Broadly, the timber sector takes the view that March 3, 2013 will go down as a good day for wood.

This, of course, is when the EU Timber Regulation (EUTR) finally comes into force in all 27 member states and, while there are still a few dissenters, that’s generally now seen as something the industry should be able to turn to its advantage.

To recap, the EUTR compels all companies that ‘first place’ timber and wood products on the EU market (so-called ‘operators’ in Regulation jargon) to do due diligence risk assessment of suppliers to minimise the danger of sourcing illegal material. This embraces businesses from foresters, sawmillers and importers, to manufacturers and retailers, and timber grown in the EU, as well as imported.

‘Traders’, those who buy timber from ‘operators’, must then keep track of who they sell on to. One benefit of the EUTR, say operators, is that it should reduce unfair competition from illegal imports – reportedly worth billions of euros annually in the EU. Striking a blow against illegal loggers and traders it should also benefit the industry’s image.

"Compliance will be an environmental badge of honour for timber," said one operator.

While appreciating the ultimate pay-offs of the EUTR, however, an outstanding concern for many companies has been the perceived technicalities, costs and administrative burden of devising and operating a compliant due diligence system.

The good news here is that there are now a number of sources of one-off advice and longerterm EUTR support services; a number which has grown as the Regulation has approached.

Of course, members of the Timber Trade Federation (TTF) get its Responsible Purchasing Policy due diligence system as part of the package. The European Timber Trade Federation has also developed a system, designed to meet the "minimum principles of the EUTR" (www.ettf.info).

Meanwhile, BM TRADA Certification has been running seminars on taking the DIY due diligence approach, encompassing the BSI and WWF PAS 2021 due diligence guidance, plus progress that has been made by the FSC and PEFC towards their environmental certification schemes satisfying the terms of the Regulation on legality assurance.

"This won’t replace the need for a due diligence system, but will mean that FSC and PEFC-certified material shouldn’t need further legality risk assessment under the EUTR," said chain of custody manager Rafal Andruszkiewicz.

Due diligence consultancies
Companies which aren’t members of the above organisations, or want more hand-holding, can turn to a widening range of independent due diligence consultancies.

One, TTF member PRP UK, builds bespoke due diligence systems and revises existing ones for EUTR compliance. The processes cover reviews of purchase and sales controls, and chain of custody systems, due diligence manuals, supplier risk assessment, training. PRP additionally provides continued due diligence support.

"We’re also in talks with insurers to offer a compliance and regulatory insurance-backed product to cover legal expenses in the event of action by the National Measurement Office [the UK’s ‘competent authority’ for enforcing the EUTR]," said PRP’s Robert McLaughlin.

The company has received due diligence enquiries from businesses turning over £1.5- 15m, ranging from garden product, to toy and tool importers.

"TTF members have the RPP comfort blanket, but other timber businesses, or those outside the usual trade ‘sphere’, also need help," said Mr McLaughlin. "First-hand importing is gearing up with the help of the TTF, but in the wider industry there’s less preparation and understanding."

Sustainable forestry consultancy Proforest also reports wide-ranging interest in its EUTR services. "Many clients are not traditional, ‘hardcore’ timber traders, so don’t have much experience with supply chains and ensuring legality – they may not even be aware they have EUTR obligations," said Proforest senior adviser Sofie Tind Nielsen. "We provide expertise in supply chain assessment and support."

Proforest offers ‘one-off’ EUTR support, covering evaluation of current due diligence systems, supplier risk assessment and visits, training and workshops. It can also "develop and review bespoke [due diligence] systems".

"Additionally, we can give long-term technical support, identifying due diligence system needs via supply chain mapping, and implementing ongoing systems, with supplier engagement and a helpline," said Ms Nielsen.

Long-established supply chain management specialist Ligna Ltd is another well-known name in the sector. Having worked with the TTF in the development of the RPP, it now undertakes members’ compulsory annual audits. It also builds bespoke EUTR-compliant due diligence systems, including for TTF members who want a more tailored system.

"There are only so many ways to skin the due diligence cat, in terms of risk assessment and operating procedures, so our previous experience stands us in good stead for the EUTR," said managing director Mike Greenland. "At the same time, no two companies’ needs are identical, so we can provide a degree of customisation."

