Chain Reactions: How Businesses Plan to Respond to the EU Deforestation Regulation in Brazil, the Congo Basin, and Europe

ABSTRACT The 2023 European Union Regulation on Deforestation‐free Products (EUDR) is a transnational regulation aimed at addressing forest loss along the value chains of forest‐risk commodities. Grounding our analysis in new institutional theory with distinct behavioral drivers explaining actor behavior, and using qualitative methods, we draw on the cases of Brazil, the Congo Basin, and the EU to understand the behavior of forestry and agricultural sector businesses in response to the EUDR. We find their stated behavior in all cases to be driven by market (dis)incentives and, especially for EU businesses, by the regulatory threat of penalties. Overall, the influence of behavioral drivers varies contextually. Businesses' frequently expected behavioral responses, like segregation of EUDR‐conforming from non‐conforming supply sources, could hamper the EUDR's regulatory effectiveness in mitigating forest loss globally. We show how the design and implementation of regulation should consider and leverage different institutional elements in creating robust frameworks that effectively influence actors' behavior.