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4.1 Communicating Policy

CommunicationsOnce a sourcing organization has developed a responsible forest products sourcing policy and implemented a programme of work, it is extremely important that it widely disseminates the information about its policy and all associated activities. At the very least, the policy must be communicated to colleagues and staff (most crucially, the organization's buyers of forest products), and suppliers that will be affected by the policy.

The sourcing organization may also choose to communicate the policy to other stakeholder groups identified in the review. The mechanisms for communicating the policy are varied and are best determined by the issuing organization.

Examples of ways to communicate the policy include the following:

Note for GFTN Participants: GFTN participant companies are required to demonstrate publicly their sourcing policy and will be required to demonstrate how this has been communicated to the supply chain.


0.0 Introduction

IntroductionSince the Global Forest & Trade Network (GFTN) first published its Guide to Responsible Sourcing of Forest Products and the closely associated Keep It Legal manual as paper documents, there have been numerous developments that resulted in this revision. The main change is the development of these web pages, which are searchable and easier to maintain—allowing the GFTN to continue to offer the best advice available.

These pages contain numerous links to other websites, many of which are external. As such, we are not responsible for the content, but believe these sites to offer greater depth to the understanding of aspects of responsible sourcing of forest products.

There have also been numerous developments within the sphere of legality of forest products. Legislative processes in the US, Europe and Australia and developments within certification and chain of custody have all prompted us to enhance the advice available regarding legality.

The ability to print most sections of these pages and to search a number of key terms is intended to allow you as the user to both take in the overall concepts and easily find what you need on specific topics.

Who Should Use These Pages

These pages are designed for use by a sourcing organization that wishes to develop a due diligence system for the legal and responsible sourcing of forest products. The guide lays out a generic approach for the development and implementation of a responsible sourcing policy, hereafter referred to as a responsible sourcing programme.

The guide is aimed at any medium-size or large enterprise, including primary mills, secondary processors, importers, manufacturers, wholesalers and retailers, which purchase or procure forest products. In appropriate circumstances, it may also serve to guide smaller enterprises.

The guide outlines the various ways in which sourcing organizations can exercise due diligence and demonstrate compliance with best practice based on compliance with their own sourcing policies. It is based on both tried and tested mechanisms and extensive experience in the development of responsible sourcing programmes.

The principles outlined within this guide are in line with the GFTN Participation Rules; and as such, the guide should help GFTN Trade Participants meet their participation requirements. All GFTN Trade Participants are advised to refer also to the specific guidance issued by their local GFTN manager. Where advice is specific to GFTN participants, there are links to relevant documents or additional guidance.

The original paper versions of these two guides are still available as downloads (PDF) and the following pages are printable. Every effort has been made to retain the core information of the previous published documents and changes have only been made where circumstances, processes or legislation has changed.

The implementation of a responsible sourcing programme to demonstrate due diligence is a major undertaking for any organization and requires a high degree of commitment to achieve results. This guide outlines a set of processes and procedures by which a sourcing organization can begin to address the problems that are common to many supply chains.

The first two paper-based versions of this guidance have been widely distributed in a number of languages and are currently used by several hundred companies representing the whole supply chain from the forest floor to the retail store. The guidance has been adopted by companies sourcing products as varied as paper and plywood to sawn timber and furniture. Although designed primarily for companies that are participants in the Global Forest & Trade Network, it has also been welcomed by companies choosing to work outside this network.

Purchasers of pulp and paper based products are advised to also consult WWF’s guidance with respect to these products where further aspects of production, beyond fibre sourcing are addressed. Further information can be found here.


8.5 Strategies for Verifying Legality

Verifying Legality

Low-Risk Suppliers

Low-risk suppliers are those that are unlikely to supply illegal timber. The level of objective evidence supplied for the risk rating process should already have been significant. Little more needs to be requested of these suppliers other than to ask them to complete a new risk-rating questionnaire each year or when you plan to purchase a new product category from them. However, you should ask them to inform you if their own upstream supply chain is altered significantly, and have them complete a new questionnaire. In the longer term, suppliers in the low-risk category need to be encouraged to work toward sourcing all their timber from credibly certified forest sources.

Low-risk suppliers should supply the following documents as evidence that the timber in their products originates from known licensed sources:

High-Risk Suppliers

Suppliers will fall into the high-risk category because they did not supply sufficient reassurances or objective evidence to prove that they could remove illegal timber from their supply chain. The range and types of objective evidence that suppliers can provide vary greatly from one country to another. The country guides cover the key issues for specific countries and the types of evidence you need from the forest and timber sector in that country. In addition a more general view of documentary requirements for timber from different countries can be found here.

In many cases, official government documentation alone is insufficient to guarantee legality, because the regulatory infrastructure may be corrupt and/or ineffective. In such circumstances, even "official letters" on government department letterheads (such as Certificates of Origin and so forth) claiming the legality of a shipment should be treated with the utmost suspicion. You will need to seek additional reassurances.

For suppliers and product lines rated as high-risk in an initial assessment, you can adopt various strategies to ensure that risk is mitigated to a lesser or greater extent.

Supplier Warranties

If a supplier is not willing to provide you with transparent information about its own suppliers, a way forward might be to obtain a supplier warranty from them. A supplier warranty is a written commitment from your supplier that it will supply you with products in accordance with the warranty. This will form a part of the commercial contract with your supplier.

You can ask the supplier to warrant that the products supplied will comply with your definition of legal timber. Your contract can specify the consequences of the supplier breaching the warranty, including termination of the contract for cause and consequent rights to damages. Genuine suppliers will develop their own Keep it Legal systems to ensure that they comply with this warranty and to keep you as a customer. A less committed supplier might sign the warranty but run a calculated risk that any illegal timber entering their supply chain will go undetected by you or others. Because the promise they make is not checked by an independent organization, the level of risk you would be taking on by relying only on a supplier warranty is relatively high. But it is a step in the right direction and you may be able to claim damages if you find out from a third party that the supplier's products contain illegal timber.

Second-Party Audits

It is entirely possible that you will meet resistance from your supplier with regard to providing information on the business that supplies them. One likely reason for this reluctance is that they will fear that you want to eliminate them from the supply chain. If you are unable to persuade suppliers to provide this information, there are alternative solutions. You can engage an independent organization or second party to gather the appropriate information under strict confidentiality guidelines. This will prevent the revealing of any information that would identify an element of the supply chain. This is a more costly option, but it could prove cost-effective in the long run if it allows you to identify your forest sources and demonstrate that the timber you are using was legally harvested. This information can be used to target markets such as the US to meet the due care requirements of the Lacey Act amendment, the EU Timber Regulation, the Australia Illegal Logging Prohibition Bill, the public procurement sectors in some Western European countries or the US that are now asking for this level of assurance about their timber purchases. Some of the organizations that undertake second-party audits include:

Global Forestry Services - www.gfsinc.biz
ProForest - www.proforest.org
Tropical Forest Trust - www.tropicalforesttrust.com
Other organizations offer similar services.

Other organizations offer similar services and this list is not exclusive or confer a recommendation on any of the above organizations.

Legality and Third-Party Audits

Third-party audits are recommended by WWF’s GFTN for high-risk suppliers and are a key element of the verification requirements for the verified-legal timber classification. The third-party auditor must check both legal compliance in the forest and the integrity of the chain of custody to ensure against mixing with illegal timber.
Several independent verification organizations now offer legal verification services and third-party audits. These companies generally claim that their service is the only truly independent one because they avoid conflicts of interest by either not undertaking any consultancy work or, if they do, by keeping the work entirely functionally separate from their auditing work. To provide additional rigor to their auditing role, many such inspection bodies employ accreditation bodies that inspect them to make sure their independence is not compromised and that their work is of a consistently high standard. Organizations offering a form of legal verification include:
Bureau Veritas - www.bureauveritas.com
Certisource Timber - www.certisource.net
Double Helix - www.doublehelixtracking.net
Rainforest Alliance - www.rainforest-alliance.org
Scientific Certification System (SCS) - http://www.scscertified.com/nrc/legalharvest.php
SGS - http://www.forestry.sgs.com/timber-legality-traceability-verification-tltv
Soil Association - www.soilassociation.org/forestry

Other organizations offer similar services and this list is not exclusive or confer a recommendation on any of the above organizations.

Timber Legality Schemes

Within the forest sector the 1990s saw increasing use of private sector mechanisms to attempt to address deforestation and secure sustainable forest management, most notably forest certification. While certification has had beneficial effects, its uptake has been uneven. Unfortunately certification was least successful in the regions where the need for it was the greatest, in particular the Amazon, Congo Basin and Borneo.

Although a number of international efforts such as the World Bank’s Forest Law Enforcement and Governance (FLEG) and the European Union’s (EU) Forest Law Enforcement Governance and Trade (FLEGT) have been made to address the issues, in particular illegal logging, many countries continue to have major problems within governance, corruption and maladministration. Due to its operational circumstances, the forest sector is often particularly prone to these issues and as a result many tropical timber producing countries are regarded as ‘high-risk’ in relation to forest management and the overall quality of governance.

It has become increasingly clear that while international efforts such as the EU FLEGT Voluntary Partnership Agreements (VPA) offer comprehensive solutions within its scope of agreement, the time when the first VPA-compliant timber is available remains many months or even years away. It will therefore be a very lengthy, process to roll out similar measures across the majority of high-risk countries, and given the voluntary nature of these agreements, it is likely that some countries can decline to participate at any stage.

At the same time, the pressure for responsible timber procurement has increased with measures such as the US Lacey Act and the EU’s Timber Regulation and the Australian Illegal Logging Prohibition Bill. With certified timber supplies from high-risk countries still low, widespread improvement through international governance years away and still few examples of credible national government-led legality verification in high-risk countries, it has fallen to the private sector to develop and implement practical solutions. There has been increasing acceptance among commercial and NGO sectors that while credibly certified responsible forest management should remain as the ultimate goal, the use of ”legal timber” can be a useful interim measure on the road to achieving this.

New Challenges

As with the early days of forest certification, while the market takes time to understand the concept of legality, a number of private sector legality verification schemes have been set up. Similarly, a wide range of credibility, trustworthiness and integrity can be found among them. This means that timber buyers need to understand how these legality verification schemes operate to ensure they do not just automatically verify ”business as usual”, and actually guarantee certain minimum legal requirements are being verified and actually being met in the field.

To provide an acceptable level of reliability legality verification schemes have to operate in a credible manner and operate within a known framework. Key elements of legality verification schemes can be seen as:

Definitions of Legality

At the core of legality verification lies the definition of legality. Preparing a definition of legality can be a challenging task. Ensuring this is done through a multi-stakeholder process will help ensure the definition is credible and fair. However, there are some difficult issues to address nevertheless. Key to these is the scope of the legality definition. If one considers all the laws in force in a country that may be applicable to forestry companies, this can often run into a large number of individual pieces of legislation. When talking about forest legality, do we really mean all laws or just the most important ones for forestry, and which ones would they be?

The ”speeding logging truck” is often used as an example to illustrate the problem. If a logging truck is caught traveling over the speed limit (i.e. it has broken an applicable law), should we consider the logs to be illegal, even if they were harvested and transported in accordance with the laws up until that point? Many people would see this is absurd as it fails to address the core issues of illegal logging.

