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Prewave's Legality Assessment for EUDR Compliance

Adam Kneitz avatar
Written by Adam Kneitz
Updated today

The European Union Deforestation Regulation (EUDR) mandates that products must be both "deforestation-free" and produced in compliance with the relevant legislation of the country of production. Prewave's Legality Assessment Score is your comprehensive tool for meeting this second, often complex, requirement.

This article breaks down how Prewave's proprietary system works for EUDR, focusing on the legal requirements, the data we use, and how the score is calculated. It provides an in-depth look at how Prewave's scoring system, alert mechanisms, and data analysis fulfil the rigorous requirements of the EUDR, helping companies manage supply chain risks effectively.

1) Overview of Prewave Score

Prewave offers a detailed and dynamic scoring system designed to help businesses proactively manage risks, make informed decisions, and maintain compliance with regulatory requirements. Scores range from 1 to 100, where 100 indicates the least risk detected, and a decreasing score signifies an accumulation of risk indication. The 360° Risk Score Development graph tracks risk score trends over the past two years, showing improvements or deteriorations in risk management.

The Overall Score (360° Risk Score) consolidates all available information, combining various components:

  • Peer Score (30% weighting): Reflects the broader risk landscape by incorporating country-specific (15%), industry-specific (7.5%), and commodity-specific (7.5%) risk factors. If commodity risk is unavailable, industry score increases to 15%. Country Peer Scoring is based on multiple NGO indices to comply with legislative requirements.

  • Alert Score (40% weighting): Represents the overall quantity and severity of alerts generated for a target in the selected Prewave Perspective, based on a weighted average of underlying Category Scores. Public alerts influence the score, while private alerts (created by customers) do not. It is important to note the implications of alert spreading, which defines how alerts propagate across interconnected targets—such as sites, site groups, and industries—based on event type and impact level. This mechanism ensures that risk signals are appropriately scaled from direct site issues to broader company-level exposures. For more information see: How do Alerts spread?

  • Assessment Score (20% weighting): Suppliers can complete self-assessments to improve or negatively impact their score if requirements are not met.

  • External Data Score (10% weighting): Customers can choose to include additional information or certificates, either manually or via API from other external platforms.

The score is a constantly changing value, influenced by factors such as the frequency of news articles (Public Media Appearance), the timestamp of the alert, its criticality, and recurrence. Within event groups, negative scores outweigh positive ones, meaning critical alerts significantly impact the overall risk assessment, while the absence of alerts results in a perfect score of 100. The group score can be worse than the minimal event type score because the weighting and number of alerts for different event types within the group are considered.

1.1) EUDR-specific Risk Score:

Prewave assigns five categories of risk to targets: No, Low, Mid, High, and Critical.

A T80 factor determines the threshold for critical risk, with other thresholds distributed accordingly. For EUDR compliance purposes, the T80 factor is set at 20, which results in the following distribution:

  • Critical (0-20): High associated risk factors
    ​

  • High (21-40): Significant risk factors present
    ​

  • Mid (41-60): Moderate risk level
    ​

  • Low (61-80): Minimal risk detected
    ​

  • No Risk (81-100): No detected or projected risks

For EUDR compliance, risk scores below 40 are considered non-negligible risk, while scores above 40 are considered negligible risk. This threshold is specifically implemented so that any producer scoring above 40 can be classified as not posing a critical or high risk, enabling efficient prioritization of compliance efforts while ensuring regulatory requirements are met.

2) Methodology and Data Basis of the EUDR Risk Score

Prewave’s solution is designed to ensure compliance with the legal requirements of the EUDR. To assess compliance with local legislation, Prewave conducts a legality assessment. This process begins with evaluating potential risks through the risk assessment component. Based on the outcomes of this evaluation, risk mitigation measures can be implemented where necessary to ensure that sourcing and supply chain activities remain fully compliant with applicable legal frameworks.

a) Companies are required to review and analyze the risks related to Article 2 and Article 10 of the EUDR to ensure that production complies with the relevant legislation of the country of origin. Prewave evaluates the risk of non-conformity, classifying it as either negligible or non-negligible, based on the identification of critical or high-risk factors. The risk assessment process integrates multiple components to generate a comprehensive 360-degree Risk Score for producers, providing a clear overview of potential compliance issues.

