The Report

Timber legality assurance systems

Implementing timber legality assurance systems: countdown to FLEGT licensed timber

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

 

Highlights

  • TLASs are country-specific systems of checks and balances, and can comply with VPA frameworks while being built according to different models 
  • TLASs are learning systems and build on continuous multi-stakeholder processes
  • Take into account costs, capacity, existing systems and the needs of small and medium enterprises when building TLASs
  • Enhance learning within and across countries, including links to private certification schemes in order to maximize lessons learned
  • Strong governance is the foundation of a culture of compliance which supports and enables investment and simpler systems of control 
 

Summary 

Panelists from Ghana, Indonesia, private sector, civil society and governments, as well as the UK's Timber Trade Federation, Forest Stewardship Council, and European Commission shared ideas and perspectives.

Presenters from Ghana and Indonesia shared information about how they are designing and finalizing their TLASs, the elements of their TLASs that need to be completed before they can issue FLEGT licenses, and the emerging challenges they are facing. The two countries have taken different approaches, based on different models.

Indonesia began developing its system before VPA negotiations. It set out to build a national system of legality verification, and is now upgrading it to comply with the VPA. Indonesia saw the VPA as a means to continue and to enhance the forest reform it began in 2003. Its vision was to improve management of its forest resources and ensure its system could demonstrate that Indonesian wood comes from legally harvested and sustainably managed areas. As the demand for legal timber was increasing, there was a strong incentive for VPAs. Improving forest governance was another key objective that led them to VPA discussions.

Indonesia's system is already working and delivering national licenses. The system relies on accredited conformity assessment bodies for implementing legality verification. Civil society has been formally integrated into the system through an independent observer role.

Ghana entered VPA negotiations to improve law enforcement and the overall governance regime in the forest sector, make progress towards sustainable forest management and maintain access to markets. It has developed a more centralized system than Indonesia, with direct involvement of government agents for legality verification in the field, strong investment in procedures and protocols (verification, non-compliance handling and other aspects), and the establishment of a new agency to oversee validation and deal with complaints.  

Meeting participants considered the presentations from Ghana and Indonesia to be timely; both countries' TLASs are becoming fully operational and FLEGT licences could be issued in 2015-2016. The insights of Ghana and Indonesia helped participants consider whether and how TLASs can be streamlined and improved.

The panellists from Ghana and Indonesia explained how TLASs are more than traceability systems; they encompass different procedures and mechanisms that together create a system of checks and balances, which ensure and show evidence that timber produced is legal. In some countries, new institutions were added to existing structures as their TLASs were developed, new legislation was developed, and procedures were created or enhanced to achieve the desired system.

Both Ghana and Indonesia demonstrated how multi-stakeholder involvement was essential to the development of their systems. They described the TLASs as learning systems that build on the experiences and concerns of stakeholders which were expressed during the development process.

For these countries, stakeholder engagement did not come without challenges. Challenges cited included managing divergent interests among multiple stakeholders; finding the right balance to make the system credible and yet not over-engineered; building the capacity of the private sector and government departments that are complying with or implementing the system; keeping manageable the additional costs and burdens to the private sector; insufficient documentation of good smallholder performance; and finally, maintaining good coordination among involved ministries.

Participants discussed the possibility of streamlining TLASs, and in particular how to build a credible system that addresses governance ambitions and remains practical in terms of cost and capacities for implementation. Participants said that a TLAS should be built from existing systems to maximize efficiency and cost. They said the focus should be on filling gaps in existing structures, institutions and procedures rather than on building new systems. The use of technology was raised by several participants. Some suggested that while sophisticated technical solutions for timber tracking were desirable, they were not mandatory within the VPA framework.

The challenge of smallholder capacities was raised several times. Many countries, not just Ghana and Indonesia, said they were struggling with addressing the needs of these actors. Some countries said the inclusion of smallholders was a specific aim of their VPA in order to help formalize these actors within the domestic market. They gave particular emphasis to artisanal chainsaw loggers and millers. However, countries said the inclusion of smallholders added complexity and that time was required for full implementation. 

Private sector participants from Ghana and independent civil society monitors from Indonesia shared their perspectives. Indonesian civil society representatives said the push to improve their national system began even before the VPA. When they began, it was unclear what was illegal because there were hundreds of laws in Indonesia regulating forests. Indonesia's legality definition now includes selected laws and goes beyond forestry legislation by including labor, environment and finance laws. Civil society participants said that they recognized that the system is not perfect and do not expect it to be perfect when FLEGT licensing starts. They said they have been involved in system development and have contributed to transparency and decisions on which laws to emphasize and improve. Civil society raised some concerns, in particular that the government is not yet strict enough in making TLAS implementation mandatory for all operators.

Private sector participants from Ghana were concerned about the computerized traceability system. They said connectivity problems and electricity cuts could cause delays in licensing. They were worried that their products could be sitting in ports and that they might not be able to deliver their goods in a timely manner due to electricity cuts and connectivity problems -- thus delaying the issuance of a license. This could be detrimental from a business perspective if the system is completely reliant on an electronic system. This problem resonated with other participants, especially in DRC. Participants from DRC suggested that countries slowly phase in reliance on digital licensing. Representatives of Ghana's government said paper-based tracking is accepted. In Ghana the government is inputting information into the system for small artisanal millers and will continue to do so until they have the capacity to do so themselves.

