WBCSD @ RIIA London, January 25th, 2007 Illegal Logging Update & Stakeholder Consultation

1. WBCSD @ RIIA London, January 25th, 2007 Illegal Logging Update & Stakeholder Consultation Global Company Perspectives James Griffiths, WBCSD Sustainable Forest Products Industry working group

2. Agenda today • Offer global company perspectives on action and strategies to address illegal logging & illegal trade challenges • The business case for action • Profile a range of current business initiatives, including member companies But start by introducing the World Business Council for Sustainable Development (WBCSD) and its focus and involvement on sustainable forest management

3. WBCSD – who are we? Coalition of 200 leading global companies: • 35 countries, 25 major sectors, including forestry/forest products • Global network of 60 national & regional business councils & partner organizations • Critical mass: member company aggregations • USD 5,000 billion revenues = Japan • 12 million employees > Portugal • 3 billion consumers per day serviced/supplied

4. WBCSD – what do we do? Shared commitment to Sustainable Development • Economic growth + Ecological balance + Social progress • Development now without compromising prospects of future generations Mission is to provide business leadership as a catalyst for Sustainable Development Business action + Policy development + Best practice + Global Outreach programs and activities to earn, retain and expand the business license to operate www.wbcsd.org

5. WBCSD & forestry/forest products Sustainable Forest Products Industry (SFPI) working group – formed 1996 but active since 2002/03 • International forestry/forest product companies: • Aracruz, Grupo Portucel Soporcel, International Paper, MeadWestvaco, Metsäliitto, Mondi International, Nippon Paper, Norske Skog, Oji Paper, SAPPI, SGC Paper, Stora Enso, Sozano, UPM, Weyerhaeuser (@ 55 % global forest product sales) • Major customers/service/ suppliers: Caterpillar, Global Forest Partners, Kimberly-Clark, P & G, Time Inc, PwC • Observers: The Forests Dialogue, National Council for Air & Stream Improvement, International Council of Forest & Paper Associations.

6. SFPI Working Group Mission: • Global platform for leading companies to collaboratively define sustainability in the forest products industry. • Improve performance; enhance customer & stakeholder confidence. Scope: • License to operate, innovate, develop and market forest products by addressing critical international issues associated with: • Sustainable Forest Management, Wood & Fiber sourcing • Energy, Carbon emissions & sequestration Approach: • Collaborative relationships; Catalyze consensus building with other stakeholders; Individual and joint company leadership & action

7. Illegal Logging & Illegal Trade • A very serious and high priority concern for international forest industry • Undermines sustainable forest management and creates significant market distortions • Negative environmental & social impacts • Unfair competition by depressing prices & profitability • Damages industry reputation, undermines market acceptance and encourages product substitution • AFPA’s study clearly identified scope/scale (Nov 2004) • Concern shared by governments, IGO, NGO, customers & communities

8. Combating Illegal Logging A priority issue for the SFPI Working Group – our response strategy: • Task Force of company specialists (since 2003) • Data and definitions = size & scale of the problem to inform our response (2003/04) • Pilot Project – shared learning initiatives (2004/05) • Multi-stakeholder dialogue & consensus (2005) • Intergovernmental processes FLEG/T’s (2005) • Company leadership actions (2006 - 2007)

9. There is real value in joint action Worked with WWF International under Collaborative Framework Agreement • Latvian pilot project developing best practice wood tracking & verification (2003/04) • Refining thinking on the term of illegal logging – sourcing, harvesting & trade • Joint statement for the The 1st Forests Dialogue (TFD) on Practical Actions to Combat Illegal Logging, March 2005 in Hong Kong

10. The Forests Dialogue – seeking multi-stakeholder consensus Hong Kong TFD made several recommendations: • Encourage collaboration to address problem • In “high risk” countries consider developing • nationally relevant legality standards – clarification process • rating systems for targeted countries & species • Encourage companies to use effective wood tracing systems • Urgent individual and collective Government action e.g. • G8 and other inter governmental approaches such as FLEGs • Target bilateral programs & ODA investments in capacity building • Greater enforcement of existing legal remedies

11. TFD 2-3 November, 2005 in St Petersburg Some important society/business messages targeting the Europe & North Asia FLEG Ministerial Process TFD • Partnerships between responsible forest industry and civil societies have led to innovation and best practice. However, this is not a substitute for comprehensive government action. • More regulation without addressing corruption leads to further corruption and fraud. • Provide positive incentives for forest business with a proven track record. • Support the markets for legal and sustainable forest products in ways which avoids penalizing legal operations.

