A decade ago the EU launched arguably the most ambitious international timber legality assurance programme to date – the Forest Law Enforcement, Governance and Trade Action Plan, or FLEGT.

The initiative was a response to mounting general concern over illegal logging and deforestation – with environmental NGOs cranking up pressure for action. To date it has involved millions of Euros of investment and thousands of man-hours’ effort from EU and timber supplier countries.

The ultimate aim of FLEGT is to ensure that all timber and wood products entering the EU are legal. That means not only that timber is harvested according to producer countries’ laws, but that its legal dues have been paid along the supply and processing chain. Another concern driving the initiative is that illegal timber traders deprive developing countries of billions in tax revenues – and, as they’re not paying tax, can undercut law-abiding businesses.

Its architects envisaged FLEGT firstly providing encouragement for timber suppliers to ensure legality (and most of those involved were expected to be tropical countries, where timber legality issues were seen as most problematic). This was to combine with an element of coercion to ensure EU companies avoided illicit material. In short, carrot and stick.

The instrument for encouraging supplier participation is a FLEGT Voluntary Partnership Agreement (VPA). This entails countries implementing comprehensive timber legality assurance frameworks, with technical and funding support from the EU and member states. The ultimate reward is guaranteed access to EU markets, with legality-proven FLEGT-licensed timber automatically meeting due diligence risk assessment requirements.

The FLEGT stick took longer to evolve, but eventually emerged as the EU Timber Regulation (EUTR). This was to make it an offence for EU ‘first placer’ timber importers or ‘operators’ to trade in illegal timber (which would have the added benefit of helping level the playing field for legal traders). It would also obligate them to undertake ‘due diligence’ illegality risk assessment and, where necessary, risk mitigation of suppliers, with only FLEGT-licensed timber exempt.

"These are intended to be two halves of the same coin," said an industry commentator. "FLEGT-licensed timber has a passport through EUTR due diligence, making it more attractive to EU buyers. That encourages others to sign up to VPAs – a virtuous circle."

FLEGT shortfalls Naturally its 10-year anniversary has prompted appraisal of FLEGT to date and, inevitably, that’s highlighted areas where it has fallen short. And the glaring deficiency is that no VPAs have yet been fully implemented, even though the first signatory, Ghana, started negotiations in 2006. Consequently no FLEGT-licensed timber has yet reached the EU.

Some fear the time implementation alone has taken has eroded faith in the initiative. And the problem has been compounded by the fact that, as a result, VPAs have not synchronised with the EUTR, which came into force in March.

"This means that countries working towards VPAs currently have to go through EUTR due diligence like everyone else," said a supplier from the Democratic Republic of Congo, which started VPA negotiations in 2010. "The worry is that if all parties get accustomed to working this way, it may reduce impetus for completing VPAs, potentially undermining our efforts."

While accepting some of the criticism, however, others involved in the initiative say it has already achieved a massive amount. They highlight that 15 supplier countries are now at some stage in the VPA process, and 10 more have requested information (see graph opposite). They argue too that the legality assurance progress signatories have already made towards achieving their VPA is significant and that, with anti-illegal timber legislation set to spread worldwide, the initiative’s appeal will grow.

"Ideally the two would have been on the same schedule, but pressure for introducing the EUTR became irresistible," said a forest specialist at the UK Department for International Development (DFID), a key FLEGT backer. "So far, however, we haven’t seen a loss of appetite for the VPA process as a result of the time lag."

Some attribute VPAs’ slow progress to underestimation of the complexity of the situation on the ground in supplier countries, and overestimation of their trade governance.

"Putting in place the IT systems in developing countries to assist traceability to the point of FLEGT licensing has been a challenge," said John Bazill, policy officer at the European Commission Directorate General for the Environment (DG Environment).

However, it has also been said that the time the process is taking additionally shows how thorough VPAs are.

"The emphasis is on making them as watertight as possible," said the DFID official. "That takes a lot of work, education and scrutiny."

A VPA starts with a ‘pre-negotiation’ phase, an initial information exchange between supplier country and EU representatives on what the Agreement entails. This must involve not just the country’s government, but also private sector and civil society stakeholders.

Once a country decides to move forward, they enter formal VPA negotiations, again demanding multi-stakeholder participation. These cover establishment of a framework for its VPA legality assurance system (LAS), including a definition of timber legality, chain of custody tracking, verification mechanisms, and establishment of a national VPA licensing authority. A third-party or government auditing system is also established.

