Differences in import standards risk shifting deforestation pressures between markets, highlighting East Asia’s role in addressing ‘sustainability leakage.’ (Image: Magnific)
As global markets tighten deforestation standards, South Korea and Japan face growing pressure to address the environmental footprint of their imports. Emerging policies and corporate initiatives offer opportunities for the region to help establish more responsible supply chains.
The global race to net zero is increasingly extending beyond smokestacks and tailpipes to the forests, farms, and plantations supplying the world’s economy. As governments and businesses work to reduce emissions, attention is also turning to the environmental footprint of the commodities they import. Climate progress at home can be undermined when consumption continues to drive deforestation elsewhere.
The European Union Deforestation Regulation (EUDR), scheduled to apply to large and medium-sized operators from December 2026, marks an important shift. It requires businesses trading covered commodities, including palm oil, soy, beef, and wood, to demonstrate that their products are deforestation-free. Meanwhile, international reporting standards are strengthening scrutiny of corporate emissions associated with land use.
But these developments also expose a challenge: environmental standards adopted by individual markets may have limited global impact if other major importing economies do not follow suit. When one market tightens its requirements, commodities that cannot meet new standards may simply be redirected to markets with weaker safeguards. This phenomenon, known as sustainability leakage, risks shifting environmental damage between markets rather than eliminating it.
For South Korea and Japan, two major importers of agricultural and forest commodities from Southeast Asia, this raises an important question: how can East Asian markets strengthen sustainability expectations so that progress elsewhere translates into genuine improvements across global supply chains? Both countries have considerable influence over regional commodity trade, and emerging policies and corporate initiatives suggest there is already a foundation upon which to build.
When one market closes, another opens
The risk of sustainability leakage is more than theoretical. A 2026 study examining the EU Timber Regulation found increased forest loss in countries heavily dependent on timber exports to the EU, identifying trade diversion toward less-regulated markets as one contributing factor. Another study modeling restrictions on palm oil and soybean imports found that EU measures alone would have limited global effects without broader participation from other major importing economies.
South Korea’s palm oil market illustrates this potential vulnerability. According to a 2026 report by Solutions for Our Climate (SFOC), palm oil and its derivatives accounted for 72% of South Korea’s biodiesel feedstocks in 2024, with consumption volumes quadrupling since the country’s blending mandate began in 2015. Over 90% of Korea-bound palm-based feedstock export volumes from Indonesia examined in the report were associated with companies or supply chains linked to documented environmental, social, or governance controversies. Although these findings do not establish trade diversion from Europe, they reveal considerable exposure to sustainability risks in a market where renewable fuel mandates lack comparable safeguards for upstream land-use impacts.
Woody biomass presents similar concerns. Japan and South Korea have become major destinations for wood pellets from Vietnam and Indonesia, driven by renewable energy incentives. Yet burning wood releases carbon immediately, while restoring lost forest carbon stocks may take decades. None of the existing certification and traceability systems adequately accounts for these impacts.
Building on East Asia’s emerging policy foundations
Despite these gaps, South Korea and Japan are not starting from scratch. Both have developed regulatory mechanisms that could support stronger supply chain safeguards.
South Korea has required importers of designated timber products to demonstrate harvesting legality through documented verification before customs clearance. Japan’s revised Clean Wood Act introduced mandatory legality verification for designated businesses in April 2025, alongside more detailed guidance on risk assessment and supply chain information management.
Neither system guarantees deforestation-free sourcing, but each offers a different approach. South Korea’s import controls demonstrate how legality requirements can be enforced through government oversight, while Japan’s approach provides practical guidance for companies managing sourcing risks.
In a recent development, Japan’s Ministry of the Environment published Practical Guidelines for Nature-Positive Procurement in July 2026, encouraging businesses to map supply chains, assess environmental risks, improve traceability, and prevent deforestation and ecosystem degradation.
South Korea, meanwhile, has shown growing political interest in corporate due diligence. Following a pioneering legislative proposal for mandatory human rights and environmental due diligence in 2023, a new bill was introduced in August 2026. The National Human Rights Commission of Korea has also called for legislation addressing supply chain accountability and meaningful stakeholder participation.
Corporate initiatives show progress—and persistent challenges
Some Japanese companies are already investing in more responsible supply chain management, even in the absence of comprehensive mandatory requirements.
Fuji Oil, a major food ingredients manufacturer, adopted a No Deforestation, No Peatland Development, and No Exploitation (NDPE) policy in 2016. Through supplier engagement, traceability initiatives, and satellite monitoring, the company reported tracing 95% of its palm oil supply to plantations in fiscal year 2024. Ajinomoto has similarly established deforestation-free sourcing commitments covering palm oil, soy, beef, and paper, reporting that 89% of its covered procurement volumes were verified as deforestation-free as of December 2025.
Corporate disclosure initiatives are also gaining traction, with Japanese businesses among prominent adopters of the Taskforce on Nature-related Financial Disclosures (TNFD).
These initiatives represent meaningful investments in supply chain transparency and risk management. However, translating commitments into consistent practices remains challenging, particularly where sourcing involves multiple intermediaries. Recent investigations by environmental organizations have raised peatland-related concerns involving suppliers linked to companies with established sustainability policies, including Fuji Oil.
These developments illustrate where further progress is needed: moving from commitments and disclosure toward verifiable improvements throughout supply chains.
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Japanese companies are improving palm oil traceability, but turning sustainability commitments into consistent supplier practices remains a challenge. (Image: iStock)
Turning individual progress into regional practice
For businesses, three opportunities stand out.
1. Apply consistent due diligence across markets
Companies can apply consistent, risk-based due diligence across their global procurement. This means assessing environmental and human rights risks, verifying supplier practices, addressing identified problems, and monitoring corrective actions. Applying comparable sourcing expectations across markets would help reduce opportunities for leakage.
2. Help Southeast Asian suppliers meet higher standards
Importing companies can work more closely with Southeast Asian producers in improving traceability, monitoring, and verification. Smallholders, in particular, need technical and financial support to meet higher standards rather than being excluded from international markets.
3. Integrate forest risks into financial decisions
Financial institutions can incorporate deforestation and land-use risks into lending and investment decisions. Frameworks such as the TNFD and Carbon Disclosure Project (CDP) offer useful starting points, but investors should look beyond published commitments to assess implementation.
Governments can reinforce these efforts by creating a level playing field through stronger regulations and public procurement standards. Japan’s nature-positive guidance and South Korea’s timber legality framework offer foundations for broader environmental due diligence, while regional cooperation could reduce incentives to maintain separate high- and low-standard supply chains.
From leakage markets to sustainability leaders
East Asia has economic influence over shaping how agricultural and forest commodities are produced and traced across the region. Its businesses have demonstrated their capacity for supply chain innovation, while emerging policies in South Korea and Japan offer foundations for stronger environmental safeguards.
The opportunity now is to build on these developments through closer cooperation among importing countries, businesses, and producers. More consistent sourcing expectations would help reduce sustainability leakage while rewarding responsible production and strengthening regional supply chains.
As global sustainability standards continue to evolve, South Korea and Japan have an opportunity to do more than adapt to changes elsewhere. They can help shape a regional approach that works for businesses, producing communities, and the forests on which both depend.
This article is part of a collaborative column series by Solutions for Our Climate (SFOC) and RECCESSARY. Republishing without permission is prohibited.
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