12. WBCSD and ICFPA joint position The Ministerial Declaration NEEDS TO - • State that law enforcement is a government function. • Recognize national sovereignty over natural resources and use. • Reflect the importance of • Well-defined and full respect for property rights • Clear requirements & obligations for land tenure and use rights. • Transparent processes for allocating & pricing of harvesting rights. • Clear and unambiguous legal definitions and regulations. e.g. no conflicting regulations over forest management and resources use.

13. WBCSD and ICFPA joint position The Indicative Action Plan NEEDS TO - • Mobilize existing legislation and enforcement agencies targeting criminal activities. • Review existing legislationbefore considering additional laws. • Avoid legality licensing regulations or the use of Government procurement policiesas primary response mechanisms. • Do not to burden legitimate business and hamper it’s competitiveness against illegally sourced products or substitute materials. • Recognize which activities within in/beyond the direct control of business. • Appreciate stakeholders’ respective roles but promote collaboration.

14. WBCSD and ICFPA joint position Enable and stimulate the use of a “tool kit” of flexible, cost effective solutions for forest managers/processors operating in high risk areas: • Geographic Information System (GIS) • Environment Management System (EMS) • Responsible Purchasing policies • Tracking/Tracing Systems • Forest certification • Chain-of-custody for certified sources • Codes of Conduct • Company Sustainability Reporting • Independent 3rd party Auditing and Certification

15. Advice on Company level strategies • Actively recognize, analyze & manage the risks related to legality and sustainability – due diligence & investment screens • Assurance of the origin & legality of wood is an essential part of procurement principles and practices • Focus on long term partnerships and investments • Have active local representative network • Involvement & leadership of local industry associations • Increase own logging operations & keep supply chains short • Offer training and capacity building to promote sub-supplier’s performance • Implement third party verified traceability and CoC systems • Engage in stakeholder dialogue and demonstration and shared learning projects

16. The business case for action

17. Business case for action - recognizes “Frontline” role of governments: • Framework conditions • Forest law enforcement & governance But also the roles & needs of other stakeholders • Societal circumstances, concerns and expectations • Customer & consumer assurance

18. Business case for action - recognizes Need for a targeted approach • Illegal logging has global impacts but local roots causes Value of coordinated and cooperative approaches • Investing in FLEG capacity building & SFM for economic growth a greater focus of ODA assistance/multilateral programs • Stakeholder initiatives – business, NGOs, communities Scope and limits of company level effectiveness • Company operations & supply chain management where companies can have greatest direct control and impact

19. Business case for action - recognizes Need for appropriate responses that do not: • Penalize legitimate operators & local forest owning & dependent communities • Raise the cost of legal forest products and thereby make illegal logging & trade even more profitable • Undermine the competitiveness of forest products relative to non wood alternatives • Steel, cement, plastic • Non renewable, higher energy intensity and not as recyclable

20. Traceability – important supply chain tool to document & verify wood origin & legality Traceability systems • « At risk » wood flows • Verify wood origin • Verify compliance with corporate policies and national legislation • Can be third party verified through EMAS, ISO 14001, Chain-of-Custody, Controlled Wood Verification Source: Latvia Case Study Contracts A Wood origin data B Auditing C Externalaudits D

21. Profiling some industry & company initiatives

22. Forest Products Association of Canada Scope : All Canadian operations of FPAC member companies How : Traceability commitment in 2006 “FPAC members commit to tracing their fibre supplies back to the forest area of origin, by the end of 2008, to assure customers that the wood fibre they are using comes from legal sources.” Traceability is a condition of membership to FPAC. FPAC has also a Statement on Illegal Logging which commits its members “ to purchase and use wood coming only from legal sources” http://www.fpac.ca/en/customer_centre/resources/Statement_on_Illegal_Logging.pdf