  • Country Risk: Based on 21 different publicly accessible indices and country-specific alerts, categorized into no risk, low risk, mid risk, high risk, and critical risk. This component, along with Industry Risk, addresses EUDR Art. 10 para. 2 lit. a), b), c), d), e), f), h).

  • Industry Risk: Utilises Prewave’s proprietary data on over 2.1 million suppliers, categorised by industry (ISIC Standard). Prewave assesses industry risks (no risk, low risk, mid risk, high risk, critical risk) based on the frequency of past incidents within these industries.

  • AI-supported Web-Screening: Conducted for a determined number of producers, this involves searching social media, news, and other online information using producer-specific and risk-specific keywords to identify relevant alerts. These "Risk Alerts" are then communicated to the user. This component addresses EUDR Art. 10 para. 2 lit. l), m), n).

  • Optional: Producer Self-Assessments: Risk identification can be supplemented by producer self-assessments using Prewave's questionnaires, specifically on EUDR-relevant topics such as "Labour Rights," "Human Rights," "Land Use Rights," "Community Rights," "Forest Related Rules," and "Environmental Protection." Responses are automatically evaluated and integrated into the producer's risk assessment. This addresses EUDR Art. 10 para. 2 lit. g), m), n).

  • Optional: Company-Provided Information: Companies can inform Prewave about specific high-risk producers or known negative human rights or environmental incidents relevant to EUDR. This information is assigned a corresponding risk level. This addresses EUDR Art. 10 para. 2 lit. i), j), k), l), m).

b) Risk Mitigation (Art. 11): If non-negligible risk was identified, companies must apply risk mitigation procedures and measures before placing relevant products on the market or exporting them. Based on the priority of identified risks and considering past measures, the Prewave system suggests adequate risk mitigation measures. These include:

  • Requesting additional information, data, or documents (Art. 11 para. 1 lit. a)), such as producer self-assessments.

  • Conducting independent surveys, audits, or requesting further information (Art. 11 para. 1 lit. b) and c)).

These measures can be documented using the Prewave Action-Planner. Prewave plans to further adapt its suggestions for risk mitigation, enabling direct execution of measures via third-party providers through the system.

Once effective risk mitigation measures have been implemented, resulting in a negligible risk, the system can generate a due diligence statement. It is crucial to remember that the options provided in the Prewave system are non-binding suggestions; users are responsible for developing, creating, and implementing their own appropriate risk-based risk mitigation concepts.

3) EUDR Perspective Overview of the 7 Event Groups

The EUDR Perspective in Prewave helps companies monitor events relevant to the EU Deforestation Regulation, focusing on identifying supply chain risks linked to deforestation or forest degradation. This supports companies in meeting regulatory requirements and enhancing visibility into sourcing practices.

Prewave incorporates insights from 21 globally recognised indices, covering seven overarching risk categories:

Land Use Rights

  • Land conflict [Direct: Critical, Company: Mid]:

    • EUDR Paragraphs: Art. 2 (40a), Art. 10 (2 a,m).

    • Impact: Critical indication for adverse impacts on land use rights. Affects the parent company with moderate criticality due to the localised character of the impact. Affects other locations of the same parent company with medium criticality due to ethical considerations, despite the localised impact.

  • Land Grabbing [Direct: Critical, Company: High]:

    • EUDR Paragraphs: Art. 2 (40a), Art. 10 (2 a,c,d,e).

    • Impact: Critical indication for adverse impacts on land use rights. Affects the parent company with significant criticality due to ethical considerations. Affects other locations of the same parent company with medium criticality due to ethical considerations, despite the localised impact.

Community Rights

  • Indigenous Right to Lands Violation [Direct: Critical, Company: Critical]:

    • EUDR Paragraphs: Art. 2 (40 d,g), Art. 10 (2 a,c,d,e).

    • Impact: Critical indication for adverse impacts on the rights of indigenous people and local communities. Affects the parent company with high criticality due to ethical considerations and the topic's high importance within the regulation, despite the localised impact. Affects other locations of the same parent company with medium criticality due to ethical considerations.

