EUTR – a work in progress

Chris Powell is owner and managing director of CP Timber
The introduction of the EUTR should have come as no surprise to anyone at operator level. We had plenty of warning in the trade press and from the TTF. Whether it was welcomed with open arms or not is another question!

One year on and without doubt everyone considered to be an operator is spending increasing time on due diligence. During the first year, clarification as to what this actually involves has been somewhat vague and left to operators to determine. And the same applies to what to do with the information gathered and how to present it.

There’s no doubt that the EUTR has led to a greater number of questions being asked, particularly by companies at trader level, which on occasion seem unclear as to what operators are obliged to provide them.

And as a TTF member, it has appeared at times as though we have to run dual due diligence systems for the EUTR and the TTF’s Responsible Purchasing Policy (RPP).

On a positive note, with the EUTR now in force, producers that are unable/unwilling to satisfy the due diligence requirements are finding that operators have little option but to remove them from their supplier list. Evidence of this has been seen in parts of West Africa, amongst other areas.

Similarly, the EUTR has given improved credibility to producers that have in place either certification and/or third-party verification, which at last pays them dividends for the time and expense incurred in achieving this status.

For the EUTR to have a full impact in terms of reducing the threat of illegal logging, it needs to be correctly policed in all EU states – and similar regulations need to be applied worldwide. The latter, I accept, is easier said than done.

Flavio Gomes is business unit manager, assurances, Bureau Veritas
Bureau Veritas is working closely with many operators on the EUTR and has assessed more than 70 suppliers in Asia, Africa and Latin America. Undoubtedly the Regulation is having a positive impact on illegal deforestation and the wider issue of sustainability, although there is a significant amount of work to do to raise awareness and promote understanding of the EUTR.

On a positive note, it appears to have driven up implementation of forestry certification systems, such as FSC. While such systems do not assure compliance, as operators buying from certified suppliers still need to exercise due diligence, independent certification is a valuable asset. This uplift can only be good for forest stewardship.

With regard to the EUTR itself, most EU member states, including the UK, have appointed competent authorities to enforce it and implemented penal requirements and the enforcing structure. In some countries penalties for non-compliance have already been issued. In the UK, the National Measurement Office and Defra have implemented the UK Statutory Instrument for the regulation that places a range of sanctions on non-compliance and operator inspections are under way.

To date we have found that the smaller operators, usually sole traders, are aware of the Regulation, but still struggling to understand it and are therefore slow to implement it. Larger operators, major retailers and importers, have either implemented their own due diligence systems or have outsourced systems. The latter helps companies overcome the challenges of sourcing timber from multi-suppliers and collating and assessing information in different languages. There are also still non-specialist timber companies unaware that they are subject to the EUTR, nor are they familiar with the range of products impacted.

A key issue that still needs addressing is operators’ exercise of due diligence. Many are going halfway and gathering necessary information but not taking the final step of assessing whether suppliers are harvesting timber products in compliance with legislation in the country of origin. To avoid repercussions, we advise that those final steps are taken to demonstrate that due diligence systems are fully operational.

Tony Miles is managing director of International Timber
As a Saint-Gobain company, International Timber had a responsible procurement policy in place for several years before the EUTR came in to force. Its demands are in some ways even more stringent than the Regulation, so we were well placed to take on board the changes, as responsible procurement was already embedded in our culture.

We checked systems to ensure that our existing policy was 100% compliant with the EUTR and ensured our workforce understood the implications, and could properly communicate this to customers and suppliers. We were one of the first companies to be visited by the regulators and were given the all-clear straight away, so the impact on our business and how we operate was minimal.

However, customers needed to understand the EUTR and how it affected them. I wrote to our entire customer base to inform them of the changes and reassure them that they could be confident of our compliance, at the same time explaining what direct impact the EUTR could have on them and where their responsibilities lay as end users.

Moving forward, education is vital. Although the EUTR has been generally well received and adopted across the industry, it is difficult to see, with the resources available to the National Measurement Office, how it will be policed effectively. This needs to be clarified.

Overall, our experience of the EUTR has been positive and I believe it can only be a good thing for the industry. It’s early days and there’s still an education process required to ensure that the Regulation is fully enforceable, but I see it having an increasingly positive impact as time goes on and knowledge of it and its implications grows.

