Sri Lanka’s rubber exports to the EU could fall by Rs7.3 billion annually under the European Union’s new Deforestation Regulation (EUDR), according to a recent report by the Institute of Policy Studies (IPS).
Complying with the EUDR requires meeting traceability and land-use standards. However, progress has been slow, and Sri Lanka is unlikely to achieve full compliance by the December 30, 2025 deadline.
According to the IPS, compliance alone is expected to increase production costs by around 5%, which could lead to a 7.6% decline in exports to the EU. With tariff challenges already affecting US trade, an EU export loss adds further strain on the rubber sector.
The Direct Approach
EUDR compliance should be obtained by establishing legality and deforestation-free cultivation for each producer, according to the IPS. “Every consignment should be traceable to the plot level, “clarifies Asanka Wijesinghe, one of the study’s authors and Research Fellow at the Institute of Policy Studies. “Compliance should be achieved for each rubber grower. Rubber products, produced from rubber not made under EUDR stipulated conditions, cannot enter the EU market.”
Institutional and Implementation Challenges in EUDR Compliance
The sector lacks the systems to fully meet EUDR traceability requirements. Sri Lanka cannot yet map all export cropland, as much of it is informally owned or poorly documented. While efforts to digitise land titles and assign digital IDs to rubber trees have begun, they remain limited, especially for smallholders in remote areas.
Meeting the EUDR requires cross-agency coordination, yet readiness is uneven. Sri Lanka is currently rated low risk under the law’s scope and exempt from some checks, but it must still meet key standards. Non-compliance could lead to more audits and stricter oversight.
Without cross-cutting governance reform and investment in digital infrastructure, the country risks partial compliance at best. This could trigger export delays, increased verification costs, or even product rejection, in turn damaging extending losses beyond the Rs7.3 billion mark.
Rubber products are our 3rd largest export earner, reaching 8% of all exports. In 2024, sales jumped 8%, far above the 3% five-year trend.
Social and Livelihood Implications for Rural Communities
The EUDR could deepen rural inequality and threaten livelihoods in Sri Lanka’s rural economy. Smallholders manage two-thirds (68.1%) of the country’s approximately 98,000 hectares of rubber land, yet many lack formal land titles, digital tools, or the capacity to meet traceability requirements. Without support, they risk exclusion from EU supply chains, shifting economic gains towards larger plantations and worsening rural inequality.
Employment
The social fallout could be significant, particularly given the sector provides direct and indirect employment to over 300,000 persons, according to the Export Development Board (EDB). The IPS report concludes that a projected 15.6% contraction in rubber manufacturing employment would occur under a non-compliance scenario disproportionately affecting low-income rural workers. Most will also find it difficult to locate employment elsewhere.
Gender Vulnerability
While rubber tapping remains predominantly male, comprising over 75% of the workforce in that segment, women make up around 25% of those employed in downstream activities such as processing and sorting. These roles are often concentrated in export-oriented factories, meaning that any closures or production cuts due to non-compliance with the EUDR could disproportionately affect female workers.
Harm Mitigation
Sri Lanka must focus on inclusive compliance strategies, subsidising mapping technologies, and simplifying digital tools. Community-based verification models and shared compliance infrastructure could empower smallholders while keeping costs manageable. If so, the transition to EUDR compliance could become a catalyst for long-term rural resilience. Without full compliance, Sri Lanka risks even greater export losses, product rejections, and long-term market damage.