  • Indigenous Self Determination [Direct: Critical, Company: Critical]:

    • EUDR Paragraphs: Art. 2 (40 d,g), Art. 10 (2 a,c,d,e).

    • Impact: Critical indication for adverse impacts on the rights of indigenous people and local communities. Transfers between locations of the same parent company as critical due to ethical considerations and the topic's high importance within the regulation, despite the localised impact. Affects other locations of the same parent company with medium criticality due to ethical considerations.

  • Right to food [Direct: Critical, Company: High]:

    • EUDR Paragraphs: Art. 2 (40 d,g), Art. 10 (2 a,c,d,e).

    • Impact: Critical indication for adverse impacts on the rights of indigenous people and local communities. Affects the parent company with high criticality due to ethical considerations and the topic's high importance within the regulation, despite the localised impact. Affects other locations of the same parent company with medium criticality due to ethical considerations.

  • Right to seed [Direct: Critical, Company: High]:

    • EUDR Paragraphs: Art. 2 (40 d,g), Art. 10 (2 a,c,d,e).

    • Impact: Critical indication for adverse impacts on the rights of indigenous people and local communities. Affects the parent company with high criticality due to ethical considerations and the topic's high importance within the regulation, despite the localised impact. Affects other locations of the same parent company with medium criticality due to ethical considerations.

Forest-Related Rules

  • Deforestation [Direct: High, Company: Mid]:

    • EUDR Paragraphs: Art. 2 (40c), Art. 10 (2 a,b,f).

    • Impact: Critical indication for adverse impacts on the environment, deforestation, and forest-related rules. Affects the parent company with significant criticality due to ethical considerations and the topic's high importance within the regulation, despite the localised impact. Affects other locations of the same parent company with medium criticality due to ethical considerations.

Human Rights

  • Freedom Of Religion [Direct: High, Company: Mid]:

    • EUDR Paragraphs: Art. 2 (40f), Art. 10 (2 a,h).

    • Impact: Significant indication for adverse impacts on people's well-being and human rights. Affects the parent company with medium criticality due to ethical considerations, despite the localised impact. Affects other locations of the same parent company with low criticality due to ethical considerations.

  • Freedom of Thought Violation [Direct: High, Company: Mid]:

    • EUDR Paragraphs: Art. 2 (40f), Art. 10 (2 a,h).

    • Impact: Significant indication for adverse impacts on people's well-being and human rights. Affects the parent company with medium criticality due to ethical considerations, despite the localised impact. Affects other locations of the same parent company with low criticality due to ethical considerations.

  • Human Rights Violation [Direct: Critical, Company: Critical]:

    • EUDR Paragraphs: Art. 2 (40f), Art. 10 (2 a,h).

    • Impact: Critical indication for adverse impacts on labour rights (sic, likely Human Rights from context). Transfers between locations of the same parent company as critical due to ethical considerations. Applies also to locations in the country impacted by the event. Affects other locations of the same parent company with high criticality due to ethical considerations, despite the localised impact.

  • Human Trafficking [Direct: Critical, Company: Critical]:

    • EUDR Paragraphs: Art. 2 (40f), Art. 10 (2 a,h).

    • Impact: Critical indication for adverse impacts on people's well-being and human rights. Transfers between locations of the same parent company as critical due to ethical considerations. Affects other locations of the same parent company with medium criticality due to ethical considerations.

  • Military Action [Direct: Mid, Company: -]:

    • EUDR Paragraphs: Art. 2 (40f), Art. 10 (2 a,h).

    • Impact: Moderate indication for adverse impacts on people's well-being and human rights. Applies to locations in the country impacted by the event.

  • Military Conflict [Direct: Mid, Company: -]:

    • EUDR Paragraphs: Art. 2 (40f), Art. 10 (2 a,h).

    • Impact: Significant indication for adverse impacts on people's well-being and human rights. Applies to locations in the region impacted by the event.

  • Military Occupation [Direct: Mid, Company: -]:

    • EUDR Paragraphs: Art. 2 (40f), Art. 10 (2 a,h).

    • Impact: Moderate indication for adverse impacts on people's well-being and human rights. Applies to locations in the country impacted by the event.

  • Privacy [Direct: Critical, Company: High]:

    • EUDR Paragraphs: Art. 2 (40f), Art. 10 (2 a,h).