Chris Cox is head of environment at TIMBMET
In the run-up to the EUTR pre March 2013 there was a degree of apprehension regarding implementing the regulation and its impact on our purchasing, but matters settled down pretty quickly in practice.

We were favoured with an early visit from the NMO in June, which enabled them to get audit experience and I think they learned as much from us as we from them. Perhaps surprisingly for a company of our size and product range, we are mostly ‘traders’ rather than ‘first placers’, buying through specialist importers who will be one stage closer to their suppliers and thus in a better position to conduct due diligence as required. In the absence of a standardised evidence of EUTR compliance, those importers have been happy to give individually crafted written assurances of compliance and forward details of species composition and country of origin.

The largest part of our first placer business is from the US – and for the non-certified imports we invoke the common sense risk assessment of ‘negligible’, which seems to be acceptable. Likewise, third-party certification is good evidence of negligible risk, subject to the usual checks on certificate scope and validity. The impending Online Claims Platform from the FSC should further assist in making such checks routine and highlight potential false claims.

Indonesian and Malaysian exporters are now mostly complying with the Malaysian Timber Legality Assurance System and VLegal documentation, while OLB and remaining Timber Legality & Traceability Verification exports from Africa give some degree of legality assurance.

Our most contentious imports as First Placers were from Côte d’Ivoire. After a due diligence visit to key suppliers last June, we concluded that the systems underpinning legality in place were surprisingly robust. While exports from Côte d’Ivoire are almost certainly not sustainable at current levels, they are legal according to current legislation. Forest legislation in Côte d’Ivoire (over 40 years old and out of sync with reality) is under review and the country is also now engaged with the FLEGT process.

We believe that the UK market should stay engaged and encourage the move toward value (engineered product) rather than volume and, over time, bring demand back in line with available supply.

We expected that products made in China would be a challenge under the EUTR, however, this has proved to be less problematic in practice. Many products are assembled from local plantation poplar with US species, so the risk of illegal harvest can be set to low.

Paul-Emmanuel Huet is social and environmental manager at Rougier
Rougier is involved in meeting the EUTR on two levels. We produce African tropical timber and are therefore required to provide proof of legality for our operations in Cameroon, Congo and Gabon. We are also tropical and temperate timber importers into the French market, so have to implement a due diligence process to ensure our supplies are EUTR compliant.

Before the establishment of future FLEGT licences in Africa, Rougier obtained certification of legality for its entire African production; and certification of good forest management (FSC) for operations in Cameroon and Gabon. These third-party certificates provide European customers with the necessary guarantee of legality, after which they can easily complete their due diligence processes.

Nearly a year after the EUTR came into force our European customers are increasingly interested in third-party certified products. But despite this there are some regrettable post-EUTR issues:

• Many European importers of African timber don’t yet instinctively supply third-party certified timber, when it is available at little or no extra cost. Certified timber is a strong way to avoid the risk of illegal timber, a support for serious, committed producers and a way to promote that the industry is proving legality. Field audits often take days, during which detailed assessment is made against local regulations. But due diligence without third-party certification is often based on documents from suppliers, offering some guarantees but covering only part of the relevant legislation in the producing country.
• Instead of supplying products certified from well-managed forests (FSC), some importers also now lean towards legality-labelled products (OLB from Bureau Veritas, TLTV from SGS, VLC from the Rainforest Alliance). Such products usually meet EUTR requirements. However, certification from well-managed forests goes well beyond certification of legality, providing far more guarantees on social and environmental issues through the entire chain of custody.

So Rougier is calling on the EU for third-party issued certificates (of legality and of good forest management) to be better recognised as guarantees of legality in the same way that FLEGT licences will be. We are also asking for clear distinction between "legality" and "good forest management" certification to support the substantial investment in time and money made by certified producers, including Rougier.

We would also like to see harmonisation of operator auditing methods used by all Competent Authorities and promotion of good forest management certification via EU public procurement policies.

Frank Miller is managing director of Track Record Global
Since the EUTR came into force in March 2013, Track Record Global (TRG) has had four of its customers audited by EUTR Competent Authorities. Each is a major operator in the EU timber sector and they’ve all implemented Track Record Global’s Track Vision DD (due diligence system).