In reality given the complexity of existing legal frameworks, most legality initiatives have chosen to restrict legality standards to a critical sub-set of laws and regulations. These fall into two broad categories:

In addition, VLC often includes requirements for legal processing, including compliance with domestic processing quotas, guarantees against mixing with non-legal sources and payment of processing levies; and legal trade and export including export licensing, procurement of necessary CITES authorization and customs clearance.

Key Elements of Legality Verification Schemes

Depending on national context and the objectives of verification, a legality definition might include some or all of the above components. Therefore, it is very important to understand the scope of the legality definition used in a particular verification audit. Making sure the key elements are included in the legality definition and how this is verified will ensure the credibility of the verification.

In an effort to support the development of a more consistent and common approach to legality verification, the GFTN and TRAFFIC developed a forest-focused set of principles and criteria covering key legality issues – the Common Framework for Assessing Legality of Forestry Operations, Timber Processing and Trade. This legality framework can help both regulators and companies, particularly GFTN members in countries of export and import, to identify the key legal requirements for VLO and VLC.

Legality Verification in Challenging Conditions

The need for legality verification is derived from the incapacity or failure of governance structures to ensure the rule of law within the forest sector. However, legality verification can never be a substitute for competent forest governance and, to a certain extent, depends on the existence of functioning governance structures in order to operate. It is therefore necessary to always consider the background governance situation, and the weaker these are, the more carefully the verification process should precede. For example, while the legality verification schemes in operation have the potential to address the issue of corruption in the allocation of harvesting rights—uncovering corrupt practices is notoriously difficult, and forest legality verification teams are unlikely to obtain access to necessary information to investigate these.

Similarly, in many cases when conducting a legality verification audit, the objective evidence needed to verify compliance with a law is derived from the national governance system. For example, harvesting block closure authorization by the forest authority may be the means of verifying that harvesting complied with key forest laws. The question arises where forest governance is weak, should the verification body seek some triangulation of evidence from the field or accept the block closure approval as appropriate objective evidence? The weaker the governance, the less likely a verification based solely on this type of evidence will be credible. However, verifiers may find it very difficult to get access to corroborate authority-derived evidence.

Further information regarding governance in forest producer countries is available from Transparency International.

Issues with Audits

Second- and third-party audits are regarded as the best means of determining the legality of a supplier. However, there are issues to consider concerning the level of assurance provided. Auditors are only on site for the duration of the audit, maybe only two or three days. Many observers ask what happens when the auditors are not present, particularly with respect to high-risk suppliers. Evidence suggests that some suppliers put on a special "show" for auditors and then revert to normal practice as soon as the auditors have left the premises.

Your local trade body will probably be able to suggest a certification body with appropriate skills in the timber sector. It is also wise to ask for recommendations from NGOs, including your local GFTN manager.


6.3 Identifying Known Sources of Forest Products

Product Traceability

"Known" Source?

Detail and Improvements

Traceable to direct supplier. Supplier is not a forest owner or manager (not an integrated company).

No

Agree on an action plan with the supplier to deliver more traceability that will identify where the wood was harvested.

Traceable to secondary processor. Processor is not a forest owner or manager (not an integrated company).

No

Agree on an action plan with the supplier to deliver more traceability that will identify where the wood was harvested. If this processor also supplies material through another direct supplier, consider a direct approach to the processor for more information.

Traceable to primary mill. Mill is not a forest owner or manager (not an integrated company).

Maybe

If the mill has complete traceability for all sources and can identify the source for given batches of material, this is acceptable. If the mill cannot offer this degree of traceability, agree on an action plan with the supplier to determine (initially) the major suppliers to the primary mill and identify what plans the mill has to improve traceability.

Traceable to an integrated forest products company (a company that is involved in forest management and forest products processing).

Maybe

If the supplier can demonstrate that it has a good degree of traceability at all levels and that it sources only from its own forestry operations, this is an acceptable level of traceability. If the integrated supplier draws from beyond its own sources, it will need to demonstrate similar traceability. If it can, this is acceptable. If it cannot demonstrate such traceability, agree on an action plan with the supplier to identify (initially) its own suppliers and what plans the mill has to improve traceability.

Traceable to the forest management unit.

Yes

Documentation and confidence in systems is high, and all materials can be traced to this forest or forests.


11.0 Environmental Status of Supplies - Recycled Sources

Credibly Certified Source

The raw material used should be designated recycled if it is either a forest product made from post-consumer recycled fibre (for paper) or wood-based material that is sourced from a recovery process. The definition of recycled varies in different countries and markets. To ensure that the policy and definition used are robust, a sourcing organization should check with its stakeholder groups. In most countries the term recycled infers that the wood or fibre has been used previously by an end consumer (this is also termed "post-consumer" recycling).

It should be noted that not every sourcing organization will want to include recycled wood and fibre within its sourcing policy. For many sourcing organizations, however, and particularly those that have identified recycling as a key issue among their stakeholders, there is much value to be gained through the use of recycled materials. A number of organizations have developed systems to certify recycled materials and have developed certification standards, including the FSC. More information on standards and definitions of recycled materials is available at www.fsc.org.

More information regarding recycled paper and WWF’s support can be found here.

What Does Recycled Source Mean?

Criteria

 

Requirements


9.0 Environmental Status of Supplies - Source Verified

Source in Progress to Certification

Sources could be legal but still involved in unwanted activities which are in conflict with the corporate responsible sourcing policy. Source verified means that the forest source has been 3rd party verified for basic social and environmental criteria-

Criteria

Requirements


8.4 Steps to Exercise Due Diligence

Environmental Status of Supplies

Key Points in Excercising Due Diligence

Because simple, objective evidence demonstrating legality is rarely available from countries with the highest levels of illegal harvesting, your organisation will need to identify which suppliers are most likely to be able to comply with your company's aims and which are least likely—that is, which suppliers present the lowest risk of supplying illegal timber and which suppliers present the highest risk.

Your organization will need to develop systems for assessing and rating risk (risk rating). Risk rating allows you to do the following:

Step 1 - Assessing the Level of Risk

Risk rating is used to assess the likelihood that a given non-certified product from a given supplier contains illegally sourced timber. Rating suppliers based on this risk considers a range of information from various sources, some of which is available in the public domain and some that is provided by the suppliers themselves.

Risk rating consists of the following activities:

Requesting Suppliers to Complete and Return Questionnaires

The first step in the risk rating process is to send questionnaires to your suppliers. A model questionnaire and guidance that can be adapted for use in your organization is available here.

Analyzing the returned questionnaires using scenario tables
The returned questionnaires need to be systematically analyzed so that suppliers can be rated between high-risk and low-risk. The risk of illegal timber being traded along a supply chain can be broken down into three broad elements.

  1. Country of origin of the timber. There are risks associated with the geographical source of the supply. If a supplier is based in a country from which high volumes of illegal timber are exported and that supplier is unable to provide objective evidence demonstrating legality, then the risk that the timber is illegal is high. The scenario tables indicate the type of regulatory infrastructure that is most likely to encourage trading in both legal and illegal timber. Ratings for some countries are suggested, based on estimated rates of illegal logging or "suspicious" sources in those countries.
  2. Supplier company's attitude. The way a supplier operates with regard to a range of issues, such as its own general sourcing policies, how it relates to stakeholders and its attitude toward local communities, has been shown to be strongly linked to that company's attitude to buying and supplying illegal timber. The questionnaire asks a number of questions in this respect.
  3. Supply chain complexity. The way a supplier sources timber from its own suppliers is key to the risk of it trading in illegal timber or timber products. The questionnaire requests various types of objective evidence to assess whether sufficient supporting documentation has been gathered. You can analyze these three elements using the scenario tables. The analysis uses three different scenario tables, which relate to different sections of the questionnaire. Although indexes tend to be difficult to justify in purely scientific terms, they provide a systematic means for analyzing questionnaires. For example, the UK Timber Trade Federation, which used scenario tables for field trials (using a very similar approach), showed that the tables were effective and the results were independently repeatable.

In an ideal world it would be possible to calculate a risk rating for each product that you purchase—that is, each product in your inventory that carries a unique product code would have an individual risk rating. In reality this may not prove cost-efficient because of the difficulty of gathering any meaningful information on a product-by-product basis. Experience has shown that a more practical approach may be to group products into product categories, such as redwood mouldings from company X, rather than rate each individual molding (with all their different dimensions) supplied by company X.

Any supplier that has not returned a questionnaire within the specified deadline is automatically classified as a high-risk. The assumption is that the supplier was either unable or unwilling to supply the required information or too badly organized to do it. The importance of receiving the supplier's objective evidence to support the questionnaire answers cannot be overemphasized.

Examples of objective evidence can be found here. A completed questionnaire without objective evidence is just a self-declaration. Experience suggests that self-declarations without supporting evidence cannot be relied on.

Feedback to Suppliers and Monitoring for Continuous Improvement

The analysis of the questionnaire to reach a supplier rating has the added advantage of identifying weaknesses in the supplier's responses. It is then possible to give suppliers feedback, explaining how their score was derived and the types of actions needed to reduce the score. It is therefore possible to provide practical advice (without necessarily being specific or an expert) on how they can reduce their risk rating—an additional benefit to the supplier for completing the questionnaire. The types of actions that will move suppliers from the high-risk to the low-risk category are discussed later in this section.

Some suppliers may rate as high-risk in terms of supplying illegal timber in the initial assessment but they may strive to improve by changing their practices so that on subsequent assessments their risk-rating score improves. Others' ratings may change very little over time. It is important to maintain records that demonstrate how suppliers have improved their performance and processes over time. Experience suggests that suppliers who are unwilling to make adjustments to comply with a buyer's sourcing policy requirements are potentially also those more likely to trade in illegal timber. Over time you may wish to stop trading with these suppliers and replace them with companies that seek to support your commitments.

Data Management

Managing the whole process of supplier assessment involves sending out the questionnaires, following up with suppliers to get them to respond, capturing their responses and the associated objective evidence, analyzing the returns, and then reporting the results to all relevant parties. This process can be demanding in terms of management time. You will need an electronic database system and/or well-organized manual filing system to maintain the process.

Step 2 - Make Further Enquiries Where Needed

Once you have assessed the risk associated with a given product range from a given supplier and decided what kind of verification process is required, the next step involves implementing that process and, over time, progressively eliminating sources that are unable to provide the verification required.

One key strategy will be to make follow-up enquiries with suppliers that have provided weak responses to the questionnaire. Suppliers rated through the questionnaire assessment as being high-risk are likely to have not provided any or enough supporting evidence; thus the questionnaire, if returned, will be largely a self-declaration. You will need to either ask the supplier to provide more evidence or investigate the timber
source directly.

Gathering information from the upstream parts of the supply chain is frequently difficult. Traders are concerned about issues such as confidentiality, particularly if they occupy a "middleman" position in the supply chain. They are concerned that the objective evidence will reveal the identity of their supplier and that you may begin trading directly with the upstream end of the supply chain. Also, suppliers occupying an intermediary role may have great difficulty getting the information from those upstream from them, particularly if they only buy a relatively small percentage of their supplier's total production; that is, they have limited leverage. Sometimes the objective evidence you require just does not exist.

