WBCSD & WWF Collaboration on sustainable forest management

1. WBCSD & WWF Collaboration on sustainable forest management Per Rosenberg Executive Director, Global Forest and Trade Network The Forests Dialogue Hong Kong, 09 March, 2005

2. Content • WBCSD WWF Collaborative Framework Agreement • WWF WBCSD Joint Statement for the TFD on illegal logging • Presented by Per Rosenberg, GFTN • Provide context for joint case study on verifying legality of wood origin in Latvia • Presented by Anna-Liisa Myllynen, Stora Enso, Chair WBCSD WWF Pilot Project Team

3. WBCSD WWF Collaborative Framework Agreement • Objective – positively influence global sustainable forest management & industry issues, processes and developments • Signed Jan 2003 between • WWF International • WBCSD’s Sustainable Forest Products Industry working group (14 global forestry/forest product companies) • Framework for • Consultation and platform joint research, work programs & communications on strategic issues

4. WBCSD WWF Collaborative Framework Agreement • Principles • Open & honest dialogue/Chatham House Rule • Consensus on joint action & communications on Framework activities • Involvement of other stakeholders • Credible outputs based on research, transparency and stakeholder input e.g. via The Forests Dialogue • Priorities 2004 and 2005 • Forest certification • Illegal Logging & Illegal Forest Products Trade

5. WWF WBCSD Joint Statement for the TFD on illegal logging • What is it and what is our intent? • Leadership statement from global NGO and business stakeholder groups for the TFD process • Outlines our common views about illegal logging & its impacts • Provide some clarity around the definition of illegal logging to facilitate stakeholder focus and action • Outlines set of joint activities to combat the problem • Others are welcome to support and join us!

6. WWF WBCSD Joint Statement: Recognize: • Extensive scope & serious env, eco & social impacts • Coordinated action needed to strengthen good governance, ensure law enforcement & combat practices that undermine sustainability • Clear understanding of the term will facilitate and focus stakeholder action to address casual factors • Stakeholders need to appreciate respective roles, set priorities and implement cost effective, just and timely responses

7. WWF WBCSD Joint Statement:Understand – our « definition »: • Focus on widespread, systematic and premeditated violations, and not isolated, unforeseen infractions • Three components parts • Illegal sourcing - when unprocessed wood is procured in absence of the sellers legal right to sell or harvest • Illegal logging – timber harvesting in violation of relevant forestry & environmental laws and regulations • Illegal forest products trade – procurement, processing, distribution & marketing of forest products from wood obtained by illegal sourcing or illegal harvesting and/or not in compliance with relevant national & international trade laws

8. WWF WBCSD Joint Statement:Agree that: • Varies in causes, intensity, impact & nature • Different responses and levels of stakeholder participation needed • Some illegal activities require international action because of level/extent of impacts • In some countries this is part of larger governance and corruption problems • Forest products meet legitimate needs but lack of information on raw material origin can undermine confidence

9. WWF WBCSD Joint Statement:Agree that: • Robust, reliable and auditable tracing systems can help stakeholders counteract/curtail illegal activities • Best practice traceability and procurement systems can help when consistently applied by companies • Credible, independent forest certification can help if legality and enforcement addressed, although limitations in countries with extensive corruption • Enhanced public awareness important to support political solutions in countries weak enforcement • Legal compliance is a basis requirement but cannot in itself guarantee long term sustainability forests & ecosystems • Processes need to be sensitive risk of injustice, comply competition, consumer, environmental & trade law

10. WWF WBCSD Joint Statement:Announce collaboration with stakeholders to: • Further joint projects focusing regions/framework conditions that drive illegal sourcing, harvesting & trade • Evolving best practice company traceability and responsible purchasing policies e.g. Latvia case study • Support TFD & positively engage FLEG/FLEGT • Urge WBCSD member companies to seek dialogue around tracing systems and improve practices if needed • Encourage other stakeholders to appreciate distinction between illegal sourcing, harvesting & trade in their discussions and responses • Activity promote agreement to other audience groups

11. WBCSD & WWF Pilot Project on Illegal Logging in Latvia Anna-Liisa Myllynen VP, Forest Environment, Stora Enso Wood Supply Europe The Forests Dialogue Hong Kong, 09 March, 2005

12. Content • What is WBCSD & WWF pilot project on illegal logging in Latvia? • Questionnaire to forest companies • Results of the questionnaire; best practices • Conclusions • Next steps