Participants were interested in how the two systems of Ghana and Indonesia are ensuring credibility and recalled the need to consider corruption when designing the TLAS.  Representatives of both countries described the checks and balances within their systems, highlighting complaint mechanisms, noncompliance procedures and even the ability to pick up discrepancies in how verification oversight is being done.

The domestic market was an important topic for discussion, focusing on how to increase the capacity of different actors involved in domestic supply chains, and the challenges countries face in developing a regulatory system to control small, dispersed holders of permits. Ghana said that most illegal timber is coming from domestic illegal chainsaw lumbering. The government representative described how Ghanaians are trying to formalize artisanal milling through legal standards. This work has been reinforced through a new public procurement policy that obliges all projects using government funds to source legal wood. Indonesia said they are also working on a public procurement policy, and that training of smallholders is an important element for advancement, but quite challenging. Participants said capacities need to be strengthened, particularly in their ability to produce sufficient documentation to show evidence of good performance, and comply with new procedures. Indonesian VPA stakeholders helped identify simpler systems based on declarations of smallholders related to elements of ownership, such as fees. In this way the Indonesian TLAS design is based on risk considerations.

An example offered by DRC showed how government capacity also needs strengthening. The example showed that harmonization of documentation across the different provinces could go a long way to helping operators provide sufficient documentation to their suppliers asking for due diligence.

A representative of the Forest Stewardship Council said FSC has benefited and learned from VPAs, in particular from VPA legality definitions. These definitions have strengthened FSC country standards in several VPA countries. FSC offered their 20 years' experience to provide lessons for TLAS development and encouraged closer collaboration so the two approaches could complement country efforts more strongly. Such experience could contribute further reflection on a number of subjects such as the level of transparency in assurance systems without compromising business, as well as on how to reduce costs and gain efficiencies. These topics are being debated in the private certification world and could contribute to and benefit by integrating FLEGT perspectives. Participants pointed to examples of certification complementing TLASs in a number of countries, but also cautioned that FSC integration is a decision of the country and the national stakeholders. They said integrating certification is something the national processes should reflect on to determine if integration works in a country context. This is because in some countries these approaches have been approached separately to avoid confusion between certification and VPAs. They pointed out that the scope of VPAs and certification is different: one is voluntary and focusing on an individual area of a particular operator, the other is nationally based thus obliging all operators to comply. From a purely technical view, many noted reconciliation needs to be done at the national level and not at the operational level.

Participants considered demand side issues. They highlighted the importance of the credibility of the system to markets, suppliers and traders. Representatives of timber traders said VPA countries would not be able to inform markets, educate and promote their products unless their systems are considered credible. A credible system does not have to be perfect: rather, it must be able to identify discrepancies and address them.

Private sector participants emphasized the importance of credibility across the whole supply chain. A participant called for risk-based approaches in the future, noting that auditing costs are increasing and that it would be good to contain them. A risk-based approach would mean less control in countries where there is good governance and a culture of compliance and increasing levels of control where there is a systematic lack of compliance. One participant expressed the hope that 30 years from now, the ‘G' part of FLEGT will strengthen producer countries' culture of governance across the board, both in compliance and enforcement.

Conclusions

A TLAS can be a basis for countries to improve their culture of compliance by putting in place a system of checks and balances and improving forest governance. Improvements to forest governance are demanded by both supply and demand sides. TLAS systems should be based first on a careful assessment of existing elements, with identification of improvements needed to comply with VPA framework and procedures (including audit of TLAS), and identification of robust and cost-effective solutions for full compliance. New technologies can be introduced gradually to reinforce the system. Proper solutions to assure credibility, strength and efficiency of the system must be found through stakeholder consultation and involvement, and contribute to strengthening governance. It is important to sharing learning among countries and stakeholders, as well as with private certification schemes and other initiatives. 

Slideshow

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Featuring

Moderator Alexander Hinrichs, EU FLEGT Facility

Speakers

Session 1: Implementing TLAS - The countdown for FLEGT licensed timber

  • Agus Sarsito, Ministry of Forestry Indonesia
  • Raphael Yeboa, Forestry Commission Ghana
  • Richard Nsenkyire, Samartex
  • Mardi Minangsari, civil society representative Indonesia
  • Luca Perez, European Commission DG Environment

Session 2: Streamlining TLAS - What VPAs can learn from other approaches

  • Francoise van de Ven, Fédération des Industrielle du Bois
  • Anand Punja, UK Timber Trade Federation
  • Martin Mbongo, Cameroon, Administration
  • Gemma Boetekees, Forest Stewardship Council
  • Mardi Minangsari, civil society representative Indonesia
  • Francois Busson, European Commission DG DEVCO
  • Sebastian Schrader, EU FLEGT Facility

Reporter Melissa Othman, EU FLEGT Facility

Keywords Legality assurance, control, verification, traceability, credibility, VPA