23. Forest Products Association of Canada How :Mechanism(s) to verify that the wood procured is from legal sources : • supplier evidence of legal right to harvest through tenure or ownership; or • a chain-of-custody certificate; or • an auditable supply chain management system; or • relevant audit results from suppliers or customers; or • supplier SFM certification Assessment:Annual reporting to FPAC and inclusion in the biennial Sustainability Report For more info: www.fpac.ca

24. American Forest & Paper Association Who:The Alliance to Combat Illegal Logging: Formed by the American Forest & Paper Association and Conservation International What: The primary objective of the Alliance is to use remote sensing technology to detect illegal logging in priority protected areas, and convey the information to local enforcement agencies and encourage enforcement action.

25. American Forest & Paper Association AF&PA / CI Alliance to Combat Illegal Logging cont. Where:The Alliance has identified a series of candidate protected areas and is currently focusing on work in Indonesia and the Philippines How:Strengthen existing enforcement regimes by quickly and accurately detecting illegal logging activity using an array of both state-of-the-art and low-tech satellite remote sensing techniques; • Promote rapid response by streamlining access to high quality information; and strengthen the capacity of government agencies to follow-up on surveillance with effective enforcement. • Rapid detection will enable local response teams to backstop government enforcement personnel, and the dissemination of satellite-based evidence of illegal logging activity to government, industry and civil society will support improved forest management and transparency.

26. Other examples Go to UPM's PPT

27. Oji Paper Co Ltd What: To confirm legality of imported and domestic woodchips to comply with new government procurement policy of Japan How:Obtain traceability reports from imported woodchip suppliers at every shipment by woodchip carriers & from domestic woodchip suppliers. Assessment:Confirmed legality of all woodchips purchased by 1,016 reports obtained in FY2005. For more info: http://www.ojipaper.co.jp/english/sustainability/procure_policy/index.html http://www.ojipaper.co.jp/english/sustainability/e_report/pdf/2006/report_con05_2006.pdf

28. From Russia…with Transparency Who: Stora Enso, Time Inc, Axel Springer, Time Inc, Tetra Pak, Randon House + local partners + NGO’s (Transparency International) What: Collaboration to improve the sustainability & transparency of wood from Russia along an entire value chain and final product segments How:Learning project to increase legal compliance, reduce safety risks and enhance SFM within Tikhiv and Chalna harvest areas – training, capacity buildings, new IT tools, pre group certification standard development and final certification Results/Assessment: Identifiable improvements in all performance areas – value and role of 3rd party verification confirmed For more info: Dec 2006 publication http://www.tikhvinproject.ru

29. WBCSD commitments in 2007 SFPI Membership Principles & Responsibilities being finalized – by 31 March 2007 Voluntary code of conduct BUT a condition of working group participation Eight performance areas + reporting on progress via company SD reports • Governance, Resource management, Fiber sourcing, Eco-efficiency & emissions, Climate mitigation, H & S, Community/stakeholders, Human rights/labor standards

30. Provisions address illegality • Governance 1.3 Work against corruption and illegal practices in all their forms. 2. Resource Management 2.1 Use SFM in all forests we own, lease or manage… 2.4 Progressively and systematically introduce credible forest certification in the forests we own, lease or manage. 3. Fiber Sourcing 3.1 Manage supply chains to obtain purchased fiber from acceptable sources, using contract requirements and education and outreach programs, as appropriate…. 3.2 Ensure legal ownership of all fiber and wood utilized and comply with all applicable laws in forestry operations. 3.3 Introduce credible, independently certified wood-tracing systems where needed to address significant risks.

31. Final points • Law enforcement is a government function. • Don’t impose regulations on legitimate business that will hamper it’s competitiveness. • Work collaboratively with different stakeholders to find the most cost efficient and effective tools relevant to the specific situation.

32. Thank you! Questions? www.wbcsd.org