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

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

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

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

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!

Recognize: 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

Understand – our « definition »: 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

Agree that: 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

Agree that: 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

Announce collaboration with stakeholders to: 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

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

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

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

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 forest workers  Loss of budget revenue estimated at USD million/a

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

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

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? SuppliersRequired by Procurement point Standing forestBy the road sideAt the mill gate Forest owners Law Company Logging companies Law Company Wood traders Law Company

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

Wood origin documents Supplier Required by Delivery place Standing forestBy the road sideAt the mill gates Forest owner Law WTWB (CL) Company CL CL, agreement (Land book, authorization, ID document) CL CL, agreement (authorization, ID document) CL CL, agreement (authorization, ID document) Logging company Law WTWB (CL) Company CL CL, agreement CL CL, agreement CL CL, agreement Wood trader Law WTWB Company CL CL, agreement CL or CL list, agreement CL or CL number in WTWB CL or CL number in WTWB, agreement CL CL, agreement CL or CL list, agreement CL or CL number in WTWB CL or CL number in WTWB, agreement CL – cutting license WTWB – wood transportation waybill

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

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

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 , Chain-of-Custody

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

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.

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.

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