDS data generally rests with the first entity to place the product on the market. Of particular note: Only the first downstream entity is required to record the reference numbers, and it must do so passively—that is, only when the information is provided by the operator, without any obligation to actively request it.
• Special category MSPO: Micro and small producers from low-risk countries who produce their own products and place them directly on the EU market benefit from particularly far-reaching facilitations, details in the update section above.

Where SMEs still come under pressure

Fewer obligations do not mean less work, because small businesses in particular quickly reach their limits: Geolocation data from suppliers in third countries is difficult to obtain, the resources for risk analyses are often lacking, and most do not have their own compliance department. On top of that, even small businesses are coming under increasing pressure because larger customers are demanding EUDR-compliant documentation from them, regardless of what the regulation formally requires.

What SMEs can do now

• Review the supply chain: Which of the seven raw materials are included in our product lineup, either directly or as ingredients in processed products?
• Approach suppliers: Clarify at an early stage which geodata and certificates of origin suppliers can provide.
• Clarify my role in the chain: Am I the first distributor or a downstream player? The specific obligations that apply depend on this.

Monitoring compliance with the EUDR

Competent authorities and monitoring mechanisms

The EU delegates enforcement of the EUDR to the member states: Each state designates its own authorities to conduct on-site inspections, which are closely integrated with customs and market surveillance.

The inspections are risk-based: Depending on the risk category of the country of origin, authorities inspect at least 1% (low risk), 3% (standard risk), or 9% (high risk) of cases. For companies, this means that the likelihood of an audit depends heavily on the origin of the raw materials. Data and supporting documentation should therefore be fully and transparently documented at all times.

Carrying out inspections and audits

Inspections are more than just paperwork. Regulatory agencies verify whether the information provided is accurate, whether internal assessments actually make sense, and whether the company’s processes comply with the rules in practice. This is done either in response to a specific incident—such as a tip—or on a regular basis as part of established minimum inspection quotas.

An audit typically proceeds as follows: Authorities cross-check documents, perform plausibility checks, and examine information regarding origin and geodata particularly closely. This is often supplemented by random sampling and, in some cases, on-site inspections. If there is an immediate risk, authorities can take immediate action, such as seizing goods or temporarily halting their sale or export.

Role of digital systems for monitoring

Without a digital infrastructure, the EUDR is virtually impossible to implement. That is precisely why the EU information system plays a central role. Due diligence statements are recorded there and reused throughout the supply chain: Downstream companies simply adopt the reference and verification numbers, either manually or via a CSV upload. An API is also available for handling large volumes of data.

For government agencies, the system serves as a central access point: It streamlines screening, supports risk-based selection, and establishes a uniform basis for traceable audits. User guides also assist with the day-to-day operation of the system.

Conclusion

The implementation of the EUDR is an important step toward sustainability and environmental protection. At the same time, it presents companies with clear tasks: reviewing supply chains, ensuring transparency, and thoroughly documenting the origin of raw materials. As a result, ensuring that products are free from deforestation becomes an integral part of day-to-day business. Digital tools and high-quality data help identify risks early on and systematically meet regulatory requirements.

The extra time gained by the postponement is not a reason to delay, but a real opportunity. Those who consistently implement the EUDR are not only fulfilling their legal obligations; they are also demonstrating that they are reliable partners in sustainable, deforestation-free supply chains. This protects forests and, at the same time, provides a real competitive advantage.