Step 3 - Improve Traceability and Verify Legality

Certified timber is tracked using inspected and verified chain-of custody systems that enable you to easily answer the question, "How did it get here?". Timber and timber products that supposedly originate from a certified forest but are not accompanied by a current and credible chain-of-custody certificate cannot be regarded as certified because the chain-of-custody has been broken and illegal product may have become mixed with the certified product. Chain-of-custody certificates apply only to timber and timber products from a certified forest. If a product comes from a verified legal forest, traceability is just as critical.

A key component of ensuring that timber is kept legal once it leaves the forest and enters the supply chain is to prevent illegal timber mixing with it. If legal timber and illegal timber are mixed, the whole product line can be "tainted". Once timber has left the forest, its legal quality can only be recognized if it can be shown to have come from that forest—in other words, traceability.

Without traceability, verification of the legality of forest management is largely a waste of time. The supply chain, or as some prefer to call it the demand chain, must have a dependable level of integrity. An efficient way of achieving this is to encourage suppliers to develop a system for tracing all timber and timber products from their own suppliers.

If you take the demand chain view, traceability should start at the downstream end of the chain and steadily be applied back upstream toward the forest. Traceability implemented in this manner will have a strong commercial orientation with a greater likelihood for successful implementation, with each business that forms a step along the demand chain benefiting.

Logs, timber and processed timber goods start their journey in the source forest and are then processed by primary and possibly secondary processing industries, exported, possibly transshipped and imported. All this may happen before the goods finally fall under your organization's control. Although it is critical to identify the source forest, it is also critical to make sure that the timber from that source forest is what you receive, rather than illegal timber that has infiltrated into the supply chain en route.

The traceability of the supply chain is vital for ensuring that you receive goods containing legal timber and that there is no "laundering" of illegal timber. In practical terms, it can be expensive and, in some cases, physically impossible to track timber down highly complex or fragmented supply chains. Complex supply chains will always be more likely to support the laundering of illegal timber.

The risk-rating system takes into consideration the potential for dilution of the supply chain by illegal timber. In high-risk situations that have a history of laundering timber, mixing legal and illegal timber to yield "legal" timber, the best option to ensure a clean supply chain is by tracking the timber from the source forest to the physical location where it comes under your organization's control. Without such tracking or traceability in their supply chains, your suppliers will be unable to meet your verification requirements for a verified legal or known licensed source or any other verification approach, such as those described below.

Traceability can be achieved through various combinations of paper- and technology-based tracking systems. In many countries where the trade in illegal timber is a problem, elaborate official paper-based systems have been implemented to theoretically track the movement of timber from the forest to the point of export. This has included the use of unique government certificates or permits covering the transportation and movement of timber in general. These documents are often linked with national forest legislation, and in many cases, it is illegal to transport timber without the necessary specific official permission accompanying the timber or timber products.

However, such systems can easily break down in countries where the regulatory capacity is weak because of a lack of resources or because of corruption, where the forest areas to be regulated are huge, or where the government has no means to manage data centrally. To make matters worse, modern printing technologies have made it relatively simple to corrupt paper-based systems with virtually indistinguishable false or forged paperwork.

Nevertheless, paper-based documentation is still the mainstay of traceability systems and is likely to be so for some time. A good understanding of the system that produces documentation, and familiarity with the "look and feel" of relevant documentation, will provide a measure of confidence and some safeguard.

To assist with this, WWF has produced a series of Keep It Legal Country Guides (in PDF format) for Brasil, China, Indonesia and Russia, for use in conjunction with this guidance, that describe how these paper-based systems operate in reality and their strengths and weaknesses.

The feasibility of tracking timber has increased significantly as Internet-related technologies and services have become more effective, cheaper and more accessible. Unreliable paperwork combined with scribed or painted identifiers on the end of logs are starting to be replaced by bar-coded tags and radio frequency identification devices (RFIDs) with the data capture carried out with handheld personal computers (PC). This enables the tree-related information to be scanned electronically and uploaded from the handheld PC directly onto the Internet, and from there it is stored in dedicated database systems. These modern technologies provide the opportunity to link individual standing trees in the forest with the logs produced from them in a much more secure manner than was possible in the past. These approaches rely on the standing trees in the forest being tagged and then the data on its position and main parameters (height, species and diameter) all being captured on a database. The systems are made secure by using uniquely identifiable tags that are linked to the key tree measurements and resultant log metrics through a record on the database. More information on timber tracking systems can be found below.

Any supply (or demand) chain has a number of critical control points along its length. Critical control points are locations at which the timber undergoes basic changes, for example, where the trees are felled, where the logs are loaded onto a log lorry and where the logs enter the sawmill. The Internet enables information from these critical control points along the supply chain to be aggregated in a single online database, no matter how remote the geographic locations of the critical control points are or what companies are involved. To manage all or part of a supply chain efficiently, you need information on how the product is moving along the supply chain. An Internet-driven system of the type described helps those collecting the information to benefit directly from their efforts as they receive reports containing key management metrics that are compiled and made available the instant any new "flow" information arrives at the database.

In an ideal world, in countries where the risk of illegality is high, the timber or timber product would all be tracked from the standing tree in the forest to the point where it enters your warehouse or comes under your organization's control. The reality is that, currently, little tracking of the types described is taking place. It is a new approach and is being adopted only by the more innovative and forward-looking operators.

Tracking, if appropriately implemented, should help a business operate more efficiently. Information from tracking can be useful for forest managers, in terms of monitoring the volumes and species being harvested from each location, mill owners, in terms of knowing what logs, species or timber products are coming out of the forest and when they may arrive at the mill, the regulatory authorities, in terms of being able to verify the legal right of a specific forest operation to transport timber and for estimation of revenues to be collected, independent auditors wishing to audit legality.

Many of the business benefits have yet to be fully realized. Currently, log and timber tracking is principally seen as a system of control that is used by government and verification organizations rather than as a business tool. Once these systems are more widely implemented and understood, it is likely their full value will be better appreciated. (For a more detailed review of timber tracking and chain of custody systems, see Dykstra et al., 2003, Technologies for Wood Tracking Verifying and Monitoring the Chain of Custody and Legal Compliance in the Timber Industry.) 

A promising recent technological advance is the use of DNA fingerprinting to prove the source and traceability of timber. Each individual tree has a unique genetic code (DNA) and code variations between individuals can be modeled to predict codes across a given geographical area. The primary use is to verify source by matching the DNA from samples taken from individual stumps in a source concession with the DNA from associated logs at a processing mill. The second, and possibly more powerful, method amalgamates the DNA data gathered from individual testing into a genetic database covering a geographical area.

The database allows samples taken from anywhere to be compared with known spatial DNA variations in order to pinpoint actual source to a geographical range. Certisource Timber has tested this technology in Southeast Asia and is currently able to undertake DNA matching for Merbau, Teak, Nyato, Mersawa and Matoa species.

Some companies that provide log and timber tracking services include:
Certisource Timber - www.certisource.net
SGS -www.sgs.com
TracElite - www.tracelite.com
Track Record - www.trackrecordglobal.com
Other organizations offer similar services.


6.2 Limited Knowledge of Forest Source

Known Sources

For the purpose of exercising due diligence, having knowledge of forest source is an important first objective. If the source is considered to be known, the purchaser knows where the timber was grown, and, as far as the purchaser is aware, the source is not unwanted (that is, at this stage there is no indication that the source does not comply with policy).

Table 1 outlines a hierarchy of steps that may be followed to establish whether a source can be described as known. 

A company has limited knowledge of forest source when:

Systems

No 2nd or 3rd party verification of information about source.


7.5 Source Assessed in the Context of Exports to the European Union

Known Licensed Sources in EuropeThe European Union's Forest Law Enforcement, Governance and Trade (FLEGT) Action Plan represents the largest international attempt to use the power of timber-consuming countries to reduce the extent of illegal logging.

The European Commission published its Action Plan on Forest Law Enforcement, Governance and Trade (FLEGT) in May 2003. Approved by the Council of the EU in October 2003, it included the following proposals:

The FLEGT and voluntary partnership agreements process is ongoing across a wide number of countries, mainly in Africa and Asia. The most recent developments, especially the latest information on where VPAs have been signed and where suitable licensing systems have been or are being developed can be found here.

VPA licensing systems have the potential to be a powerful and useful resource for responsible purchasers who can take advantage of sourcing products covered by such licenses. To date no such systems have become available and more advice will be available in 2013-2014.

The FLEGT Action Plan also prohibits the placing of timber from illegally harvested forests and products derived from such timber.  Regulation (EU) No 995/2010 of the European Parliament and of the Council of 20 October 2010 adopted the EU Timber Regulation (EU TR) to do just that. The EU TR has specific provisions that:

Once products are on the market, requires traders of products to keep records of their immediate suppliers and buyers.

Who is affected by the EUTR?

Operators are those that place timber products in the EU market for the first time. Some examples of operators are importers, retailers or manufacturers that directly import wood based products, or forest managers that supply timber from an EU forest. It is prohibited to place in the EU market illegally harvested timber and operators need to apply a due diligence system to avoid the risk of such sources as well as keep records of their immediate customers.

Operators can either use their own due diligence system, use an already existing system or work with Monitoring Organisations. Independently of the due diligence system used, operators remain liable that no illegal timber enters the supply chain.   

Traders are those that buy and/or sell wood based products that were already placed in the EU market (by an operator). Traders need to keep records of their direct suppliers and their direct customer for all wood based products traded. Individual final consumers are not covered by the EUTR. The table below illustrates the specific requirements for Operators and Traders under the EUTR.

A “Due Diligence system” is a framework of procedures and measures to minimise the risk of placing illegally harvested timber, or timber products, on the EU market See the EU TR briefing note for more detailed information or visit the EC website


12.0 Environmental Status of Supplies - Checklist for Working Through the Steps of Environmental Status

Checklist


7.7 Source Assessed and Forest Law in Producer Countries

The types of information and documentation available will vary by country, as will their reliability. Specific guidance for several major exporting countries is given below.

Please Note: These documents are for educational and informational purposes only and are not intended and should not be construed as legal advice. Persons seeking legal advice on compliance with any law, regulation or requirement should consult with a qualified legal professional.

Country

For company use

For verifier's use

General guidance for this country

Brazil

   

X

Cameroon

 

X

 

Central African Republic

X

X

X

China

X

X

X

Democratic Republic of Congo

X

X

X

Gabon

X

X

X

Indonesia

X

X

X

India

 

X

 

Malaysia

X

X

X

Republic of Congo

X

X

X

Russia

X

X

X

Vietnam

X

X

X

       

General - Countries not listed

X

X

 
       

If the material is sourced from other countries, the sourcing organization should establish, through discussion with the supplier, WWF or other NGOs, or the relevant forestry department, which documents are required. Guidance on assessing the credibility of the documents and information supplied is covered in the next section.


5.4 Rating of Suppliers' Compliance with Policy

Establishing TraceabilityIn an ideal world, once an organization has defined a timber sourcing policy, it could present it to suppliers and they would then follow it. The outcome would be the delivery of products that fully comply with the organization's policies and specifications. However, the reality is that suppliers can find it difficult to comply with the most basic requests for proof of policy compliance for a number of reasons. Therefore, suppliers' compliance with the sourcing policy requirements may take considerable time and effort, and non-compliance may be the norm in the early stages of an organization's policy implementation.

