A recent study published by Forest Trends, based on a survey of forestry professionals, has revealed the varied successes and stumbling blocs generated by the European Union Timber Regulation (EUTR) since its introduction in 2013.
The questionnaire, completed by 72 timber ‘Operators’ and ‘Traders’ of various corporate sizes; ranging from under 10 employees to over 250 from within the single market, provides an insight into the efficacy and changes initiated by more stringent timber control.
What appears to be one of the great successes of EUTR, has been the increased knowledge of company supply chains, which has lead to the “systematisation of their sourcing approach including…specific risk assessments and prohibited species lists.”
When first formulated, EUTR represented a groundbreaking expansion of corporate responsibility in the wood industry, requiring companies to examine their own supply chains and mitigate the risk of illegality until it becomes negligible.
In the past, operators moving wood into the EU have placed an overwhelming reliance on third-party certification schemes, such as FSC and PEFC, to mitigate risk and comply with EUTR. This is problematic, as although FSC wood is likely to have its origins in well-managed forests, it in itself does not fulfil EUTR stipulations of a negligible risk of illegality. However, as a consequence of the new regulations, it appears that attitudes and understanding of mitigation and risk assessment are improving.
The dangers of placing too much emphasis on FSC certification have recently been placed in the spotlight, following a report published by the environmental watchdog Earthsight. The report ‘Flatpacked Forests’, asserted that IKEA had been sourcing illegally harvested and unsustainable wood from the Ukraine that was nonetheless FSC certified.
Consequent allegations of ‘greenwashing’ and a lack of transparency in its auditing process have lead many ENGO’s, including Greenpeace, to withdraw their support from FSC, damaging the certifiers credibility. Therefore the use of FSC third-party certification as the “main mitigation tool” in risk assessments is now unacceptable.
It is clear that the industry professionals participating in the Forest Trends study have understood this and now incorporate a plethora of risk assessment tools: “with most using a combination of tools such as Preferred by Nature’s (formally NEPCon) Sourcing Hub and the Transparency International’s Corruption Perception Index”.
Other important market changes and difficulties that have been generated by EUTR are as follows:
The use of more detailed risk assessments have also allowed for the “flagging” of supply chains from countries considered potential sources of illegality. In order to combat illicit origins, the firms surveyed provide ample evidence of new and improved methods of diverting their sourcing of timber.
The movement of supply chains from Brazil, evaluated to be high risk due to: “a deteriorating political context and international media coverage”, demonstrates a willingness of the surveyed firms not only to comply with the complicated regulations but also to mitigate: “reputational risk for the company”.
The identification and removal of species-specific sources of illegality is also becoming much more widely adopted. Most frequently cited as failing to meet due-diligence requirements is teakwood. Sustainable Wood has already published an article on the destruction of the teakwood forests in Myanmar, where previous junta regimes have exploited the highly sought after timber to bolster its failing economy.
The initiative taken by many Operators to avoid illicit wood is a clear sign of expanded corporate responsibility and growing awareness that illegal supply chains would attract the attention of ENGO’s. Therefore, the mitigation of risk is clearly seen by many of the surveyed companies as increasingly vital to sourcing policy.
The survey also illustrates many of the shortcomings and disparities in the industry created by EUTR; chief among which is an uneven enforcement of regulations between member states.
The inability of the EU to enforce its import restrictions becomes painfully clear in the aforementioned cases of teakwood from Myanmar and IKEA’s sourcing from Ukraine. In both instances, although legal action was taken by national forestry commissions against some of the firms involved, the contempt for the EU’s ability to enforce EUTR was clear. One Operator voiced their concern that it appeared: “counter-intuitive to ask companies to conduct Due Diligence when the resources to enforce it are not available.”
The survey revealed that several suppliers in the EU are allegedly continuing to offering cheap and undocumented wood, whilst others are bearing the expense of implementing and understanding the EUTR regulations.
Therefore, a major challenge presented to European policymakers will be formulating a clear set of legal consequence to be thrown behind its environmental regulations.
Overall EUTR appears to be stimulating positive change in the European forestry sector by encouraging firms to risk assess their supply chains and understand their responsibilities regarding due-diligence.
Although there are clear issues with the regulations, such as its complexity and the inability of the European Commission to enforce it universally, it is fair to surmise the EUTR still represents a major step forward in ensuring sustainability of European supply chains.