The three international operators based in the UK have all been recognised by the National Measurement Office (NMO) as compliant with the EUTR, which substantiates TRG’s claim to have developed one of the most robust and rigorous DD’s currently available to operators and traders.

Because TRG has been at the vanguard of developing a DD that comprehensively complies with the EUTR, on behalf of our customers we have been able to provide the NMO with straightforward access to the detailed information and evidence required for an EUTR audit.

Where our Track Vision DD stands out from other organisations offering similar systems is the fact that it has been developed from the outset as an online system. Delivering results to the NMO from a web platform gives the NMO the opportunity to efficiently carry out more audits in a less intrusive manner, which is key for the EUTR to succeed and to be seen as an effective regulation. In TRG’s view, it is the way that all regulations of this type will be compliance checked by the authorities in the future.

Without doubt the EUTR is having a positive impact in the reduction of high-risk timber crossing the EU border, but to really make a significant impact the NMO needs to spend less time on site and more time reviewing the gathered evidence. This can only really be achieved if the DD is delivered online.

Another key differentiator to our approach to the EUTR is that TRG has no intention of becoming a Monitoring Organisation (MO) and will remain an independent body. We carry out audits on behalf of our customers. The information gathered is strictly confidential to them and is securely held by TRG. I really don’t think that MOs offer any advantages. The fact that four of our operators have already been successfully audited by the NMO proves absolutely that we have developed a comprehensive and robust DD that allows companies to demonstrate EUTR compliance.

We fully support the EUTR and, although it may still be too early to see its full impact, it has already led to more transparency about the structure of supply chains and more awareness and understanding of high-risk timber.

Joe Walker is managing director of Premier Forest Products
Premier Forest Products is quite comfortable with the scope and requirements of the EUTR. The levels of due diligence required are certainly robust and there’s no doubting that to do it properly requires considerable time and effort.

However, prior to the Regulation’s inception, we were already pushing well beyond the minimum requirements of pre-existing risk management schemes such as the TTF’s Responsible Purchasing Policy, with projects such as developing and acquiring ground-breaking VLO certification in partnership with The Forest Trust for our Chinese poplar sources.

We were also already working with Track Record Global in supply chain risk management to ensure the best possible levels of diligence so we saw the EUTR requirements as a natural extension to that, and something that Premier still welcomes if it can assist in filtering out illegal sources so often associated with undermining fair trade in the industry.

Scrutiny of our supply base has never been closer, but there are tangible benefits to that beyond meeting the Regulation’s requirements – better quality and closer working relations with key trusted suppliers for certain.

In so far as the wider trade is concerned, the perception is that there certainly has been an element of scepticism and a certain amount of ‘head-in-the-sand’ attitude over the effective enforcement of the EUTR in the UK. However, we believe that those who are lagging behind or were simply unwilling to give away a possible commercial advantage by not fully engaging in the process are now beginning to feel increasingly alarmed by the fact that the NMO means business.

Joyce Lam is senior project manager at Proforest
For many EU-based companies, establishing due diligence systems is the key to compliance with EUTR. But this is just the beginning.

Even though EU-based companies understand the EUTR and how to run due diligence systems, the challenges remain on the lack of capacity of suppliers from other regions to understand and fulfil the requirements.

Ultimately EU companies are relying on their suppliers to provide assurance that the timber products they purchase are not from illegal sources. Therefore, helping suppliers to understand the requirements and evidence requirements is crucial. We believe that targeted training and capacity building of suppliers in timber producing and processing countries is therefore essential.

Over the past year, Proforest has helped companies with Chinese suppliers to develop a due diligence framework and carried out the necessary supply chain mapping. The companies have staff based in China to liaise with suppliers who have played a key role in acquiring necessary documents and explaining to suppliers what is required. In this process, we have transferred our knowledge to these Chinese staff, who are now able to effectively pass on the message of EUTR requirements to the suppliers.

We are also working on a project funded by the German Federal Ministry for Economic Co-operation and Development on the training of trainers on EUTR compliance in Thailand and Vietnam. The objective is to build capacity and increase the level of understanding of EUTR requirements among small and medium enterprises. These kinds of capacity building projects will be very much needed in the coming years.

Developing centres of expertise to provide the latest information and advice on EUTR will be valuable.