Therefore, the first step for any buyer is to identify which suppliers are most likely to be able to comply with the policy, that is, those suppliers who present the lowest risk of supplying non-compliant products, and which suppliers are least likely to comply with the policy and therefore, present the highest risk of supplying non-compliant products.

By using systematic risk-rating methodologies, it is possible to develop future sourcing strategies based on the risk rating of suppliers, highlight actions that would help suppliers reduce their risk rating and monitor suppliers' progress toward being able to supply policy-compliant product.

In an imperfect world, rating suppliers based on risk presents the best way forward and the next step toward achieving full implementation of the sourcing organization's responsible sourcing policy.

More information on a risk-rating methodology, with a particular emphasis on legality, can be found here. Rating of suppliers is done using a range of information, some of it available in the public domain and some of it provided by the suppliers themselves. The rating process is really an assessment of the characteristics of a supplier that can be trusted to do its best to avoid noncompliant trading of products.

The basic system relies on the following actions:

  1. Sending a standardized questionnaire out to all suppliers
  2. Making sure the questionnaire is completed by the suppliers and returned
  3. Making sure that, where possible, suppliers provide appropriate objective evidence to support the questionnaire answers
  4. Using a straightforward and justifiable means of systematically assessing each returned questionnaire and giving the supplier a risk rating accordingly
  5. Giving suppliers feedback that lets them know what they need to do to improve their risk rating
  6. Implementing a means for monitoring continuous improvement, that is, whether or not suppliers are improving their rating over time
  7. Using a set of procedures that can be independently verified in order to underpin the thoroughness and credibility of the whole approach

This process helps send a clear message to suppliers as to what is important to you as a buyer. It gives them direction when they are probably receiving many mixed signals from the downstream end of the supply chain.

Note for GFTN Participants: GFTN participant companies are required to establish a programme that will ensure traceability over a reasonable period of time. It is a central component of GFTN participation.


7.6 Source Assessed in the Context of Exports to Australia

Aligned with international efforts, including measures developed by the United States and EU, Australia further strengthens its leadership position in the Asia-Pacific region in promoting trade in legally harvested timber and timber products by enacting the Australian Illegal Logging Prohibition Act (AILPA) and enhancing international cooperation to combat illegal logging.

AILPA was passed in 2012, a draft Amendment was issued in May 2013 and is expected to enter into law November 2014. The aims of AILPA are to reduce the harmful environmental, social and economic impacts of illegal logging and affects to Australian timber importers and domestic processors of Australian raw logs.

The regulation does not require a due diligence system to be created for each transaction.  Rather, the regulation requires the establishment of a single due diligence system that can be applied to each import. For example, an importer may establish a due diligence system and apply it to a particular product from a particular source.  The outcome of this process will be an understanding of the information and documentation required to be obtained when importing that product from that particular source.

However the regulation that outlines the operational framework for importers and processors will come into effect after 30 November 2014.

In addition, the regulation also provides:

  1. civil offence and penalties.
  2. Infringement notice provisions.
  3. Administrative sanction provisions.
  4. Identity card requirements.

The law does not impose any Australian legislation on the source country, but uses the laws that are in placed in the country of origin to determine illegality of harvest and trade.

 

The list of regulated timber products is prescribed in a Schedule of the Regulation (http://www.comlaw.gov.au/Details/F2013L00883). This list is closely aligned with the list of EU products, with some exceptions where the imports of those products to Australia are of low trade value and/or volume. It has fewer products than either the EU or US legislations and has an additional category relating to wooden framed seats.

Some products are exempted from the due diligence requirements of the Regulation. These include: timber products that are recycled material and any content of a timber products that are recycled material. Timber in a regulated timber product is recycled material if:

However, material in a regulated timber product is not recycled material if the material is the by-product of a manufacturing process. Examples: Sawdust or off cuts from sawn timber used to make particle board or plywood

 

Information the importer needs:

-          Evidence that the product has not been illegally logged

-          Information on whether the harvesting of that tree species from which the timber was derived is prohibited in the place of harvest or not

-          If the harvest of the timber in that place is authorised by legislation and regulation – proof that the requirements of the legislation been met for the harvest of that timber

-          If payment is required for the right to harvest the timber – proof that payment has been made

-          Information on whether the harvest of the timber was consistent with the law establishing or protecting the legal rights of use and tenure in the place of harvest or not 

 

Before importing a regulated timber product into Australia, an importer must have a due diligence system and retain a written record of that due diligence system. The requirements for a due diligence system may be summarised as a four step process to be put in place by an importer as set out below.

Step 1: Information gathering (section 10 of the AILPA)

  1. An importer must obtain as much of the prescribed information as is reasonably practicable. The Regulation includes a list of types of information to be obtained by an importer.

Step 2: Optional process - assessing and identifying risk against a timber legality framework (section 11) or a country specific guideline (once they are prescribed) (section 12)

  1.      ii.        Under the Regulation, in certain circumstances, an importer may elect to assess the risk that the timber in the product they are importing has been illegally harvested using either:

-          a timber legality framework that is prescribed in Part 1 of Schedule 2 to the Regulation; or

-          a country specific guideline (once they are prescribed in Part 2 of Schedule 2 to the Regulation). The Regulation requires that, should an importer elect to use this optional process, they must:

  1. Should an importer elect to use this optional process and, in doing so, assess that there is a low risk that the timber product is illegally logged, then the requirements under section 13 do not apply. In circumstances where section 13 does not apply, risk mitigation (section 14) also does not apply.
  2. However, risk mitigation does apply in circumstances where the importer is required to use section 13 and the risk that the timber product was illegally logged, as assessed under section 13, is not a low risk.

Step 3: Risk assessment (section 13)

  1.       i.        Where an importer has not used the optional process set out in Step 2, or where they have used the Step 2 process but they have identified a risk that the timber is illegally logged and the risk is other than a low risk, an importer must undertake a risk assessment in accordance with section 13.
  1. The Regulation requires the importer, as part of this process, to identify and assess any risks by taking into consideration the risk factors that are referred to in subsections 13(2) and (3).

Step 4: Risk mitigation (section 14)

  1. Where an importer has, during Step 3, identified a risk that the timber was illegally logged and the risk was not a low risk, an importer must undertake a risk mitigation process in accordance with       the Regulation.  The Regulation requires the risk mitigation process to be adequate and proportionate to the identified risk.

 

Timber sourced from certified forests (*FSC or **PEFC) will automatically be determined to be “low risk by the AILPA.

The act requires a declaration about the timber legality at the point of import of each shipment. Importers of regulated timber products must have declarations, at the time of import, to the Customs Minister about the due diligence that they have undertaken.

Detailed information on the AILPA can be found here: http://www.comlaw.gov.au/Details/F2013L00883


4.2 Communicating Progress

Communicating Progress Towards Sourcing ResponsiblyHaving developed policies and associated activities to deliver them, the organization will then communicate its progress. The mechanisms for communicating progress are the same as for communicating policy.

It is strongly recommended that public reporting of progress against targets be conducted on an annual basis and be subject to some form of external verification. The report should indicate progress against targets, the general status of the supply base (using the stepwise approach advocated in this guide) and new targets for the next reporting period or longer if required.

Clear, accurate and truthful communication of policy and activity can be a valuable tool. The integrity of the organization and its supply chain are at risk if the nature, role, scope and achievement of the policy are poorly communicated.

Note for GFTN Participants: GFTN participant companies are required to report their performance against targets on a regular basis to GFTN. Public reporting of performance is encouraged.


7.1 Defining Legal Timber

Environmental Status of SuppliesTo direct your organization's sourcing away from the products of illegal logging and toward those in favour of legal operators, you will need to define what you mean by "legal" or acceptable sources. That definition should exclude products or activities that fall within the scope of the problem defined in your policy. The scope of concern may be broad, and thus be difficult to comply with, or narrow, which would run the risk of not addressing key issues. A balance between these extremes needs to be struck.

Verifying that the timber in a product is from a source assessed requires the purchaser to obtain proof that, in addition to having the ownership and access rights, and a legal right to harvest, the harvesting entity complied with the law when harvesting the timber and that the timber was legally traded and exported or imported. The category also requires a higher degree of scrutiny over the chain of custody. Forest management certification systems that require independent chain-of-custody audits can also provide this level of assurance on legal compliance.

You should also be guided by any market based legislation (Lacey etc) – as these laws and regulations will provide more detail as to the scope of legislation they require must be considered. 

Which Laws Apply?

There can be challenges in determining what constitutes an illegal act and interpreting global definitions within the context of the legal system of a given producer country. These challenges include the following:

In many producer countries efforts are underway to better understand and then to define the laws that are relevant to forestry and associated trade. These processes are seeking to also address the apparent contradictions and to provide workable solutions using multi-stakeholder processes, often within international frameworks supported by the relevant Government agencies. A good example of this international process is the Forest Law Enforcement Governance and Trade (FLEGT) process. 

In many jurisdictions, rationalization and clarification of such issues are clearly needed to enable effective law enforcement. However, where laws are unclear, best practice for sourcing organizations, suppliers and auditors is to note the flaws in the relevant laws and state clearly the basis on which verification has been assessed, including, where possible, the rationale for the interpretation by the verifier.

In other countries, standards, criteria and checklists relating to legal compliance may have been developed for forest certification purposes. These can serve as useful reference points to interpret the forestry law of a given country.

Addressing "Bad" or "Unfair" Laws

Illegality in the timber extraction business is often a symptom of deeper underlying problems. A narrow focus on illegal activities may perpetuate inequities and corrupt resource allocation processes. Forest laws, or decisions made in purported application of the law, often reinforce unfair relationships or disregard customary forest rights. Arguably, such laws need to be reformed before their enforcement can properly serve the public interest.

The following are some examples of laws that may have undesirable results:

The key safeguard against associating with unjust but legal outcomes in a supplying country is to position your company's policy within the broader context of corporate social responsibility. Similarly, efforts to avoid the products of illegal logging should be embedded within a broader goal of promoting sustainable forestry.

Legal compliance is best seen as a factor that contributes to responsible forest management rather than as the end game. The GFTN Responsible Sourcing Guide deals with this by positioning legality as one step along the way toward achieving environmentally sound, socially beneficial and economically viable production and sourcing of forest products.

Another safeguard is to have an explicit policy on disputed or controversial decisions by officials—for example, alleged corrupt or improper allocation of forestry concessions. This would allow for the reality that many developing countries lack effective administrative law mechanisms such as complaints procedures; tribunals to review official decisions; and the allocation of permits, freedom-of-information provisions and independent watchdog institutions such as an ombudsman. Where such systems are weak or absent, aggrieved parties cannot easily challenge official decisions made improperly or at odds with legal requirements. Your sourcing policy could include a proviso, for example, that if your organization is made aware of a significant dispute over the process by which the forest manager secured the permit, it will inquire into the status of the dispute and not regard the forest as a legal source until the dispute is resolved.

Another issue to consider when formulating a policy is that illegal logging problems are greatest in countries where forest governance is poor. In such countries the task of strengthening governance and building local regulatory capacity will take time, even where there is the political will to improve.