    • Impact: Critical indication for adverse impacts on people's well-being and human rights. Affects the parent company with high criticality due to ethical considerations, despite the localised impact. Affects other locations of the same parent company with low criticality due to ethical considerations.

  • Right to participation [Direct: Critical, Company: High]:

    • EUDR Paragraphs: Art. 2 (40f), Art. 10 (2 a,h).

    • Impact: Critical indication for adverse impacts on people's well-being and human rights. Affects the parent company with high criticality due to ethical considerations, despite the localised impact. Affects other locations of the same parent company with medium criticality due to ethical considerations.

  • Torture and cruelty [Direct: Critical, Company: Critical]:

    • EUDR Paragraphs: Art. 2 (40f), Art. 10 (2 a,h).

    • Impact: Critical indication for adverse impacts on people's well-being and human rights. Transfers between locations of the same parent company as critical due to ethical considerations. Affects other locations of the same parent company with high criticality due to ethical considerations, despite the localised impact.

Business Practices

  • Accounting fraud [Direct: High, Company: Mid]:

    • EUDR Paragraphs: Art. 2 (40h), Art. 10 (2 a,g,h).

    • Impact: Critical indication of non-compliance with tax, anti-corruption, trade, and customs regulations. Affects the parent company with low criticality due to its localised character. Affects other locations of the same parent company with low criticality due to ethical considerations, despite the localised impact.

  • Collusion [Direct: Mid, Company: Mid]:

    • EUDR Paragraphs: Art. 2 (40h), Art. 10 (2 a,g,h).

    • Impact: Critical indication of non-compliance with tax, anti-corruption, trade, and customs regulations. Affects the parent company with medium criticality due to ethical considerations, despite the localised character of the impact. Affects other locations of the same parent company with low criticality due to ethical considerations.

  • Corporate investigation [Direct: High, Company: Mid]:

    • EUDR Paragraphs: Art. 2 (40h), Art. 10 (2 a,g,h,m).

    • Impact: Critical indication of non-compliance with tax, anti-corruption, trade, and customs regulations. Affects the parent company with high criticality due to ethical considerations. Affects other locations of the same parent company with high criticality due to ethical considerations, despite the localised impact.

  • Corporate Liability [Direct: Critical, Company: High]:

    • EUDR Paragraphs: Art. 2 (40h), Art. 10 (2 a,g,h,m).

    • Impact: Critical indication of non-compliance with tax, anti-corruption, trade, and customs regulations. Affects the parent company with high criticality due to ethical considerations. Affects other locations of the same parent company with high criticality due to ethical considerations.

  • Corporate Wrongdoing [Direct: Mid, Company: Mid]:

    • EUDR Paragraphs: Art. 2 (40h), Art. 10 (2 a,g,h,m).

    • Impact: Critical indication of non-compliance with tax, anti-corruption, trade, and customs regulations. Affects the parent company with medium criticality due to ethical considerations, despite the localised character of the impact. Affects other locations of the same parent company with medium criticality due to ethical considerations.

  • Corruption [Direct: Mid, Company: Low]:

    • EUDR Paragraphs: Art. 2 (40h), Art. 10 (2 a,g,h).

    • Impact: Critical indication of non-compliance with tax, anti-corruption, trade, and customs regulations. Affects the parent company with medium criticality due to ethical considerations, despite the localised character of the impact. Affects other locations of the same parent company with low criticality due to ethical considerations.

  • Customs Issue [Direct: High, Company: Mid]:

    • (Details on EUDR paragraphs and specific impact not explicitly detailed in provided sources beyond the table in).

  • Fraud [Direct: Critical, Company: High]:

    • EUDR Paragraphs: Art. 2 (40h), Art. 10 (2 a,g,h).

    • Impact: Critical indication of non-compliance with tax, anti-corruption, trade, and customs regulations. Affects the parent company with high criticality due to ethical considerations. Affects other locations of the same parent company with medium criticality due to ethical considerations, despite the localised impact.

  • Insider trading [Direct: Mid, Company: Mid]:

    • EUDR Paragraphs: Art. 2 (40h), Art. 10 (2 a,h,m).