13. Participants of the WBCSD & WWF pilot project in Latvia • Norske Skogindustrier ASA • Silva / Thomesto Ltd, Metsäliitto Group • Stora Enso • UPM-Kymmene • Pasaules Dabas Fonds • WWF International • World Business Council for Sustainable Development

14. Background • State Forest Service statistics: • illegal logging was 0.8% of total harvesting volume in 2003 • Logging without a felling license in own or other property • Ignoring normative requirements • WWF/WB Alliance study: • Evasion of income tax: a substantial portion of private forest owners pay income tax • Illegal practices provide a cost advantage of 15-20% in comparison with legal business • Evasion of social charges currently affects 6 000 - 10 000 forest workers • Loss of budget revenue estimated at USD 15-30 million/a

15. Goal • Case study on developing best wood tracking practices for verifying legality of wood origin in Latvia, • Based on the existing wood tracking systems of companies operating in Latvia • To support distribution of the best practices in Latvia and other countries • To support dialogue with authorities to improve the law enforcement in Latvia • To support the Forests Dialogue (TFD) process on illegal logging

16. Working mechanism • Questionnaire sent to the main forest sector enterprises in Latvia • 11 biggest logging and wood processing companies • Reply from 7 companies • Work group discussions based on questionnaire results • Preparing case study paper and slides • Distribution

17. Questionnaire to forest companies • What kind of documents do you require from suppliers concerning the origin of wood? • What kind of additional requirements/activities do you perform to verify wood origin? • Could you describe these activities? • What kind of requirements do you include in wood purchase contracts regarding wood origin?

18. Results, summary • All respondents at all wood trade points ask for Wood Transportation Waybill (WTWB), as required by law • Additional measures, exceeding the requirement of law: • Clauses in wood purchasing agreements • Proof of the wood origin and legality is wood cutting license • Supplier and forest audits can take place in order to verify the delivered information and forestry practices • Third party verification increases credibility and transparency

19. Wood origin documents CL – cutting license WTWB – wood transportation waybill

20. Environmental clauses in contracts • Signed • with main suppliers or all suppliers • prior to delivery with big suppliers, or on wood delivery with small suppliers • Included requirements: • Supplier has environmental policy • Wood origin is known and documentation filed • Information can be verified • Wood is procured in a legal way • Audits can be done by the buyer’s representative or by third party • No wood from protected areas unless in line with protection plan • Supplier is responsible for sub-suppliers’ and contractors’ activities • Clause allows to discharge contract and reject non-acceptable wood

21. Wood origin information • Cutting license issued by State Forest Service • Cutting license contains information about: • Unique license number • Forest owner • Property name and location • Land register number • Cutting site: cutting type, area, main species, volume • Etc. • Companies ask for: • Cutting license copy • Cutting license number in WTWB • List of cutting license numbers

22. Audits • Audits assess • the way suppliers collect and file their wood origin data, reliability • supplier’s legal status • authenticity of the cutting license • own wood origin data filing system • forestry practices in logging area (legislation and instructions) • Environmental and biodiversity aspects in logging area • Different audits • Internal audits for control, monitoring and development • Supplier audits to verify wood origin information • Field audits to verify wood origin and forest management practices • Third party audits of certified system • ISO 9002, ISO 14 001, Chain-of-Custody

23. Wood origin tracking system - recommendations • Basic requirements: • Company commitment on wood legality that is addressed to suppliers with contract • Wood origin information is based on cutting license • Auditing system is in place to prove wood origin and legality • Optional • Third part verification of system as part of ISO/EMAS/CoC

24. Conclusions • Wood origin tracking system is a major step of verifying the origin and legality of wood • The most important challenge in Latvia is ensuring legal business environment in the forest sector • To ensure fair competition in the market, more attention needs to be paid to preventing phenomena such as tax evasion, money laundering, etc. • This can only be solved by the Latvian government, using a combination of measures, in cooperation with private sector and non-governmental organizations.

25. Conclusions • The project allowed project partners to develop a better understanding of the scope and magnitude of the problem • The project’s conclusion can also benefit other actors in Latvia, as well as other industries and countries. • WBCSD and WWF pilot project in Latvia is a good example of how the forest companies together with NGO's can work at regional level to reach a common goal.

26. Next steps • WBCSD & WWF Latvia Case study paper published and communicated • Dialogue with national authorities in Latvia • The working group suggests WBCSD & WWF to contribute in dialogue with Latvian government • Dissemination of results to other regions • The working group suggests WBCSD & WWF consider to engaging in dialogue in other relevant regions and sectors