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IMM annual report: FLEGT acceptance as evidence of low-risk with respect to FSC Controlled Wood criteria and the PEFC Due Diligence standard? 

The FSC Controlled Wood System was first introduced in 2004 alongside introduction of the FSC Mix label which allows, under controlled conditions, the mixing of FSC certified material with uncertified material in FSC labelled products. The non-certified portion must comply with the FSC Controlled Wood standards which enable manufacturers and traders to avoid timber and timber products from unacceptable sources. The Controlled Wood requirements are an integral part of FSC chain of custody (CoC) certification which, at the end of 2018, applied to 40,000 operators worldwide, including nearly 20,000 in the EU. 

Only materials from acceptable sources can be used as controlled. There are 5 categories of unacceptable material that cannot be mixed with FSC certified materials:

  • illegally harvested wood
  • wood harvested in violation of traditional and civil rights
  • wood harvested in forests in which High Conservation Values are threatened by management activities (HCVs are areas particularly worth of protection)
  • wood harvested in forests being converted to plantations or non-forest use
  • wood from forests in which genetically modified trees are planted.

The FSC standard “Requirements for sourcing FSC Controlled Wood (FSC-STD-40-005 V3-1 EN)” sets out a due diligence system to be implemented by chain of custody (CoC) certified organisations to ensure they avoid material from ‘unacceptable’ sources in the production of FSC Mix products. Initially the FSC Controlled Wood system relied on risk assessments undertaken internally by CoC certified organisations. However, in a process starting in June 2011 and due for completion by October 2019, FSC progressively phased-out company-developed risk assessments to be replaced by FSC-approved National Risk Assessments (NRAs) for making risk designations. 

The CoC standard explicitly requires the use of NRAs to evaluate the risk for each of the FSC Controlled Wood categories and indicators for a defined geographic area. NRAs should result in either ‘low risk’ or ‘specified risk’ designations. When ‘specified risk’ is determined, organisations are required to implement “Control Measures” to mitigate the risk. “Mandatory Control Measures” may be specified in the NRA. If the NRA specifies no mandatory measures, then the certified company is obliged to develop their own measures using procedures set out in the Controlled Wood standard.

According to FSC, the requirements for demonstrating negligible risk of illegal harvest have been drafted to align with the legality requirements of the EUTR. For FSC Mix products, certified companies must demonstrate a “low risk” of any “illegally harvested wood” content. “Illegally harvested wood” is defined as that which has been “harvested in violation of any laws applicable to harvesting in that location or jurisdiction including the acquisition of the harvesting rights from the rightful owner; the harvesting methods used and the payment of all relevant fees and royalties”. 

FSC state in the standard that “Low risk” as determined by FSC is synonymous with “negligible risk” as defined by the EUTR. The standard also proscribes that a “Low risk area” must be identified “through the risk assessment process described in FSC-PRO-60-002a FSC National Risk Assessment Framework or in approved National Risk Assessments”.

As the FSC assessments are nationally determined, and as the only country to have issued FLEGT licenses, Indonesia is the only country for which FSC has pronounced on the Controlled Wood status of FLEGT licensed timber. In 2018 the FSC updated its “Centralized National Risk Assessment” (CNRA) of the Indonesian Timber Legality System and published both the full result and an explanation of its findings in February 2019. 

The CNRA concludes that Indonesia “cannot be regarded as low risk for many controlled wood requirements, including legality”. As a result, companies seeking to source controlled wood from Indonesia have to apply risk mitigation measures, even though the EU recognises Indonesia’s FLEGT-licensed timber as legal. The FSC explicitly mentions that its own conclusions are “at odds with the issuing of EU’s FLEGT licenses for timber and timber product exports”. FSC quoted the following reasons for this decision:

  • “FSC Controlled Wood indicators go beyond legality of harvesting and include four other categories.
  • FLEGT legality requirements are less comprehensive than the CNRA legality requirements.
  • The precautionary approach to FSC risk assessments requires confidence that the risk of wrong-doing is low, even if there is not always direct evidence of such a risk”.

FSC also state that there would be “insufficient stakeholder trust in the effectiveness of an enforced legality scheme, with respect to upholding community and indigenous peoples’ rights and in successfully combatting corruption”. Another point of criticism is the level of evaluation of the FLEGT VPA, with the Periodic Evaluation found by FSC to not systematically report against specific indicators. 

 

FLEGT as evidence of “negligible risk” with respect to PEFC Due Diligence

The PEFC International Standard for Chain of Custody of Forest Based Products, which has been mandatory for all PEFC CoC certified organisations since 2014, aims to ensure compatibility with the due diligence system requirements of EUTR and to apply the same systematic approach to ensure negligible risk of any wood from the full range of "controversial sources" identified in the standard entering supply chains of PEFC-labelled products. By the end of 2018, nearly 11,500 PEFC chain of custody certificates had been issued worldwide, including over 9,000 in the EU. Under article 3.9 of the PEFC standard, controversial sources are defined as "forest activities which are:

  1. not complying with local, national or international legislation, applying to forest related activities (...) 
  2. not complying with legislation of the country of harvest relating to trade and customs, in so far as the forest sector is concerned,
  3. utilising genetically modified forest-based organisms,
  4. converting forest to other vegetation type, including conversion of primary forests to forest plantations".

The CoC standard requires that certified organisation’s risk assessment shall result in the classification of all supplies into the “negligible” or “significant” risk category and that the organisation’s risk assessment be carried out based on an evaluation of:

(a) the likelihood that activities defined under the term controversial sources occur in the country / region of the supply or for the tree species of the supply (which PEFC refer to as the likelihood at the origin level) and;

(b) the likelihood that the supply chain has not been able to identify a potential controversial source of supply (which PEFC refer to as the likelihood at the supply chain level).

PEFC publishes no formal guidance on the specific status of FLEGT-licensed timber in the PEFC due diligence system. On enquiry by IMM, PEFC stated: “PEFC requires each and every company to undertake its own assessment, based on its company-specific supply chain. While supplies verified by licensing mechanisms such as FLEGT may provide valuable information concerning the legality of timber, the decision as to whether this is sufficient to be considered as low risk must be taken by the company itself and that decision justified to, and verified by, the certification body for the purpose of PEFC Chain of Custody certification”.

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