    • Impact: Critical indication of non-compliance with tax, anti-corruption, trade, and customs regulations. Affects the parent company with medium criticality due to ethical considerations, despite the localised character of the impact. Affects other locations of the same parent company with low criticality due to ethical considerations.

  • Lawsuit [Direct: Mid, Company: Low]:

    • EUDR Paragraphs: Art. 2 (40h), Art. 10 (2 a,g,h,m).

    • Impact: Significant indication of non-compliance with tax, anti-corruption, trade, and customs regulations. Affects the parent company with medium criticality due to ethical considerations, despite the localised character of the impact. Affects other locations of the same parent company with low criticality due to ethical considerations.

  • Legal Procedure [Direct: Mid, Company: Low]:

    • EUDR Paragraphs: Art. 2 (40h), Art. 10 (2 a,g,h,m).

    • Impact: Significant indication of non-compliance with tax, anti-corruption, trade, and customs regulations. Affects the parent company with medium criticality due to ethical considerations, despite the localised character of the impact. Affects other locations of the same parent company with low criticality due to ethical considerations.

  • Regulatory shutdown [Direct: Critical, Company: Mid]:

    • EUDR Paragraphs: Art. 2 (40h), Art. 10 (2 a,g,h,m).

    • Impact: Critical indication of non-compliance with tax, anti-corruption, trade, and customs regulations. Affects the parent company with medium criticality due to ethical considerations, despite the localised character of the impact. Affects other locations of the same parent company with low criticality due to ethical considerations.

  • Sanctions [Direct: Mid, Company: Low]:

    • EUDR Paragraphs: Art. 2 (40h), Art. 10 (2 a,g,h,m).

    • Impact: Significant indication of non-compliance with tax, anti-corruption, trade, and customs regulations. Applies to locations in the country impacted by the event.

  • Scandal [Direct: Mid, Company: Low]:

    • EUDR Paragraphs: Art. 2 (40h), Art. 10 (2 a,g,h,m).

    • Impact: Significant indication of non-compliance with tax, anti-corruption, trade, and customs regulations. Affects the parent company with medium criticality due to ethical considerations, despite the localised character of the impact. Affects other locations of the same parent company with low criticality due to ethical considerations.

  • Smuggling [Direct: High, Company: Mid]:

    • EUDR Paragraphs: Art. 2 (40h), Art. 10 (2 a,h,m).

    • Impact: Critical indication of non-compliance with tax, anti-corruption, trade, and customs regulations. Affects the parent company with medium criticality due to ethical considerations, despite the localised character of the impact. Affects other locations of the same parent company with low criticality due to ethical considerations.

  • Tax evasion [Direct: High, Company: Mid]:

    • EUDR Paragraphs: Art. 2 (40h), Art. 10 (2 a,h,m).

    • Impact: Critical indication of non-compliance with tax, anti-corruption, trade, and customs regulations. Affects the parent company with medium criticality due to ethical considerations, despite the localised character of the impact. Affects other locations of the same parent company with medium criticality due to ethical considerations.

Labor Rights

  • Child Exploitation [Direct: Critical, Company: Critical]:

    • EUDR Paragraphs: Art. 2 (40e), Art. 10 (2 a,h).

    • Impact: Critical indication for adverse impacts on labour rights. Transfers between locations of the same parent company as critical due to ethical considerations. Applies also to locations in the country impacted by the event. Affects other locations of the same parent company with high criticality due to ethical considerations, despite the localised impact.

  • Child Labor [Direct: Critical, Company: High]:

    • EUDR Paragraphs: Art. 2 (40e), Art. 10 (2 a,h).

    • Impact: Critical indication for adverse impacts on labour rights. Transfers between locations of the same parent company as critical due to ethical considerations. Applies also to locations in the country impacted by the event. Affects other locations of the same parent company with high criticality due to ethical considerations, despite the localised impact.

  • Discrimination [Direct: Mid, Company: Low]:

    • EUDR Paragraphs: Art. 2 (40e), Art. 10 (2 a,h).

    • Impact: Critical indication for adverse impacts on labour rights. Affects the parent company with medium criticality due to ethical considerations, despite the localised impact. Affects other locations of the same parent company with low criticality due to ethical considerations.

