Summary
• The EU published its recommendations on tackling illegal wood last October.
• It set out proposals for due diligence systems.
• Later amendments propose more draconian measures.
• It is hoped the Swedish EU presidency will provide more insight.

The new legislation for combatting trade in illegal wood being considered by the EU could impact profoundly on the whole wood trade. It’s intended to build on and strengthen existing initiatives to encourage responsible procurement practices in the EU. But it’s feared it could create a monstrous pile of red tape, seriously undermining the industry’s competitiveness and creating barriers to trade. Everything hinges on the direction of high-level negotiations now under way within the European institutions.

Following 18 months of discussion and consultation on various options, the European Commission (EC) proposed last October that European timber traders and wood product manufacturers should be required to implement a due diligence management system to minimise the risk of illegal wood entering their supply chains. The legislation would be broad in scope, covering everything from logs to furniture and paper products, but would apply only to first line importers who place goods “for the first time on the Community market”, ie rather than those who trade timber on, buyers or end users.

The proposals set out broad principles for the due diligence systems that would be recognised by the authorities and said that companies could either develop their own or become members of a group system operated by a “monitoring organisation” (for example the WWF Global Forest and Trade Network or The Timber Trade Federation’s Responsible Purchasing Policy). Both individual and group due diligence systems would have to meet minimum standards and be recognised by authorities in individual EU states. There would be mutual recognition so that, once a member state recognises a system operating within its national borders, all others would have to recognise it too.

Implementation a challenge

Implementation of the proposal would be a challenge. The technical resources required to develop, implement and effectively regulate due diligence systems are considerable and may well be lacking in many EU states. Developing relevant and reliable procurement policies in the private sector has taken many years and it may be unrealistic to expect the development of state or industry-wide ones as is proposed within two years of adoption of the new legislation.

There is also potential for significant variation in the quality of due diligence systems introduced in different countries states, at least in the short to medium term and there’s said to be a need for greater clarity in risk assessment procedures.

But, as originally framed, the EC’s proposal also had significant strengths. It had potential to formalise existing private sector initiatives which have already demonstrated their ability to reduce the risk of illegal wood entering the trade.

The proposed law in its initial format would additionally have avoided problems associated with establishing a chain of evidence linking a particular piece of timber with an illegal forestry operation overseas.

The original proposals were also proportionate to the scale of the problem. Recent estimates by Forest Industries Intelligence suggest that, at most, only 5% of the wood consumed in the EU is potentially at risk of being derived from an illegal source. And an emphasis on risk assessment would mean that new potentially bureaucratic and costly measures to prevent illegal imports were focused on those external suppliers which pose the greatest illegal trade risk. Targeting the legislation at EU operators that first place timber on the market also made it more practical, as opposed to extending it down the European supply chain, which comprises around half a million companies.

Green Party amendments

But, unfortunately, there is now a chance that many of the positive aspects of the legislation will be lost as it is being considered for adoption under the EU’s convoluted “co-decision” procedures which require consensus agreement of both the European Parliament and the Council of Ministers.

Before the European Parliament voted on the legislation on April 23, Caroline Lucas, leader of the EU’s Green Party and an MEP for southern England, was instrumental in introducing a huge number of amendments, completely altering the thrust and character of the legislation. And this met with minimal opposition from MEPs who, it seems, had little understanding of the implications of the amendments.

They potentially turn a proposal requiring a targeted group of EU operators to practise appropriate due diligence procedures into a proposal for rigorous state control over the entire European wood supply chain. While the challenges and costs of introducing the EC’s original proposal would have been considerable, they would be nothing compared to what this would entail.

The Parliamentary text introduces a new requirement that “operators shall ensure that only legally harvested timber and timber products are made available on the market”. This amounts to a reversal of the burden of proof, implying that prosecutions could be brought against companies simply because they are unable to prove the legality of a timber product.

Proving legality

And the challenge of “proving” legality would be considerable. For example, The American Hardwood Export Council has commissioned credible independent research to demonstrate that there is a less than 1% chance of any hardwood imported from the US coming from an illegal source. However, because US hardwood is procured from a resource owned by 7 million small family foresters, it is rarely practical to provide “proof” of legality with each individual parcel of timber. And yet full traceability for every parcel is exactly what the Parliament’s amended text would require, irrespective of the level of risk that the wood derived from an illegal source.

To make matters worse, the Parliament’s amended text proposes that these requirements be imposed immediately. The two-year bedding-in period proposed by the Commission is dropped, allowing no time to develop the necessary competence, capacity or procedures.

The parliament’s text proposes sanctions against operators “presumed to have infringed these requirements”. This includes governments having powers to seize timber products and to order the operator to cease commercial activities immediately pending a full investigation. So a company could be closed down based merely on a suspected failure to meet its obligation.

Swedish presidency

The hope is that wiser heads will prevail when the legislative proposal is put before the European Council of Ministers in the next few weeks and there is good news on this front. The Swedish government holds the European presidency during the second half of 2009 and can be expected to have a much clearer insight than the European Parliament into the implications of the legislative proposal for the timber sector.

The stakes are high, not only for the wood industry but also for the wider environment. There is clearly a need for more effective action to prevent illegal wood entering European supply chains. But at a time when concern for climate change demands greater use of natural energy-efficient materials capable of sequestering carbon, it makes no sense to smother the wood supply chain with controls which are out of all proportion to those imposed on competing fossil-fuel intensive materials such as plastic, steel or aluminium.