The consensus of the Independent Market Monitor’s (IMM) recent stakeholder consultation in France was clear – that the IMM’s role, tracking international tropical wood trade flows and gauging market perceptions and impacts of the FLEGT timber legality assurance initiative and FLEGT licensing, should continue and develop. Against a backdrop of increasing global spread of import market legality requirements and evolving regulation to combat deforestation, delegates felt its independent monitoring activities were of ongoing and, in fact growing, value to timber buyers, suppliers, policy makers and other timber and forest sector stakeholders.
The 15 participants at the meeting included representatives of European business, trade federations, EU competent authorities, an NGO and a forest and timber consultancy. It was held under Chatham House Rules in Nantes at the Carrefour International du Bois exhibition.
It was the second in a series of consultations, following the one in Jakarta, organised to canvas opinion on the quality and value of the IMM’s work and to pose the question as to whether it, or a successor body, should continue to undertake its functions in some form beyond December 2022, when, after seven years of operation, its EU contract is set to end.
Significance of IMM’s role
The operation of IMM was described as having been integral to the wider EU-FLEGT project. Delegates said its provision of ‘real-time data’ on VPA country trade flows in the context of the global timber market and canvassing of market views and perceptions had informed not just the European Commission, EU trade and FLEGT partner countries on how FLEGT was progressing, but the wider industry and policy makers internationally.
It was also highlighted that having an independent market monitor was mandated in Indonesia’s FLEGT Voluntary Partnership Agreement (VPA) with the EU and that its role was seen as crucial by other supplier countries engaged in the FLEGT process. One delegate noted that, while Malaysia remained at the negotiation stage, it still considered independent market monitoring as key to informing FLEGT’s development and to understanding if and how FLEGT and FLEGT licensing influenced market sentiment and trade.
Perceived value of IMM activities
Another delegate said that ‘the IMM had delivered a lot of good and useful market data, feedback and inputs’ of relevance to businesses and trade bodies and valued as a reference in their work. One federation representative said they recently gave an update on tropical trade at a major industry conference using figures from the IMM’s online Data Dashboard and the Sustainable Timber Information Exchange (STIX) it draws on.
Another said they invited IMM consultants to address their member events on FLEGT and tropical trade developments more widely.
On their awareness of the range of IMM’s work and outputs, delegates knew most about its annual trade surveys, trade consultations, annual report, newsletter and website. A federation representative said they referred to all three of the latter. “They’re a useful resource for widening knowledge not just of FLEGT but of the marketplace. They help us as a federation keep up with tropical trade flows and other developments and to keep members informed.”
Another delegate said these outputs provided a useful service in collating disparate information about FLEGT country and wider tropical timber trade developments and presenting it clearly in one place. “Technically, we could trawl the web for some of this information, but in business you don’t have the time,” they said.
IMM surveys and trade consultations
The IMM annual trade surveys, which, to date, have involved more than 1000 interviews with timber suppliers, importers, traders, retailers and others in the wood and wood products sector, were seen as an important channel for gathering on-the-ground trade information and for businesses to share their views on FLEGT and trade developments and policy.
“We always advise members to participate,” said a federation representative. “It provides a unique opportunity to get their voice heard, to share views, explain their industry’s interests and express concerns to EU policy makers.”
Among feedback from surveys highlighted by delegates was that importers, traders and others appreciate a FLEGT Licence’s provision of ‘a green-lane’ through further EU Timber Regulation (EUTR) due diligence. They said it made importing from Indonesia easier and reduced businesses’ risk of breaching the EUTR to zero.
Surveys, delegates pointed out, also picked up on trade dissatisfaction with aspects of FLEGT’s administration. One recurring criticism mentioned was that what was viewed as `inconsistent messaging and lack of endorsement for FLEGT’ had created confusion about licensing’s value and affected market uptake.
Survey respondents also felt the EUTR has not been uniformly enforced across the EU, undermining a Licence’s appeal as a `due diligence-free pass into the market’.
An ongoing trade disappointment surveys picked up on is that still only one country, Indonesia, is issuing FLEGT licences, limiting licensed product availability and choice and FLEGT’s market profile.
Delegates in Nantes also appreciated the value of IMM trade consultations for sounding out trade opinion and channelling business and other stakeholder views back to decision makers, learning about grass roots impacts of FLEGT and how business operates, notably in procurement. It was considered important ‘for any monitoring body to engage with the market and its audience in this way’.
The Nantes consultation itself was also regarded as important to gather market views on IMM’s operation; whether its role should have a future and what that future should look like. These, felt delegates, should be considered in any decision on the matter.
Delegates also said they valued the IMM’s special reports. These have examined the degree to which FLEGT and timber and wood products’ legality and sustainability assurance more widely are taken into account in such fields as timber promotion, international timber and forest investment, architectural specification, furniture importing and public and private sector procurement generally.
One delegate, however, felt reports could be better promoted through news bulletins and IMM website summaries.
Room for improvement
Consultation delegates made further suggestions on how the IMM could improve and develop its service. Some felt its newsletter was not concise enough. In today’s fast-paced work environment businesses and business organisations said they needed brief bulletins, where salient information could be taken in at-a-glance, with the option of linking to more detailed reports and analysis online.