  • Health & Safety Issues [Direct: Critical, Company: High]:

    • EUDR Paragraphs: Art. 2 (40e), Art. 10 (2 a,h).

    • Impact: Critical indication for adverse impacts on labour rights. Affects the parent company with high criticality due to ethical considerations, despite the localised impact. Affects other locations of the same parent company with medium criticality due to ethical considerations.

  • Illegal employment [Direct: Critical, Company: Mid]:

    • EUDR Paragraphs: Art. 2 (40e), Art. 10 (2 a,h).

    • Impact: Critical indication for adverse impacts on labour rights. Affects the parent company with high criticality due to ethical considerations, despite the localised impact. Affects other locations of the same parent company with medium criticality due to ethical considerations.

  • Labor Rights Violation [Direct: Critical, Company: High]:

    • EUDR Paragraphs: Art. 2 (40e), Art. 10 (2 a,h).

    • Impact: Critical indication for adverse impacts on labour rights. Affects the parent company with high criticality due to ethical considerations, despite the localised impact. Affects other locations of the same parent company with medium criticality due to ethical considerations.

  • Modern Slavery [Direct: Critical, Company: High]:

    • EUDR Paragraphs: Art. 2 (40e), Art. 10 (2 a,h).

    • Impact: Critical indication for adverse impacts on labour rights. Affects the parent company with high criticality due to ethical considerations, despite the localised impact. Affects other locations of the same parent company with medium criticality due to ethical considerations.

  • Unethical labor [Direct: High, Company: Mid]:

    • EUDR Paragraphs: Art. 2 (40e), Art. 10 (2 a,h).

    • Impact: Significant indication for adverse impacts on labour rights. Affects the parent company with medium criticality due to ethical considerations, despite the localised impact. Affects other locations of the same parent company with low criticality due to ethical considerations.

  • Wage Theft [Direct: Critical, Company: High]:

    • EUDR Paragraphs: Art. 2 (40e), Art. 10 (2 a,h).

    • Impact: Critical indication for adverse impacts on labour rights. Affects the parent company with high criticality due to ethical considerations, despite the localised impact. Affects other locations of the same parent company with medium criticality due to ethical considerations.

  • Workplace Safety [Direct: Critical, Company: High]:

    • EUDR Paragraphs: Art. 2 (40e), Art. 10 (2 a,h).

    • Impact: Critical indication for adverse impacts on labour rights. Affects the parent company with medium criticality due to ethical considerations, despite the localised impact. Affects other locations of the same parent company with medium criticality due to ethical considerations.

Environmental Protection

  • Biodiversity Degradation [Direct: High, Company: Mid]:

    • EUDR Paragraphs: Art. 2 (40b), Art. 10 (2 a,m).

    • Impact: Critical indication for adverse impacts on the environment. Affects the parent company with significant criticality due to ethical considerations and the high importance of the topic in the regulation, despite the localised impact. Affects other locations of the same parent company with low criticality due to ethical considerations.

  • Chemical Leakage [Direct: Critical, Company: High]:

    • EUDR Paragraphs: Art. 2 (40b), Art. 10 (2 a,m).

    • Impact: Critical indication for adverse impacts on the environment. Affects the parent company with significant criticality due to ethical considerations, despite the localised impact. Affects other locations of the same parent company with low criticality due to ethical considerations.

  • Environmental Issue [Direct: High, Company: Mid]:

    • EUDR Paragraphs: Art. 2 (40b), Art. 10 (2 a,h,m).

    • Impact: Critical indication for adverse impacts on the environment. Affects the parent company with significant criticality due to ethical considerations, despite the localised impact. Applies also to locations in the country impacted by the event. Affects other locations of the same parent company with medium criticality due to ethical considerations.

  • Pollution [Direct: High, Company: Mid]:

    • EUDR Paragraphs: Art. 2 (40b), Art. 10 (2 a,m).

    • Impact: Significant indication for adverse impacts on the environment. Affects the parent company with low criticality due to the localised character of the impact. Affects other locations of the same parent company with low criticality due to ethical considerations.

  • Resource Intensity [Direct: Mid, Company: Low]:

    • EUDR Paragraphs: Art. 2 (40b), Art. 10 (2 a,m).

