The fast-approaching EU Timber Regulation (EUTR) should hold no fears for the UK timber industry, particularly those companies that are Timber Trade Federation (TTF) members and signatories to its Responsible Purchasing Policy (RPP).
That was the overriding message at the TTF’s recent workshop on the anti-illegal timber legislation. "We think the EUTR is a good thing," said chief executive John White. "We’ve lobbied for it and we think it provides real validation for our work in the UK on responsible sourcing.
"We’ve seen the volume of tropical timber [into the UK] fall over the years because of legality issues but this legislation might actually lead towards an increase in volume as people will be able to offer tropical timber with guarantees of legality," he said.
"We’ve now reached a point with the RPP where the EUTR shouldn’t hold any fears – but the devil is in the detail."
Some of that detail – or, at least, a promise of detail to come – came from Stephen Lowe from Defra’s EU & International Forestry Team. While his message was that some of the necessary guidance on implementation of the EUTR still needed to be ironed out, he said the UK was very well placed.
"I’m spending a lot of time in Brussels and, seen in comparison with other [EU member countries], we’re well down the track and UK companies are way ahead on risk assessment," he said. "For many UK companies the EUTR will be more about reinforcing their existing practices than implementing something completely new."
The EUTR sits within the EU’s overarching Forest Law Enforcement Governance & Trade (FLEGT) action plan. On the supply side of this are the Voluntary Partnership Agreements with countries exporting timber to the EU. The other arm, on the demand side, is the EUTR, which covers all timber first placed on the EU market.
While six countries have signed VPAs, there is currently no FLEGTlicensed timber under a VPA available yet – although Ghana and Indonesia are tantalizingly close and Cameroon is coming up fast on the rails.
"Once timber has a FLEGT licence it will automatically comply with the EUTR," said Mr Lowe, "but those licences aren’t ready yet, so, until they are, due diligence will still be necessary [for timber from those countries]."
Due diligence for operators placing timber on the EU market is at the heart of EUTR compliance. It comprises very tangible information gathering – species, country of harvest, type of product etc – and the slightly less tangible risk assessment and risk mitigation procedures.
No set system
"On risk assessment procedures the guidance supporting the regulation will provide greater clarity as to what a reliable and acceptable certification or legality verification system should include," said Mr Lowe. "There will be no set system and the operator will undertake due diligence on a case-by-case basis.
"Similarly, risk mitigation procedures should be on a case-by-case basis and an ongoing process."
The National Measurement Office (NMO) has been appointed the ‘Competent Authority’ and will police implementation of the EUTR in the UK . However, its funding has yet to be arranged, so while it has "timber experts on board and plenty of experience in due diligence systems", it is not yet in a position to provide any advice.
In fact, further guidance is still in the melting pot. For example, the EU has to provide guidance on what "placing on the market" actually means as this can have different interpretations in different countries.
It also has to define "negligible risk", and the role of certification schemes. And it has to firm up on the implications for timber packaging.
"If you import it because you’re a packaging company then it is inside the scope of the EUTR," said Mr Lowe. "However, if you’re importing goods on a timber pallet, that pallet is outside its scope."
The position of agents also remains to be determined as, while they source stock, they don’t own it at any point. "They may be outside the scope of the EUTR but it’s going to depend very much on the structure of the contracts," said the TTF’s sustainability manager, Anand Punja.
The next steps for the UK will be a consultation launched in October; and development of further guidance and of an EU-wide communications strategy. Adoption of the secondary legislation – ie implementing the EUTR in UK law – will be the final step and Defra is "confident that we’re on track for this to happen on March 3", said Mr Lowe.
While the EUTR should hold no fears for reputable timber companies, "getting it wrong" could have a profound effect on a business, according to Neil Woods, group purchasing manager, timber at Grafton Merchanting GB.
Despite this jeopardy – or perhaps because of it – he is a self-confessed fan of the EUTR.
"I love this legislation," he said. "It will increase transparency and level the playing field.
"A fully legal supply chain will become compulsory and due diligence will no longer just be a housekeeping exercise," he continued.
"Products will be traded for what they are and not what they appear to be and there will be a uniform level of responsibility."
There will be a wealth of opportunities for those companies staying on the right side of the legislation but "going wrong could be catastrophic", particularly in today’s tough economic environment, he said.
Not only will the NMO be policing the EUTR but the environmental NGOs will also increase their focus on the timber trade. "They’re the ones who will really tell you if you’ve done wrong," cautioned Mr Woods.
"The NGOs will play a far more active role in the industry. We should be engaging and open with them and making them our new best friends. They can play a very positive role in ensuring the rules are enforced."
He added that all the risks of non-compliance would have financial implications.
"There’ll be seizure of stock and fines, which is straight off the bottom line," he said. "There will be legal fees and shares will be dumped and investors will withdraw. There will be broken contracts and customers will have the opportunity to walk away or renegotiate. There will be lost sales and the loss of approved supplier status. There will be expensive replacement costs – a tough market and tight inventory controls make replacing stocks from landed materials expensive. There will also be the cost of rebuilding relationships and reputation."
And, he said, there was the ultimate sanction of a custodial sentence to consider. "You’d make new friends," he said, with heavy irony.
"Don’t think it can’t happen to you," said Mr Woods. "Use a proven, reliable measurement scheme which can be trusted by all – RPP is an off-the-shelf recognised system of measurement.
"Adopt a common reporting scheme that everyone can understand and use," he continued. "Keep up to date with the rules as they take effect – and don’t leave it too late."
That was certainly the message from the TTF, too. The legislation may not bite until next year but "if your products are ordered now and will be placed on the market after March 3 then you should be doing your due diligence now," said Anand Punja. And, he added, due diligence should always be carried out "up front, prior to contract".
Commercial sensitivities
"The legislation encourages transparency in the supply chain and that’s always a challenge for the timber trade as there are commercial sensitivities around revealing suppliers’ names," he continued.
But, by way of encouragement he added: "At the recent PEFC Stakeholder day, Julia Griffin from B&Q stated that their long-term aspiration is to not buy anything that doesn’t have complete traceability – that’s quite a strong statement.
"Based on the implementation of RPP for the previous two years, TTF members already know where the risks are in their supply chains, so use that information," he advised, adding that the RPP is a cost-effective framework for real time due diligence.
"For effective implementation accept that due diligence is an art, not a science. Engage with the EUTR at all levels and use it as an opportunity over non-TTF members," he said. "And, if possible, adapt and update your software business systems to integrate the RPP. Most importantly, take responsibility for your own RPP."