Ligna’s aim is to get clients so au fait with their system, they don’t need further help.

"But some ask us to come back to check risk assessment procedures or, if they don’t have the resources in-house, to provide more ongoing back-up," said Mr Greenland. "After all, they’re in business to sell timber, not operate a due diligence system."

According to Frank Miller, managing director of consultancy Track Record, the advantage of outsourcing due diligence to a consultancy like his company is that its "experienced team undertakes product due diligence assessments every day of the week".

"In a nutshell, we operate an EUTR due diligence ‘machine’ that gathers all that messy compliance information and produces a result that’s reliable and easy to defend," he said.

Track Record takes on one-off projects, but specialises in longer-term client partnerships. "Increasingly we directly support customers’ business processes, and they use our risk ratings in supplier negotiations," said Mr Miller.

Chinese supply chains
Track Record has direct contact with suppliers, employing Mandarin speakers to deal with "sensitive Chinese supply chains", and clients include such big names as Premier Forest Products, DLH and International Plywood.

"But we’re also being approached by small to medium-scale businesses," said Mr Miller. "As a small business ourselves, we know what it’s like having to manage cash flow, as well as adapting to new regulations."

The Soil Association’s Woodmark forestry and timber certification arm is one body aiming for Monitoring Organisation (MO) status under the EUTR. This entails it not only providing a due diligence system, but managing and monitoring it on behalf of users.

"Through our FSC and PEFC chain of custody work, our Woodmark legality certification, and worldwide auditor network, we’re ideally placed to become an MO," said Woodmark project manager Beck Woodrow. "We will provide companies with a ready-made system, and everything that’s needed for EUTR compliance."

Operators using Soil Association as an MO will be subject to annual audits, with additional scrutiny if sourcing patterns change, and will also undertake supplier checks.

Like other due diligence providers, the Soil Association anticipates growing interest in its services from companies "outside the support network of bodies like the TTF", including retailers and manufacturers.

"We have an active outreach programme to reach such businesses," said Ms Woodrow.

Denmark-based environmental consultancy NEPCon is another MO applicant, expecting to hear soon whether it’s been approved. It already has experience of legality verification and due diligence risk assessment through its LegalSource Programme, which comprises "pick and mix" legality services. These include a due diligence system, which has been "aligned" with anti-illegal timber regulations worldwide, including the US Lacey and Australian Illegal Logging Prohibition Acts, as well as the EUTR.

"We also offer gap analysis of existing due diligence systems against LegalSource, training and supply chain auditing tools for companies wishing to conduct legality verification themselves," said NEPCon acting manager UK and Ireland Ann Weddle.

Fellow international certification consultancy SGS is also aiming to be an MO and certification client manager Alan Peters tackled concerns that the status might raise conflicts of interest for bodies which also offer EUTR support services, with an MO’s duties including informing the European Commission of non-compliances.

"The MOs’ first step will be to advise on corrective action, not immediately pick up the phone to the EU," he said.

SGS also devises bespoke due diligence systems and offers training, supplier audits and reviews of operators’ risk assessments. Benefits of using SGS, he added, included tapping into its understanding of the EUTR, and its "worldwide network of affiliates" for supplier verification.

"Essentially, we’ll speed up and simplify the EUTR preparation process, and can also offer support services, including FSC and PEFC chain of custody certification," he said.

Lack of awareness
At the end of December, consultancies reported rising interest in their EUTR services, but also some lack of awareness of who faces what obligations under the Regulation.

Several also saw evidence of companies burying their heads in the sand, either due to concerns over the perceived bureaucracy involved, or the costs of compliance (with consultants’ day rates of £250-500, and a £900 starting point for "simple supply chain gap analysis", seeming about average).

"But the price of non-compliance could be considerably greater," said one consultancy. "Our conversations with the NMO suggest they’d rather encourage EUTR compliance than rack up prosecutions, but that doesn’t mean they’ll be lenient, especially with environmental NGOs preparing to flag up breaches. And fines and seizure of goods won’t be the only costs: damage to environmental reputation could be irreparable."