In the transition phase, purchasers can contribute significantly to improved governance by awarding contracts to legitimate enterprises that are attempting to do a good job under difficult conditions. This helps keep the 'good' operators engaged. It is a more positive way forward than boycotting all business in the country. Such contracts, however, must encourage constant improvement, and contracts with organizations that fail to take positive steps should not be renewed. The stepwise approach to responsible sourcing advocated by WWF's GFTN allows flexibility for your company, encouraging your business to stay engaged and to drive reform in the places where the problems are greatest.


14.1 Introduction

The overall aim for the Common Legality Framework is to support companies and where relevant, regulators in their efforts to improve governance of their forest resources and prevent illegal logging and timber trade through encouraging compliance with laws related to the forest sector at the national and international level. By providing information on a forest-focused sub-set of applicable laws and regulations in a clear and accessible manner, this legality framework can help both regulators and companies—particularly GFTN members in countries of export and import—to verify that timber and other forest products contribute to sustainable forest management.

A further aim is to support the development of a more consistent and common approach to considering legality of forest operations, timber processing and trade that would be broadly applicable across countries. This approach is considered important in order to reduce the potential confusion among industry and governments that could result from the proliferation of different legality frameworks.

In Africa, the Framework supports the work of the Commission des Forets D’Afrique Centrale (COMIFAC) in the Congo basin. In particular, the framework supports COMIFAC’s Plan de Convergence, including sustainable use and management of forest resources, certification, traceability systems and national plans against illegal use of forest resources.

The Framework will also directly support implementation of the EC Action Plan for Forest Law Enforcement, Governance and Trade (FLEGT) to: promote equitable and just solutions to the illegal logging problem that do not have an adverse effect on poor people; help partner countries to build systems to verify timber has been harvested legally; promoting transparency of information; promote policy reform; and build the capacity of civil society and partner country governments.


0.2 Responsible Sourcing Programme Elements

Seven Essential Elements of a Responsible Purchasing ProgrammeThe stepwise approach cannot operate in isolation and needs a supporting process that seeks continuous improvement, similar to that used by environmental management systems. The supporting process requires that a number of key elements be in place. The remainder of this guide discusses these elements in detail.

Implementation of a responsible sourcing programme requires several key elements, which form the essential building blocks:

  1. Obtaining support from key members of senior management
  2. Reviewing the organization's present situation (whether at the starting point or a stage in an existing process) and establishing a baseline
  3. Setting policies that describe the boundaries within which the organization will operate (that is, its values and aspirations)
  4. Communicating its values and objectives to key audiences
  5. Establishing traceability
  6. Assessing the environmental status of supplies - due diligence 
  7. Reviewing and improving - due diligence

These seven elements form the basis for the remainder of this document. Appendices and links provide more detail where needed. The stepwise approach is mainly contained in elements six and seven, though all elements need to be in place for the system to operate correctly.Program Elements


14.4 National Legality Frameworks

The following National Legality Frameworks were developed by compiling all available documents constituting the legal framework for the forestry sector in each of the countries and conducting consultations at the national level with relevant individuals in the forestry sector including representatives of the forestry administration, government, research institutes, the private sector—including current GFTN members where appropriate, legal experts, NGOs and donors.

Please Note: The designations of geographical entities in this publication, and the presentation of the material, do not imply the expression of any opinion whatsoever on the part of WWF, TRAFFIC or its supporting organizations concerning the legal status of any country, territory, or area, or of its authorities, or concerning the delimitation of its frontiers or boundaries.

The views of the authors expressed in this publication do not necessarily reflect those of the TRAFFIC network, WWF or IUCN. 


8.3 Uncertified Timber - Reducing the Risk of Buying Illegal Wood

Reduce the Risk of Buying Illegal WoodIn an ideal world, as a sourcing organization, you would state that you did not want any illegal timber or timber products in your business's supply chain; you would then pass this specification to your suppliers and they would follow it. The outcome would be the delivery of legal timber and timber products.

In the absence of credible certification, a chain of custody; FSC Controlled Wood; third-party legal certification; or another form of certification that provides some assurance of basic legal compliance, the onus is on the purchaser to manage the risk of sourcing illegal wood. This process of due care or due diligence can be broken down in to a series of steps:

Suppliers in countries where significant volumes of illegal timber and timber products are traded often find delivering timber with legal verification very difficult. These suppliers often have little incentive to invest in legal verification systems. Their timber may be legal, but proving it takes significant extra effort and cost and therefore is not done. Suppliers can find it difficult to comply with the most basic requests for proof of legality for a range of reasons, such as the following:

In recognition of these realities, this section describes a four-step system to reduce the risk of having non certified timber that has been illegally harvested or traded enter your supply chain. The methodology is based on a range of practical experiences gained by traders, trade associations, and GFTN participants.

The next section outlines a systematic approach to evaluating the suppliers in your supply chains, including an assessment of the level of risk associated with each supplier and then, based on that information, the level or degree of legality verification needed. In addition, the methodology provides guidance on how to ensure that the timber arrives at the location you control without being substituted or diluted with illegal timber.


1.0 Senior Management Support

Senior Management SupportTurning policy and values into a programme that promotes the legal and responsible sourcing of forest products inevitably requires management support. Any activity that is seen as not being central to operations stands little chance of succeeding. Like all environmental and ethical programmes, a programme of responsible sourcing will succeed only when it is supported at the highest levels of management.

For smaller sourcing organizations, a programme of legal and responsible sourcing will require the support of a partner or owner to ensure that the necessary resources are made available and to ensure that conflicts over policy enforcement are resolved.

In larger sourcing organizations, a member of the board of directors or vice president should be made accountable for the programme. In all cases, the support of the head of the buying or trading function should be sought.

Key Points - Senior Management Support

Management Roles

The member of senior management should support the programme and its policies at the highest level of management in the sourcing organisation and resolve any major conflicts that may arise relating to the work. A member of middle management should manage the relationship with stakeholders, set and agree to targets, develop policies and negotiate with key internal stakeholders. A programme manager should manage relationships with buyers and traders, manage relationships with suppliers and develop tools to assess the environmental status of forest products in the supply chain. Organizstions that have successfully embedded such policies have broadened management responsibilities for implementation as widely as possible. Ensuing that all key roles are involved and in turn understand their responsibilities is a key to success. 

Note for GFTN Participants:
GFTN participant companies are required to nominate both senior managers and day-to-day contacts.


3.2 Main Policy Elements

Unacceptable SourcesResponsible purchasers should develop an environmental policy or set of policies that exclude unwanted forest sources. The list of unwanted sources, and the precise terminology used to describe them, will vary according to the social and environmental issues of concern to the organization and its stakeholders.

Unwanted Sources

WWF recommends that, at a minimum, sourcing organizations regard timber or fibre as unwanted if the following conditions exist:

  1. The source forest is known to or suspected of containing high conservation values, except where the forest is certified or in progress to certification under a credible certification system, or the forest manager can otherwise demonstrate that the forest and surrounding landscape is managed to ensure that those values are maintained.
  2. The source forest is being converted from natural forest to a plantation or other land use, unless the conversion is justified on grounds of net social and environmental gain, including the enhancement of high conservation values in the surrounding landscape. More information on WWF's work concerning forest conversion can be found here.
  3. The timber was illegally harvested or traded.
  4. The timber was traded in a way that drives violent armed conflict or threatens national or regional stability (i.e. what is commonly called conflict timber).
  5. The harvesting or processing entity or entities, or a related political or military regime, are violating human, civil and traditional rights.
  6. The timber is from genetically modified trees.
  7. The source forest is unknown.

Note: The seven categories of unwanted sources eliminate most activities from the supply chain that preclude credible certification. These items also are closely linked to the requirements for the Forest Stewardship Council (FSC) Controlled Wood Standard.

This list is a minimum, and other elements should be introduced to reflect stakeholder concerns that are identified. More information on these categories is available here.

Acceptable Sources

The organization will also want to consider what is the minimum acceptable in terms of policy. Acceptable sources of wood or fibre, in descending preference might include:

  1. Material from credibly certified forests / recycled material
  2. Material from verified sources forests which has been 3rd party verified for basic social and environmental criteria.
  3. Material from assessed sources which have been evaluated for basic legality and traceability. 

In all cases compliance with all aspects of the purchaser's policy should be the desired state.

Examples of forest products sourcing policies can be found here.

Note for GFTN Participants: GFTN participant companies are required to agree policies that, as a minimum, cover these key elements.

Scope - What to Include

The scope of the policy may vary from one sourcing organization to the next—such as, the inclusion or exclusion of forest products intended for resale only, forest products sold under "own brand" or "store brand" only, forest products procured for service use and not for resale (for example, copier paper) and forest products used within the fabric of buildings (for example, wooden doors or floors in new offices or factories).

Therefore, the scope of the policy is flexible and can expand overtime. Best practice dictates that the scope of the policy be set to apply to the largest impact area of the business; for example, a retailer should consider its largest selling range of forest products before its office copier paper.

It would also be prudent to consider market based legislation, existingand evolving, to ensure that the policy at the very least covers material affected or potentially affected.

The policy should also include:

The policy and any associated documents should be the responsibility of senior management within the sourcing organization and should have the same level of endorsement as any other of the sourcing organization's policies (such as those on health and safety or discrimination).


8.0 Environmental Status of Supplies - Reducing the Risk of Trading in Illegal Timber

Risk of Trading in Illegal TimberThe simplest way to reduce the risk of trading illegal timber is to buy and sell certified timber. For the majority of businesses involved in the timber sector, particularly those trading in tropical hardwoods, this is not an option because only modest volumes are currently available from countries or of some species.

Legal timber (that is not certified) is traded internationally every day of the year. For timber originating in countries with well functioning regulatory systems, the risk of trading in illegal timber is relatively low and stringent legal compliance auditing is not warranted. However, if the country of origin of the timber is uncertain, or the timber is known to come from a country with weak regulatory systems, the risk of trading in illegal timber is high. Addressing this risk requires commitment and vision by all those involved in the supply chain. In the US trading environment, this is known as exercising due care (with respect to Lacey Act compliance) and in a European environment this is known as practicing due diligence (with respect to EU Timber Regulation).

Timber legality can be viewed as a product quality issue. When you ask your suppliers to provide legal timber, you are requesting timber with a new quality: legality. If timber lacks proof of legality, it lacks the quality that you require. Timber can be attributed the quality, or status, of legality only in its forest of origin. It can maintain that legal quality only if it remains unmixed and is not diluted by illegal timber as it travels down the supply chain. Its legal quality can also be devalued by other illegal activities connected with its passage down the supply chain.

Two basic questions should always be at the back of your mind:

"Is the source legal?"
Where was the forest of origin? Were the ownership and access rights undisputed and free from the taint of illegality? Was the quality of the forest management and timber trades such that all timber purchased had the right 'legal' quality?

"How did it get here?"
Was the quality and traceability of the supply chain such that no illegal timber was introduced and the legal quality was not subsequently diluted?


Defining “Illegal Logging”

WWF defines illegal logging, related trade, and corruption as occurring when timber is harvested or traded in violation of relevant national or sub-national laws or where access to forest resources or trade in forest products is authorized through corrupt practices.

This generic definition of the problem has three key elements:

1. Illegal harvesting. Timber cut or removed without the required license or in breach of a harvesting license or law. This includes logs that are stolen.

