The Report

Demand-side measures to reduce illegal timber trade

Lessons learned from the EU FLEGT Action Plan and ways forward

Wednesday 18 March, from 9:00 to 12:30

 

Highlights

  • Demand-side measures are transforming the global market place in support of legal timber trade.
  • The EU market provides a trade incentive to change behavior of the timber sector. However, closer cooperation among EU, Australia, China, Japan, USA and other consumer markets is needed to reduce trade in illegal timber more effectively at the global level. 
  • Greater consistency and alignment is needed among EU member states in the development and implementation of procurement policies. 
  • Demand-side measures must take into account the wider context and what is achievable on the supply side. The support provided to the supply side through Voluntary Partnership Agreements and the recognition of FLEGT licences within the EU Timber Regulation is a good example of the type of approach that is needed.
  • Tropical timber is perceived as risky. Measures to encourage a more discerning market may have the unintended impact of perpetuating a negative image of tropical hardwoods. Exposing illegality while at the same time encouraging the use of legal and sustainable tropical timber remains challenging. A more concerted effort is needed to change these perceptions. 

Summary

The discussion drew on the experience and perspectives of nine panelists from EU Competent Authorities, NGOs, the Chinese state administration, and representatives of both the International Market Monitor and a Monitoring Organisation.

Participants reviewed the range of measures originally identified in the EU FLEGT Action Plan. These measures included legislative (such as the EU Timber Regulation), public procurement, private sector initiatives (such as codes of conduct), financing and investment, money laundering, and ‘stolen goods, bribery and corruption'. Participants agreed that significant progress had been made with the adoption of public procurement policies by EU member states and the entry into force of the EU Timber Regulation in 2013. They acknowledged the role of the Action Plan in the establishment of the Bilateral Coordination Mechanism (BCM) between the EU and China and the amendment of the US Lacey Act in 2008.

Kate Horner, Environmental Investigation Agency

"Demand-side prohibition policies are bringing about transformation in the global market place and unprecedented transparency and accountability in what was previously a ‘no questions asked' market."

Representatives of the German and Dutch competent authorities shared experiences with enforcement of the EU Timber Regulation and the adoption of public procurement policies. These provided useful insights into efforts needed to improve enforcement and meet other challenges.

Both Germany and the Netherlands reported that about 25% of companies assessed do not have adequate due diligence systems in place. The two countries explained the remedial actions are taking with these companies. The representative of the German government identified the requirement for operators to register with the Competent Authority as a strategy that had been particularly useful. It has helped to identify those with whom the Competent Authority needs to engage. This has in turn facilitated communication with these operators about their obligations under the EU Timber Regulation. Although this requirement for registration is only being applied in Germany and Portugal, other member states could consider adopting it as a useful strategy.

Meriam Wortel, Netherlands Food and Consumer Product Safety Authority 

"Demand-side measures are all about people making choices. We are trying to influence the choices they make."

A common theme across both presentations, which was later echoed in the discussion on enforcement of the US Lacey Act, was the important role civil society and private sector can play in the adoption and enforcement of due diligence and prohibition measures. This role is important because operators are wary of reputational damage.

Participants said there is a need for better alignment and consistency of application across member states with regard to public procurement policies. A study by WWF carried out in 2014 revealed that many member states do not yet have public procurement policies. Some participants expressed concern that of those that do have public procurement policies only the UK's policy makes explicit mention of FLEGT-licensed timber as meeting the requirements.

Participants acknowledged that the development of guidance for EU Timber Regulation implementation had been helpful. Judging what constituted ‘negligible risk' still posed a considerable challenge to Monitoring Organisations and Competent Authorities, since this process can imply additional costs. Although on-site audits would provide the necessary assurances, this is not economically viable. Some participants suggested that a focus for the future should be the development of tools and techniques for risk mitigation.

Despite some challenges with implementation in the early phases, the EU Timber Regulation was acknowledged as a positive step towards creating a ‘level playing field' in the market for verified legal timber. The explicit recognition of FLEGT licences within the EU Timber Regulation reinforces the efforts of VPA partner countries to develop the systems for FLEGT licensing. The link between the demand-side measure and the support provided to the supply side through VPAs was highlighted as important for ensuring that such measures do not favour larger enterprises at the expense of small and medium enterprises which are less well equipped to meet market demands. Demand and supply-side measures would benefit from better alignment and coordination among them. 

Rupert Oliver, Independent Market Monitor

"Without supporting the supply side to meet various demand-side measures, we risk creating a ‘two-tier market' of an in-crowd of elite operators who can deliver certified and sustainable wood and operators who are ‘outcasts', selling into less discerning markets." 

The European Investment Bank illustrated the way that the finance sector is increasingly applying due diligence processes to investments in the forest sector to minimise the risk of financing illegal and/or unsustainable practices. Participants welcomed these initiatives but expressed concern about the criteria used to make decisions on the type of investments that can be financed. Some participants said the risk-averse nature of the due diligence being employed was providing little if any incentive for sustainable forest management. Participants called on financial sector to take a more nuanced approach to assessing risks of investments. More specifically, they said innovative financing options are needed to support small and medium enterprises in VPA partner countries.

An unintended impact of greater consumer awareness brought about by the introduction and enforcement of demand-side measures is the perception that the consumption of tropical hardwoods is bad for the environment. Participants said investment in promoting tropical timber is necessary to address the negative image on the market. They want to create a discerning demand from the market so that tropical hardwood consumption is not undermined.

Participants recognized that decreasing demand for tropical timber within the EU means that the leverage that this market provides as an incentive for changing practices is significantly less than it was at the time that the EU FLEGT Action Plan was drafted. Today, a collaborative and concerted effort is needed among consumer markets around the world. Domestic markets and mega-cities must also be brought into the development of new market incentives.  

Conclusions

  • Demand-side measures have played a fundamental role in transforming timber markets around the world in favour of legality.
  • Demand-side measures must be paired with efforts in supplier countries so they can meet these demands. VPAs are innovative in establishing such links.
  • Investment for small scale operators and innovative solutions for financing their operations should be adapted to enable them to contribute to the global movement toward legality.
  • The financial sector needs to remain engaged as markets demand legal timber, and support these efforts. However, it must ensure that its support does not discourage sustainable forest management.
  • Greater alignment and consistency in the implementation of procurement policies remains a priority and a challenge. EU member states that have not yet passed public procurement policies should do so and consider making explicit links to FLEGT licences.
  • Future efforts with demand-side measures should encourage greater collaboration among the EU and other global consumer markets (international and domestic). Such efforts should include measures to support the supply side to meet changing market demands.

Slideshow

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Featuring

Moderator Laura Furones, EU FLEGT Facility

Speakers

  • Emily Unwin, ClientEarth
  • Thorsten Hinrichs, Federal Ministry of Agriculture and Food
  • Robert Busink, Dutch Ministry of Economic Affairs
  • Meriam Wortel, Netherlands Food and Consumer Product Safety Authority
  • Jie Chen, State Forestry Administration
  • Christian Sloth, NEPCon
  • Kate Horner, Environmental Investigation Agency
  • Jane Feehan, European Investment Bank
  • Rupert Oliver, ITTO

Reporters Clare Brogan, Laura Furones, Thomas de Francqueville

Keywords EUTR, Lacey Act, Procurement, Enforcement, Trade

Presentations and materials

  • Not yet available