Once the VPA’s contents are agreed, including individual products it covers (with the whole process managed by an EU/supplier country Joint Implementation Committee), it is translated into 24 EU languages and scrutinised by all 28 member states. Only then can it be formally ratified, another multi-layered process.

Finally, once the LAS is deemed effective and its product list is added to the EU FLEGT Regulation, the supplier partner country implements the VPA and starts issuing FLEGT licences. Subsequently no product covered by their Agreement can enter the EU without one.

FLEGT-licensed timber in 2014
An EU official said they’d have to "keep their foot on the gas" to hit their deadline, but Indonesia and Ghana now forecast that next year they will become the first countries to deliver FLEGT-licensed timber. And the work both have done to get to this stage further underlines the demands of the process.

Indonesia, for instance, has so far audited 650 timber companies and half its production forest under its SVLK legality assurance system (its prospective VPA LAS). It has also established a licensing system, called V-legal, effectively as a FLEGT-licence test bed, and earlier this year sent trial licensed shipments to the EU.

"This was as much to test the capacity of the EU agencies to handle timber licensing as the system itself," said the DFID source.

Other countries are expected to finalise the process within two years, with Cameroon, Republic of Congo, Central African Republic and Liberia having completed negotiations and begun implementation.

"The implementation of the first VPAs and market advantage they give should also spur others to finalise theirs," said a UK importer.

As more countries move towards this goal, the value of what they’ve already achieved in the VPA process is also becoming more apparent, adding to its momentum.

"Key outcomes include the stakeholder involvement and transparency it instills," said the DFID official. "It’s a sea change from times when old-style timber barons in some countries rode roughshod over other interests."

Contrary to views that, by coming in before VPAs were implemented, the EUTR may disincentivise signatory countries, there’s growing belief their involvement already gives them an edge under the Regulation.

"Clearly those engaged in VPA processes will be better equipped to deal with EUTR requirements," said DG Environment head of multilateral environmental agreements Hugo Maria Schally.

"If countries have their VPA LAS framework in place, it should simplify and narrow the scope of due diligence processes for EU operators," agreed the DFID source.

Multi-national legality passport
VPAs are being given added weight by FLEGT’s engagement with other major timber sector players, such as Brazil and China. For instance, dialogue has started on the latter’s evolving legality verification system.

"We’re working with China on its development, with the expectation it will give preference to timber from countries with VPAs," said the DFID official.

Longer term, VPAs are forecast to be further boosted by helping suppliers satisfy other anti-illegal timber legislation.

"FLEGT-licensed timber will be accorded the same no or low risk status as FSC and PEFC-certified under the Australian Illegal Logging Prohibition," said Stephen Mitchell of the Australian Timber Development Association.

There’s no guarantee until tested in a US court, but observers also expect VPAs to be considered as contributory evidence of due care under the country’s Lacey Act.

Underlining belief in their wider international currency are countries with relatively low exports to the EU, like Honduras and Guyana, starting negotiations for VPAs.

There’s a view too that they could become part of the pathway to sustainability certification, given their chain of custody elements, stakeholder engagement and focus on improving institutional governance of the whole forest sector. It would not be a major incremental step, it has been said, to adapt FLEGT VPA mechanisms to the demands of a proof of sustainability system.

Dr Nurudeen Iddrisu, Head of Ghana Forestry Commission, London Office
"Reform in institutional capacity for our VPA has been challenging. Even though we had quite efficient monitoring in place, we have had to introduce more reliable electronic systems in line with international standards. This has meant retraining and acquisition of a full array of modern technology to improve on forest governance and legality systems."

Sheam Satkurugranzella, Director of Malaysian Timber Council London
"Forest governance in Malaysia has always been the strongest in our region, but the years of effort towards our VPA process have focused us on the key elements of legality and helped increase transparency, although finding an acceptable balance amongst all stakeholders has been challenging."

Jirawat Tangkijngamwong, Chairman of Thai Timber Association
"The VPA process is provoking our industry to pay attention to the legality assurance process as well as the legality definition. It is a big challenge to engage with all civil society representatives and other stakeholders and build in their input. But I believe the end result will be improvement in legality processes across our country’s forestry and timber sectors."