2. Illegal trading. Timber, or a product containing timber, bought, sold, exported, or imported and processed in breach of the laws, including laws implemented under the Convention on International Trade in Endangered Species.

3. Corruption. Authorization to harvest or trade logs or timber products is secured through corrupt application of laws or administrative procedures.

Below is a selection of the many definitions from other organizations.

Other definitions of illegal logging

Organization

Definition

Reference

United States Government (Lacey Act)

“It is unlawful for any person … (2) to import, export, transport, sell, receive, acquire, or purchase in interstate or foreign commerce .... any plant—

(i) taken, possessed, transported, or sold in violation of any law or regulation of any State, or any foreign law, that protects plants or that regulates—
(I) the theft of plants;
(II) the taking of plants from a park, forest reserve, or other officially protected area;
(III) the taking of plants from an officially designated area; or
(IV) the taking of plants without, or contrary to, required authorization;

(ii) taken, possessed, transported, or sold without the payment of appropriate royalties, taxes, or stumpage fees required for the plant by any law or regulation of any State or any foreign law; or

(iii) taken, possessed, transported, or sold in violation of any limitation under any law or regulation of any State, or under any foreign law, governing the export or transshipment of plants

Amendments to the Lacey Act from H.R.2419, Sec. 8204 (1)

European Commission

'legally harvested' means harvested in accordance with the applicable legislation in the country of harvest;

'illegally harvested' means harvested in contravention infringement of the applicable legislation in the country of harvest;

'applicable legislation'  means the legislation in force in the country of harvest, covering the following areas of law: 

  • rights to harvest timber within gazetted boundaries;
  • payments for harvest rights and timber including duties related to timber harvesting;
  • timber harvesting, including directly related environmental and forest legislation;
  • third parties’ legal rights concerning use and tenure that is affected by timber harvesting; and
  • trade and customs legislation,

…. in as far as the forest sector is concerned.

European Commission 2009  (2)

Greenpeace

Illegal logging takes place when timber is harvested, processed, transported, bought or sold in violation of national laws. Laws can be violated at many different stages of the supply chain and can include:
• Obtaining concessions illegally (for example, via corruption and bribery)
• Cutting protected tree species or extracting trees from a protected area
• Taking out more trees and more undersized and oversized trees than is permitted or trees outside an agreed area 
• Illegal processing and export
• Fraudulent declaration to customs of the amount of timber being exported
• Nonpayment or underpayment of taxes
• Use of fraudulent documents to smuggle timber internationally.

Greenpeace 2005 (3)

Malaysian Timber Council

In Peninsular Malaysia, three categories are used to classify forest offenses.
Category 1 covers offenses involving logging without license, logging outside licensed area and unauthorized construction of infrastructure and forest roads. Category 2 covers encroachment of forest reserves for agricultural activities and settlement. Category 3 covers other forest offenses that involve felling of unmarked trees, cutting trees below the cutting limit, unlicensed workers, contractors with no valid sub-license, unregistered machinery plus other breaches of rules and regulations committed within and outside the forest reserve.

Malaysian Timber Council 2004. (4)

 

Russian Supreme Court

Illegal forest felling operation (cutting) is cutting of trees, bushes and lianas without a harvesting license, order or cutting with a harvesting license, order issued with abuse of the existing cutting-practice rules, as well as cutting carried out at the wrong site or beyond a site's borders, exceeding the set quantities; cutting of wrong species or of trees, bushes and lianas that are not subject to felling ticket, order, before and after logging period fixed in felling ticket, order, logging of trees, bushes and lianas that are forbidden to log according to Resolution No. 155 of the Government of the Russian Federation June 1, 1998, or after the announcement of the decision about temporary prohibition, restriction or complete discontinuance of forest user activities or the right to use forest area. 

Resolution No.14, Russian Federation Supreme Court 1998 (The definition is related to the application of Article 260 of the Criminal Code of the Russian Federation).(5) 

World Business Council on Sustainable Development

• Sourcing of illegal wood takes place when unprocessed wood is procured in the absence of the seller’s legal right to sell or harvest.
• Illegal logging takes place when timber is harvested in violation of relevant forestry and environmental laws and regulations.
• Illegal forest products trade involves the procurement, processing, distribution and marketing of products made from wood that has been obtained by illegal sourcing or illegal harvesting and/or are not in compliance with relevant national and international trade laws.

WWF/WBCSD Joint Statement on Illegal Logging 2005. (6)

1. http://www.aphis.usda.gov/plant_health/lacey_act/downloads/background--redlinedLaceyamndmnt--forests--may08.pdf
2. Taken from: Proposal for a REGULATION OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL laying down the obligations of operators who place timber and timber products on the market; ec.europa.eu/development/icenter/.../flegt_timber_proposal_oct08.pdf
3. Lawless: How Europe's Borders Remain Open to Trade in Illegal Timber (Greenpeace Fact File, October 2005)
http://www.greenpeace.org/raw/content/international/press/reports/lawless-illegal-timber.pdf.
4. Malaysian Timber Council www.mtc.com.my 
5. Resolution No. 14, Russian Federation Supreme Court from November 5, 1998 (The definition is related to the application of Article 260 of the Criminal Code of the Russian Federation).
6. WWF/WBCSD Joint Statement on Illegal Logging for The Forest Dialogue (March 2005)
http://www.wbcsd.org/plugins/DocSearch/details.asp?type=DocDet&ObjectId=13627


7.3 Source Assessed in the Context of the US Market

Environmental Status of SuppliesMajor marketplaces in Europe and the United States have seen major changes with respect to market access requirements for producers and the role expected of those who import or trade forest products.

United States

In the U.S., the Lacey Act was amended in 2008 and seeks to eradicate trade in illegally sourced forest products—including timber and wood fibre based products (such as paper). The Lacey Act is only enforced within the boundaries of the United States. While the Lacey Act does not apply to other countries, it is of great importance to exporters of forest products who want to trade with US companies—as US-based customers are relying on their trading partners to help them demonstrate compliance with this law.

The Lacey Act has stiff penalties for US companies that commit offences. Penalties for US companies range from: a criminal felony fine (up to $500,000 for a corporation, $250,000 for individual, or twice maximum gain/loss from transaction); to a possible prison sentence of up to five years; forfeiture of goods, a criminal misdemeanor penalty (up to $200,000 for corporation, $100,000 for individual, or twice maximum gain/loss from transaction); to a possible prison sentence of up to one year, or a civil penalty fine from $250 to $10,000. The penalties applicable are linked to the degree of care taken (or not) and the nature of the crime, ranging from direct knowledge of illegal trade and falsified import declarations down to more inadvertent mistakes. What should be clear to all exporters is that US importers are almost entirely reliant upon their suppliers to help them demonstrate due care and are more likely to trade in the future with those who can assist them in this process. Increasingly, legal compliance will feature in contracts between companies and civil penalties may be sought where there are breaches.

U.S.-based forest products importers will be seeking assurances that the products they source from both the domestic market and from overseas have been harvested, possessed, transported, sold or exported without breaking any relevant underlying laws in the country where the tree was grown, even if it was processed in another country.

The laws which are regarded as relevant and which need to be complied with include those that relate but not limited to:

  1. Theft of plants;
  2. Taking plants from an officially protected area, such as a park or reserve;
  3. Taking plants from other types of "officially designated areas" that are recognized by a country's laws and regulations;
  4. Taking plants without, or contrary to, the required authorization;
  5. Failure to pay appropriate royalties, taxes or fees associated with the plant's harvest, transport or commerce; or
  6. Laws governing export or trans-shipment, such as a log-export ban.

Note: The reference to “plants” includes logs, timber, fibre, veneer and all other forms of product later derived from the harvested plant (i.e. a tree).

U.S.-Based Importer Requirements

The Lacey Act requires importers to provide a basic declaration to accompany every shipment of plants or plant products. The purpose of these declarations is to increase transparency about the timber and plant trade and enable the US government to better monitor the trade and assist in enforcing the law.

The declaration must contain:

  1. Scientific name of any species used
  2. Country of harvest
  3. Quantity and measure
  4. Value

Exporters can assist US importers in providing this basic information. This in itself is not enough. Exporters should also ensure that all forest products that are to be exported are compliant with the relevant laws of the countries where the wood was harvested and also with any laws regarding processing, export or taxes within the processing country.

Exercising "Due Care"

U.S. importers need to exercise "due care" when sourcing forest products to ensure that they comply with the Lacey Act. Due care is a flexible concept that has been developed over time by the US legal system. Due care means "that degree of care at which a reasonably prudent person would exercise under the same or similar circumstances. As a result, it is applied differently to different categories of persons with varying degrees of knowledge and responsibility" (Senate Report 97-123). Given the lack of certainty around how the court might view due care with respect to the Lacey Act provisions, for timber harvesting and trade, it would be prudent for companies dealing in forest and paper products to avail themselves of the wide array of tools, technologies and resources available for assessing and eliminating illegal wood from often long and complicated supply chains. Internal company policies and tracking procedures are a critical element.

Understanding and implementing a responsible sourcing programme for forest products is an example of a best practice that can contribute to exercising due care. The key with lacey Act compliance though is that the system should help to increase the confidence of the company in ensuring legal timber throughout its supply chain as prosecutions can brought even if a company felt it had done everything that is reasonable. The nature of the legislation allows penalties for selling illegally harvested or traded timber regardless of how hard a company tried not to do this.

Steps may also include bar-code or other tracing systems; legality verification; certification under third-party schemes; stepwise programs offered by various organizations and other innovative public-private partnership models.


14.2 The Common Legality Framework's Principles & Criteria

The Common Legality Framework encompasses the legal requirements covering the entire supply chain including forestry operations and corresponding processing and timber trade relating to timber origin, production, transportation, processing and trade, and legislation safeguarding agreed standards in relation to environmental, conservation and social issues. This includes national laws, rules, regulations and administrative circulars, including contractual obligations that cover these areas. Legislation and regulations outside these areas are not included in the Framework.

The Framework is composed of a set of principles, each supported by one or more criteria. When developed for use within a national context the criteria are further supported by nationally appropriate indicators and guidance notes/verifiers – specific to that country – based on the existing legislative base, that are practical, easily implemented on the ground and readily audited. The format of principles, criteria and (national) indicators is a format widely used within forest certification and already accepted by civil society, industry and government.

The Framework comprises nine broad legal Principles. Africa includes a 10th Principle specific to their needs after multistakeholder consultations there. These Principles are the fundamental aspects to be addressed in all cases. Each Criterion represents an important aspect which allows the assessment of a legal Principle. Local indicators, verifiers and guidance have to be developed to allow use of the Framework within a national context and these will vary between countries relative to the legislation in force.

The Common Legality Framework’s Principles and Criteria

Principle 1

Access, Use Rights and Tenure

Criterion 1.1

The company is legally registered with the relevant administrative authorities

Criterion 1.2

Use, access and tenure rights applications are subject to stated pre-conditions within the laws and regulations

Criterion 1.3

Clear evidence of forest and/or land use, access and tenure rights shall be demonstrated in accordance with laws and regulations

Criterion 1.4

Use, access and tenure rights are subject to stated conditions within the laws and regulations

Principle 2

Harvesting Regulations

Criterion 2.1

Forest Management Plan in accordance with the government policies, guidelines and regulatory requirements, approved by relevant authority

Criterion 2.2

Harvesting/timber licence with stated conditions in accordance with the government policies, guidelines and regulatory requirements, approved by relevant authority

Criterion 2.3

The company implements harvest operations in accordance with the legally prescribed silvicultural system and relevant regulations

Principle 3

Transportation of Logs and Wood Products

Criterion 3.1

Clear evidence of documents and licences for companies and carriers involved in timber products transportation shall be demonstrated in accordance with the laws and regulations.