    • Impact: Moderate indication for adverse impacts on the environment. Affects the parent company with low criticality due to the localised character of the impact.

  • Toxication [Direct: Critical, Company: High]:

    • EUDR Paragraphs: Art. 2 (40b), Art. 10 (2 a,m).

    • Impact: Critical indication for adverse impacts on the environment. Affects the parent company with moderate criticality due to ethical considerations, despite the localised impact. Affects other locations of the same parent company with low criticality due to ethical considerations.

  • Waste Disposal Problem [Direct: High, Company: Mid]:

    • EUDR Paragraphs: Art. 2 (40b), Art. 10 (2 a,h,m).

    • Impact: Significant indication for adverse impacts on the environment. Affects the parent company with low criticality due to the localised character of the impact.

4) Indices for EUDR Peer Score

The Peer Score accounts for 30% of the total Prewave Risk Score and reflects the broader risk landscape of a company by incorporating industry-specific and country-specific risk factors. The Country Risk, calculated independently of Prewave alerts, relies on publicly available indices from reputable international organisations like the International Labour Organization (ILO), the International Trade Union Confederation (ITUC), and the Environmental Performance Index (EPI).

For EUDR compliance, Prewave specifically incorporates insights from 21 globally recognised indices covering the overarching risk categories of Land Use Rights, Community Rights, Forest-Related Rules, Human Rights, Business Practices, Labor Rights, and Environmental Protection.

Land Use Rights

Community Rights

  • The Indigenous Navigator: A framework and set of tools for Indigenous Peoples to systematically monitor the recognition and implementation of their rights.

    https://indigenousnavigator.org

Forest-Related Rules

Human Rights

  • ENACT Organised Crime Index: A multi-dimensional tool assessing criminality and resilience to organised crime for 193 countries across criminal markets, criminal actors, and resilience.

    https://ocindex.net

Business Practices

  • CPI - The Corruption Perceptions Index (CPI): The most widely used global corruption ranking, measuring the perceived level of public sector corruption from 0 (highly corrupt) to 100 (very clean).

    https://www.transparency.org/en/cpi/2023

  • The Index of Economic Freedom: Focuses on four aspects (Rule of law, Government size, Regulatory efficiency, Market openness) and measures 12 components of economic freedom. Prewave uses the Trade Freedom field.

    https://www.heritage.org/index/download

Labor Rights

Environmental Protection

5) FAQ

Q: Does only the calculated overall risk value trigger a non-negligible risk, or, for example, also a "high-risk" in a sub-category?

At present, only the "Overall Score" of a target is considered for the Legality Assessment. There is no mechanism in place to react to very adverse scores in specific sub-categories. The Overall Score is an average of the 7 EUDR Risk Categories. Legal opinion indicates that an assessment of the complete picture regarding a producer is sufficient for determining negligible or non-negligible risk, as the regulation does not prescribe how the Due Diligence system should determine negligibility, only that all factors should be considered, which Prewave's scoring model achieves.

Q: Risk assessment: How is the AI "calibrated"? On what legal basis was the threshold determined?

Prewave calibrates its AI by extending its domain vocabulary with regulation-specific terms to monitor publicly available data for adverse events relevant to the EUDR. The default EUDR legality check threshold is a best-practice recommendation provided by Prewave. While exact score values are not prescribed by law, Prewave's scoring methodology and the threshold are proprietary, designed to align with the scoring's development, and are certified by our legal partner to align with the EUDR. The final threshold is a governance choice for each company, advised to be calibrated to their risk appetite, using Prewave's recommendation as a starting point. Prewave is open to jointly adjusting the default EUDR threshold while the solution remains in an adaptable phase.

Q: What does the scoring model behind the legality check look like? Are there particularly heavily weighted factors ("K.O. criteria")?

Currently, the scoring model does not apply any “knock-out” (K.O.) rules. Risk event types contribute proportionally within their groups, similar to how groups contribute proportionally to the overall score. Prewave is in the process of designing a K.O. concept to allow selected event types (e.g., confirmed illegal land conversion, encroachment on protected areas, final court rulings) to dominate or gate a perspective score where appropriate, and welcomes input on which EUDR event types should be considered for this.

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