Echoing views from its Jakarta stakeholder consultation, it was also felt the IMM should develop an app for rapid dissemination of ‘bitesize’ news to mobile devices and potentially for flagging up and linking through to other IMM outputs, such as special reports. “An app can be used to broadcast key developments that might otherwise be buried in a long report,” one delegate remarked.
It was highlighted too that an app can be customised to users’ requirements, so it flags up news of particular interest to them; for instance reports on specific products or timber from particular sources.
Another suggestion was that, while IMM surveys were considered an important channel for sounding out trade perceptions on FLEGT impacts, the part licensing plays in business procurement and views on market and regulatory development, they should be biennial rather than annual. A delegate said trade perceptions did not evolve at a rate justifying an annual survey, which asked some of the same questions year on year. Making it biennial would also avoid ‘survey fatigue’.
Future of FLEGT and IMM
Delegates also brought prospects for FLEGT VPAs and FLEGT licensing going forward into discussions and raised the repercussions for both of the proposed new EU Regulation on Deforestation-free Products, referred to by participants as the `EU Deforestation Regulation’ or `EUDR’.
The proposed Deforestation Regulation’s aim is to prevent the EU contributing to ‘imported deforestation’. In its proposed form it would impose new due diligence and other rules on trade in six forest and ecosystem risk commodities, including timber. It would assimilate elements of VPAs into ‘Forest Partnerships’ and supersede the EUTR, with importers having to undertake due diligence on commodity imports to ensure not just legality, but zero risk of implication in deforestation or forest degradation. A FLEGT Licence would be accepted as proof of legality, but current drafts would not grant a ‘green lane’ for licensed timber and wood products through the Regulation’s due diligence requirements. Supplier countries would also be deforestation and forest degradation risk benchmarked.
Several delegates felt timber and wood products should not be ‘lumped together’ with other forest risk commodities under the new rules, as the timber sector was already ‘years ahead in terms of assured legality and sustainability’. Rather, it was suggested, FLEGT should be further developed and strengthened and run in tandem with, or as an integral but independently operating element of the proposed Deforestation Regulation.
It was acknowledged FLEGT was ‘not perfect’, with only one country licensing so far. However, delegates said it had resulted in major advances in partner countries in terms of establishing timber legality assurance systems, strengthening forest governance and growing stakeholder engagement. Some felt the proposed Deforestation Regulation risked slowing progress in these areas or actually undermining these and other achievements made through FLEGT VPAs and by buyers and suppliers meeting the EUTR’s requirements.
It was also noted that, while there was no categoric evidence FLEGT licensing had increased Indonesia’s EU timber market share, ‘the positive attitude of IMM survey respondents implied licensing may have contributed to stabilising its share’. It was underlined too that Indonesia saw their FLEGT licensing and the SVLK Forest Legality and Sustainability System that underpins it as strengthening their timber export prospects in the growing number of ‘regulated’ markets worldwide requiring some form of legality assurance.
The question was also raised as to whether the proposed Deforestation Regulation might discriminate against higher risk supplier countries. FLEGT VPAs, it was maintained, had provided a route for these to make step by step progress in legality performance and governance reform, supported by the EU. But, it was asked, would Deforestation Regulation Forest Partnerships take the same approach, or exclude higher risk countries, which can’t overnight become forest degradation-free?
However, another delegate felt the Deforestation Regulation would not wholly devalue a FLEGT Licence or disincentivise countries from progressing through VPAs to achieve licensing status. Providing proof of legality would remain critical to accessing the EU market, they said. So, a FLEGT Licence would still be valued in terms of reducing importers’ due diligence workload.
Others said that, whether the Deforestation Regulation was introduced in its proposed form, or with amendments, independent monitoring would still be needed to track its effects on tropical timber trade flows.
“It will be important to track the trade impacts of risk benchmarking and the benefits to countries of entering Forest Partnerships and of continuing investment in strengthening governance. An impartial market monitor will be needed to provide this information.”
It was also suggested the IMM or a successor body could to an extent ‘decouple’ from FLEGT and take a broader role monitoring tropical timber trade more generally. It could address areas from certification developments and tropical supplier country competitiveness, to impacts on trade flows, forest management and governance of EU and other regulated consumer market import controls to ensure timber legality and combat deforestation.
Another participant agreed the spread of importer country legality requirements made for a new dynamic in the tropical timber trade which merited monitoring. It was pointed out that such ‘regulated markets’ now accounted for 65% of timber and wood products exports from lower to middle income supplier countries, a category covering all countries engaged in the FLEGT process.
Summarising, a timber and forest sector consultant said that, via IMM’s data work, surveys and other outputs, and its creation of a ‘strong private sector network’ in the EU and VPA partner countries, it had developed a resource for identifying and analysing timber trade trends of use to timber trade, government and civil society. Given ever increasing global focus on forest maintenance, timber legality and sustainability and growing appreciation of timber’s value as a low carbon raw material resource, this could become even more valuable for informing public policy and business sector strategies in the future.