Criterion 3.2

Clear evidence of documents and corresponding markings of timber products for transport shall be demonstrated by companies and carriers in accordance with the laws and regulations

Principle 4

Processing Regulations

Criterion 4.1

Clear evidence of documents and licences for companies involved in timber processing shall be demonstrated in accordance with the laws and regulations

Criterion 4.2

Timber processing companies are subject to stated conditions within the laws and regulations

Principle 5

 Import and Export Regulations

Criterion 5.1

Clear evidence of licence/permit of company involved in import and export shall be demonstrated in accordance with the laws and regulations

Criterion 5.2

Clear evidence of official documents of timber products for import and export shall be demonstrated by companies and carriers in accordance with the laws and regulations

Criterion 5.3

Timber products import and export companies are subject to stated conditions within the laws and regulations

Principle 6

 Environmental Regulations

Criterion 6.1

State/company conducts environmental impact assessments or other required assessments within the laws and regulations

Criterion 6.2

State/company takes mitigation measures on negative environmental parameters in accordance with the laws and regulations

Principle 7

 Conservation Regulations

Criterion 7.1

State/company conducts conservation assessment/evaluation within the laws and regulations

Criterion 7.2

State/company takes mitigation measures on negative conservation values in accordance with the laws and regulations

Principle 8

 Social Regulations

Criterion 8.1

Company maintains or strengthens socio-economic welfare of local communities/indigenous people in accordance with the laws and regulations

Criterion 8.2

Company recognizes legal or customary rights of indigenous/local people in accordance with the laws and regulations

Criterion 8.3

Company complies with the laws and regulations on its employees’ and workers’ rights

Criterion 8.4

Company complies with the laws and regulations of its employees’ and workers’ welfare

Principle 9

 Taxes, Fees and Royalties

Criterion 9.1

The company fills in its tax returns in accordance with its effective professional activity

Criterion 9.2

Clear evidence of current paid taxes, fees and royalties in a timely manner shall be demonstrated by the company in accordance with the laws and regulations

Principle 10 is specific to Africa where stakeholders considered the issues related to subcontractors and partners to be important and upgraded this to a separate Principle. In Asia it was retained at the criteria level as an integral part of other principles.

Principle 10

 Subcontractors and Partners

Criterion 10.1

The company respects the contracts made with subcontractors and partners

Criterion 10.2

The company ensures that all subcontractors and partners are operating within the law


Questionnaires - Things to Consider

General guidance
Suppliers need encouragement in order to complete questionnaires. Below are some strategies, based on practical experience that can help get the questionnaires completed and returned.

Contact suppliers well in advance of them receiving the questionnaires to explain the commercial reasons for asking them to complete a questionnaire. This can be done by e-mail and should be backed up by a phone call.

Mail out the questionnaire with an accompanying letter explaining why you need this information and what the information will be used for. Emphasize that all commercial information they provide will remain completely confidential and will not be shared with anyone else, whether buyer or supplier.

Allow 2 to 3 months for a supplier to complete the questionnaire from the time that they receive it. It tends not to be a priority; also, the supplier may need time to gather the appropriate documentation. You will need to be prepared to answer questions and concerns that suppliers raise regarding the questionnaire.

Provide a deadline date for completion, stating clearly that if they fail to return a completed questionnaire, they will be rated automatically as a high-risk supplier. You may need to contact some suppliers just before the deadline to remind them what they need to do; you also may need to extend the deadline by a few days for some.

Emphasize that the supplier needs to provide appropriate objective evidence to support all self-declarations. This is still an inexact science. What constitutes objective evidence to support the answers to the range of questions will vary significantly from one country to another.

Make sure that the mill or manufacturer is answering the questions or supplying the appropriate information when the organization you have sent the questionnaire to is merely acting as an intermediary for a mill or manufacturer. Some intermediaries get concerned about confidentiality. If you deal with this type of organization, you may need to reassure them that you are not excluding them from the supply chain but merely want answers to questions: Where did it come from? How did it get here?

Ensure that all forest sources for each product are identified, if known. Although you may be asking a single supplier about a single product, if you purchase significant quantities, or different components of composite products, these may come from more than one source forest, and even more than one country. One of the sources may be legal and the other not, making an entire product line effectively illegal. Traceability is critical in such cases.

Below are some common issues that arise when suppliers are asked questions regarding their sourcing of forest products, along with suggestions on how to deal with them.

Supplier didn’t provide enough information—Major gaps in data make it difficult to make any form of assessment. Talk to the supplier and find out why it cannot or did not provide the data requested. If the supplier does not have the technical expertise, ask that it request its own suppliers to furnish the missing data and to collate these data for you. Agree on a date by which the data will be provided.

Supplier misunderstood a question—Make contact with the supplier and explain why you are asking the question and what sort of answer you require.

Supplier refuses to complete the questionnaire—The supplier may refuse to complete questionnaires or provide data. Lack of resources is a common excuse, as is “company policy.” Explain to the supplier that your requests are valid and that you routinely make this request of all your suppliers. Small suppliers may have genuine concerns about committing time and resources to providing data; in such circumstances agree that the data can be provided in small segments over an agreed-upon period of time. Suppliers that continue to avoid supplying data should be given an ultimatum, after which they should be removed from the supply chain. This is a last resort, however, and the intervention of senior management on both sides may be useful to maintain a dialogue and to avoid this.

Concerns over confidentiality—In some industries and in some countries it is common to experience concerns over the confidentiality of supply chain data. This can be overcome in a number of ways, ranging from giving the supplier verbal assurance that the data are used for environmental and quality control purposes and will not be used in a commercial context, through to giving the supplier a signed confidentiality agreement. The provision of data may have to be made in a manner that furnishes the required information without revealing the names of commercial intermediaries or processors. However, full disclosure is preferred and may come in time as part of an action plan.

Supplier “does not feel responsible”—Some suppliers do not feel obliged to respond to requests for supply chain data. Arguments can vary, from a position of “being too small to have any effect” to “it is none of your business.” Suppliers in this situation should be given an opportunity to reflect on their position. Experience has shown that companies with little regard for their customers’ expectations and requirements usually fail. If a supplier cannot change its opinions and recognize your point of view, it should have no place in your supply chain.

Supplier cannot provide evidence of legality—Depending on your supplier’s place within the supply chain, obtaining such proofs may prove difficult. Those supply chain elements furthest removed from the forests or primary processors will experience the greatest difficulty in obtaining the required documentation. You have several options to address this difficulty: Give the supplier more time to obtain the documents required.

Encourage the supplier to source forest products in less controversial areas.
Encourage the supplier to seek independent certification for its forest products.
Encourage the supplier to obtain a third-party legal verification audit.


3.0 Policy Development

Policy Development This section deals with the critical issue of how to develop a policy to promote responsible sourcing. This policy will dictate the activities that must be undertaken to deliver the objectives of the programme as a whole.


4.0 Communications

CommunicationsKey Points - Communications


6.1 Dealing with Unknown and Unwanted Sources

Unwanted Sources

Unwanted Source

Unwanted sources may have a high degree of traceability or be simply unknown. Where the source is identified, the key information is that the source clearly does not comply with the requirements of the organization's policies, and there is no remedy for this situation. Where remedies can be identified, these should be included in action plans developed with the supplier. The progress of these action plans should then be reviewed periodically, and, if improvements are made, the source may be categorized as a limited knowledge of forest source or higher. If improvements are not made, the source remains unwanted.

Unwanted sources can be identified virtually at any stage in the assessment process and a source that was previously regarded as acceptable may on further investigation be regarded as unwanted. This may be through obtaining further information direct from the supplier or through other parties.

Limited knowledge of forest source may not be regarded as unwanted initially, but if the source remains of limited knowledge after SMART targets have been set, it must inevitably become regarded as unwanted and be dealt with accordingly.


3.4 Focusing Policy on Legal Compliance

Policy Development In defining the scope of its sourcing policy, your organization will need to understand the regulation affecting forestry and trade of forest products in the markets where you operate and source from. Your organization should also identify other legal issues of concern for your key stakeholders. Then your organizations will need to balance the range of legal compliance issues with teh need to contain auditing costs. Note legislation affecting the legal trade of forest products is increasing globally with examples such as the amendment of the Lacey Act in the US, the European Union Timber regulation and the Australian Illegal Logging Prohibition Bill. You can find more information on legality in other sections in this guid that address this issue. 

A comprehensive approach to determining the legality of forest products could cover many issues beyond forestry. For example, the policy could explore adherence to laws relating to taxes, labour, health, corporations, transport, customs, pollution or money laundering;  ingredients besides wood (finishes, other materials, packaging) and phases of production (harvesting, hauling, milling, shipping, manufacturing, trading and end use). In addition, a full approach could address the procedures leading up to the grant of a timber permit, including adherence to planning laws, impact assessment requirements, tendering procedures, contractual "fairness" provisions and absence of any suspicion of corruption or collusion.

Your policies need to prioritize the legal compliance problems to be addressed; for example, is the focus on illegal logging or does it also include labour and pollution laws in factories further along the supply chain? The following approaches can be used to find this balance.

A key role of your policy on illegal logging is to establish the framework upon which a culture of legal sourcing can be built. A good policy will precisely define the issues that it seeks to address and will identify what is and what is not acceptable to your organization. The policy should clearly convey the values of your organization and show how these values will be upheld.

Although pervasive corruption is a major cause of poor forest governance, this manual focuses on illegal logging and related trade. Experience has shown that both illegal harvesting and related trade can be addressed directly through responsible sourcing, whereas pervasive corruption is a broader problem that generally requires a different set of responses. (For mechanisms to address corruption, go to Transparency International Web site at www.transparency.org.)

More information on the negative impacts of supporting the illegal trade in forest products can be found here.

Note for GFTN Participants: GFTN participant companies are required to agree a scope of their participation that at least covers their main impacts regarding sourcing of wood or fibre.


Illegal Logging

Implications for Those Buying and Supplying Illegal Timber

Companies that buy products containing illegal timber may do so knowingly or because they have failed to exercise due diligence over their supply chains. Either way, the potential negative consequences of trading in such products include the following:

The global trade in illegally extracted timber is a multibillion dollar industry. Illegal logging occurs when timber is harvested, transported, processed, bought, or sold in violation or circumvention of national or sub-national laws. Although generally portrayed as a problem in tropical forests, illegality also occurs in developed countries and economies in transition.

Negative Impact of Illegal Logging

Illegal logging takes place in many countries on a small scale and has limited impact on the environment or society in general. However, in a significant number of countries, illegal logging is a major problem that poses a serious threat to forests, communities, and wildlife.

The negative impacts of illegal logging include:

Further information within the WWF website on the negative impacts of illegal logging can be found here.

Countries Where Illegal Harvesting Takes Place

Although exact figures are difficult to obtain (given the nature of the activity), recent estimates of the scale of illegal logging in some countries are provided below. Every effort is made to keep this table as up to date as possible, but it is suggested that the www.illegal-logging.info website is used as a starting point to obtain the latest information.

It is worth noting that all of the sources below have employed a variety of methodologies to derive the estimated figures. The most recent data available suggests that there may be some reduction in some countries though this is difficult to assess given the range of methods employed. What is clear is that nearly all of the countries highlighted have, and continue to experience, serious levels of illegal harvesting and illegal trade in their forest products industries and are therefore considered high-risk from the purchasers perspective.

Country sources of illegally harvested timber

Country

American Forest & Paper Association Estimates of “Suspicious” Timber

Other Estimates of Illegal Logging

Source of Other Estimates

Eastern Europe

Russia

15–20% of production
15–30% of exports

25% of exports

25–50% of exports

 

30% of production
(one-third)

 

20–60% of production

World Bank 2005 (1)

 

USDA Foreign Agricultural Service 2005 (2)

House of Commons Environmental Audit Committee (UK) 2006 (3)

IUCN 2005 (4)

 

Estonia

 

50% of production

 

50% of production

Taiga Rescue Network 2005 (5)
Estonian Green Movement 2004 (6).

Latvia

 

20% of production

 

15–20% of production

Taiga Rescue Network 2005 (5)
WWF Latvia 2003 (7).

Africa

Cameroon

30% of production

50–65% of production

25% of all production
(less in export oriented production)

World Bank/WWF Alliance 2002 (8)

Chatham House 2009 (19)

Equatorial Guinea

30% of production

 

 

Gabon

30% of production

 

 

Liberia

30% of production

100% of production

National Transitional Government of Liberia (NTGL) 2005 (9)

Ghana

30% of production

50% of production

The Forestry Commission of Ghana 2003 (10)

Asia Pacific

Vietnam

 

73% of imports from high-risk countries

Chatham House 2009 (19)

Indonesia

60% of production
55% of plywood exports
100% of log exports

80% of production

 

83% of production

40% of harvest

House of Commons Environmental Audit Committee (UK) 2006 (3)

CIFOR 2004 (11)

Chatham House 2009 (19)

Malaysia

5% of production
70% of log imports

 

 

Papua New Guinea

20% of production

65% of log exports

Forest Trends 2006 (12)

China

30% of production
30-32% of export products

50% of production

 

USDA Foreign Agricultural Service 2005 (13)

Latin America

Brazil

15% of production
15% of export products

37% of production

Imazon 2005 (14)

Peru

 

70-90% of production

80%

 

> 90% of exports (mahogany)

ITTO 2002 (15)
The Peruvian Environmental Law Society, 2003 (16)

 

ParksWatch 2005 (17)

Ecuador

 

70% of production

Ecuador's Wood Industry Association 2005 (18)

 

 

 

 

Note: Note that illegal harvesting does not just occur in developing countries. It occurs to a limited extent across Europe and North America. Good regulatory systems that are enforced, however, ensure that it is kept to a minimum.

For more information on illegal logging go to www.illegal-logging.info. The site is maintained by the Energy, Environment and Development Programme of Chatham House in London, with funding from the UK Department for International Development (DFID).

(1) World Bank, 2005, Forest Law Enforcement Governance (FLEG) in Eastern Europe and Northern Asia (ENA-FLEG). p. 8.
(2) USDA Foreign Agricultural Service GAIN Report, 2005, Russian Federation Solid Wood Products Forestry Sector Continues to Struggle 2005. p. 4.
(3) House of Commons Environmental Audit Committee, 2006, Sustainable Timber: Second Report of Session 2004-05. p. 12.
(4) IUCN Global Temperate and Boreal Forest Programme IUCN Office for Russia and the Commonwealth of Independent States, 2005, The Beginning of the ENA FLEG Process in Russia: Civil Society Insights. p. 21.
(5) Taiga Rescue Network, 2005, Sweden: Forest Industry – Giant with Big Timber Footprints in the Baltic Region. p. 2.
(6) Estonian Green Movement, 2004, Illegal forestry and Estonian timber exports. p. 2.
(7) WWF Latvia, 2003, The features of illegal logging and related trade in the Baltic Sea region. p. 5.
(8) World Bank / WWF Alliance, 2002, Forest Law Assessment in Selected African Countries. p. 19.
(9) All logging concessions in Liberia were cancelled in Feb 2006 following a report by the Forest Concession Review Committee - Phase 3, 31 May 2005, which had found that no individual concession holder was able to demonstrate sufficient level of legal compliance. UN Security Council sanctions were re-imposed on Liberian timber exports in December 2005.
(10) The Forestry Commission of Ghana, 2003, Keynote Address by Hon. Prof. Dominic K. Fobi - Minister for Lands & Forestry.
(11) Tacconi L, Obidzinski K, Agung F, 2004. Learning Lessons to Promote Certification and Control Illegal Logging in Indonesia, Report for the WWF/TNC Alliance to Promote Forest Certification and Combat Illegal Logging in Indonesia, Centre for International Forestry Research.
(12) Forest Trends, 2006, Logging, Legality, and Livelihoods in Papua New Guinea: Synthesis of Official Assessments of the Large Scale Logging Industry Volume I.
(13) USDA Foreign Agricultural Service GAIN Report, 2003, People’s Republic of China Solid Wood Products Annual 2003. P. 5.
(14) Figure based on data from IMAZON (Amazon Institute of People and the Environment) and Brazil’s environmental agency Ibama. Imazon, 2005, Human Pressure in the Brazilian Amazon. P. 5.
(15) ITTO, 2002, Achieving the ITTO Objective 2000 and Sustainable Forest Management in Peru – Report of the Diagnostic Mission. P. 4.
(16) The Peruvian Environmental Law Society, 2003, Case Study on the Development and Implementation of Guidelines for the Control of Illegal Logging with a view to Sustainable Forest Management in Peru.
(17) ParksWatch, 2005, An Investigation of Illegal Mahogany Logging in Peru’s Alto Purús National Park and its Surroundings. The report confirmed nearly all of Peru’s exports of Mahogany were illegal.
(18) Office of the United States Trade Representative (USTR), 2005, Interim Environmental Review of the United States-Andean Free Trade Agreement.
(19) Chatham House, 2009, Illegal Logging and Related Trade: 2008 Assessment of the Global Response (Pilot study), Duncan Brack, Sam Lawson & Larry MacFaul.

 

Seneca Creek Associates and Wood Resources International, 2004, “Illegal” Logging and Global Wood Markets: The Competitive Impacts on the U.S. Wood Products Industry.” Prepared for American Forest & Paper Association. Available from www.afandpa.org.


 


3.1 Where to Start

Responsible Sourcing Policy DevelopmentThere is no right, wrong or perfect set of policies to underpin the effort to achieve more responsible sourcing of forest products. However, it is important that the policy be aligned with SMART targets (these types of targets are discussed later).

It is also important that policy makers consider the consequences of their policy prior to its implementation. Strong policies, for example, may have a financial cost that renders them unsustainable; and weak policies may attract criticism from stakeholder groups. Therefore, a workable balance must be struck. It is important for the values of stakeholders to be reflected within the policies developed.


13.1 Improving Supply Chains and Supplier Performance

There are numerous ways by which to improve the supply chain. This section highlights some of the more common methods and their benefits.

The Same, But Better

Reviewing and Improving the  Programme

Working with an existing supply chain has the major benefit of keeping out new and unknown suppliers or materials, with all the risks that these can entail. If the chain has developed successfully, a degree of understanding and trust already exists among the organizations that make up the chain. Therefore, working with existing supply chains to achieve more responsible sourcing is a desirable option when heavy investment has been made in establishing the chain or in the timber it supplies; the suppliers involved have unique skills, technology, or sources of raw material; or a change in suppliers may have an adverse impact on business.

If working with existing supply chains is to be a viable option, they need to be able to demonstrate a commitment to, and acceptance of, the purchasing organization’s policy and targets; a willingness to improve transparency in sourcing; a commitment from the forest sources involved to achieve certification within an agreed-upon period; a commitment from the intermediaries in the supply chain to achieve chain-of-custody certification within an agreed-to period; and the commitment of forest owners to seek participation in a stepwise approach program (such as the GFTN) to otherwise attain credible certification.

New Source, Same Suppliers

Manufacturers or processors supplying directly to the purchasing organization may have difficulty tracing the sources of their forest products, or it may become evident that these sources are illegal or include unmanaged high conservation values. Where the direct supplier demonstrates sufficient commitment and it is evident that the forest sources involved are unwilling to improve their practices, re-sourcing is the only option.

Re-sourcing while using existing suppliers offers the following benefits

All-New Supply Chains

Radically altering supply chains to improve the responsible sourcing of forest products can be the quickest way to ensure such improvements, but it is also the riskiest.

The following are potential risks:

The potential benefits include:

Other Ways of Improving

The ability to challenge, innovate and ultimately change can be extremely useful when pursuing the goal of responsible purchasing. Not every purchasing organization can change its sourcing or its products easily or quickly, but some purchasing organizations have this ability and can benefit from such changes.

The exploitation of alternative species of timber provides opportunities to source more responsibly, although if the purchasing organization lacks experience or familiarity with the timber some risks may be involved. As with all timber species, secondary (or nontraditional) species have inherent characteristics that can make them excellent substitutes for primary (traditional) species for some uses but unsuited for others. In fact, up to 70 per cent of output in some major producing countries consists of nontraditional species, and these species command considerably lower prices than the primary species. This potential provides a financial incentive to organizations able to develop markets for such timber species.

Initiating funding or research into the process of certification and the requirements of supply chains is an option for responsible purchasers. Not all purchasing organizations have the resources necessary for such work, but some major corporations have provided funding in the past. This type of initiative has direct benefits, not just to the donor organization but to all aspiring purchasers in a position to gain by using the findings of the research.


2.2 Conducting a Baseline Assessment

Supply Chain Review A preliminary analysis of the organization's current sources of forest products must be undertaken to broadly categorize supplies according to the level of traceability and the environmental status of source forests. This analysis should include an investigation of key suppliers to identify any issues or concerns that will require further investigation. This analysis may form the basis for prioritizing certain supply chains or source countries when the fuller process of assessment commences.

The baseline assessment should match the information-gathering and assessment systems that are discussed in more detail within elements five and six: establishing traceability and determining the environmental status of supplies. This will help ensure that only one system will need to be developed and suppliers will not face a variety of different processes that will lead to confusion.

The baseline assessment is very likely to reveal gaps, sometimes major, in the picture of the supply chain. These gaps are the priority areas for future target setting and activity. The baseline assessment provides a snapshot of the current situation and may reveal large areas where transparency and policy compliance is poor. Without this assessment, it is impossible to identify targets for improvement in the short, medium and long term.

Note for GFTN Participants: Companies that are applicants to the GFTN will routinely be asked to complete a baseline assessment prior to developing their first action plan. A template of a GFTN baseline appraisal is available from your local GFTN manager.


15.0 Supporting Information

 

Glossary

Questionnaires




This is an excerpt from WWF’s Global Forest & Trade Network (GFTN) Guide to Responsible Purchasing. All rights reserved. © WWF. The full text can be accessed online at rpg.gftn.panda.org.
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