1. PEFC certification and the combat against illegal logging Follow up to Meeting on 22 February 2007 Mike Clark, Chairman PEFC Council CHATHAM HOUSE, 10 July 2007

2. Key Learning's from 22 February 2007 Illegal logging is a serious problem, not least because it can not be clearly defined. Forest certification schemes can not currently provide the answer. Stakeholder concerns over: - Lack of co-operation between schemes. - Lack of logo clarity. - Complexity of supply chains. - Complexity of chain of custody processes. - Lack of sufficiently robust C-O-C governance controls.

3. Key Learning's from 22 February 2007 Issues for Certification Schemes: “Production Orientation”: - Focus on forest management standards. - C-0-C chain managed more in theory than in practice. - Too many labels. - Too much complexity. - Lack of adequate experienced resource. - How will we deal with >30,000 C-0-C certificates?

4. Key Learning's from 22 February 2007 Issues for Certification Schemes: Supply Chain Confusion - “We can’t operate that in our branches, they don’t understand it!” - The reality: perception gap. - Growing cynicism. - Increased opportunities for illegal supplies: “We are xyz certified. Tell us what you want and we will supply it with the logo.” - Unfair burden on certifiers.

5. Certification vs FLEGT Strengths: Transparency. Independent verification. Choice of schemes – fitness for purpose. Covers wide range of environmental, social and economic criteria. Weaknesses: “Production orientation” Assumes consent of participants, therefore legality less robust than forest management. Lack of supply chain understanding. Label complexity – lack of transparently. Can you explain the detail? Proven failures use of illegal timber. Does not meet demand for carbon footprint data – “Well managed” does not mean low footprint. 1. Certification

6. Certification vs FLEGT Opportunities: Co-operation between schemes on areas of common interest. Simplification of labels and C-O-C process. Real engagement with changing market demands. Greater honesty: less hype. Position of ENGO’s on FLEGT. Threats: Collapse of credibility. Consumer “fatigue”. Brand “stretch”. Carbon footprint evidence. Political conflict. “Production orientation.” Ambitions out of kilter with realities. Support of ENGO’s for FLEGT. 1. Certification

7. Certification vs FLEGT (cont’d) Strengths: Robust. Single issue driven. Clearer focus than certification on legality issues. Supported by VPA’s Backed by EU Governments. Weaknesses: VPA’s vary country by country. Dependent on political consensus and will. Single issue. Lacks consumer appeal. Does not address underlying carbon footprint issues. Infrastructure not superstructure. 2. FLEGT

8. Certification vs FLEGT Opportunities: Fall-back position in case of certification “failure”. Meets basic needs in an increasingly over complex world. Common standard. Backed by Public Procurement policies. Support from ENGO’s. Threats: VPA’s will be politically compromised. Fails to address final user needs for climate change/ carbon footprint data. Second tier Public Procurement – endorsement. Lack of support/ indifference from ENGO’s.. Can not be made to work. 2. FLEGT

9. Opportunities for Forest Certification Schemes Forest Certification Schemes provide the only current mechanism for meeting overall consumer demands (real or perceived) for a sustainable supply chain, embracing legal sourcing of timber. Independently verified, credible forest management systems legal raw material sources credible C-O-C processes clear labelling/ logo usage “I know it does what it says on the can!” Link to “climate change,” carbon footprint data.

10. Challenges for Certification Schemes 1.Stop internal arguing between schemes – focus on market needs! 2.Balance perception with reality, ambition with assurance. 3.Simplify = reduce opportunities for illegal supply chain penetration. Don’t confuse “consolidation” with “simplicity”. 4.How to balance the dash for market share with the absolute imperative for integrity ? 5.How do we make legality a core issue – not an “audited assumption”? 6.How do we move from a reactive 1990’s needs driven concept, to a proactive 21 st C contributor to the resolution of a global problem? 7.If we fail to address these challenges, we hand the baton to far less credible and sustainable alternative materials.

11. General Conclusions 1.The current threat to certification is supply chain, not process driven. 2.We have to agree a common, “non branded,” agenda for joint resolution of key issues. 3.Next stage Government Procurement Policy implementation must have as a first priority the assured delivery of existing policies – before even thinking about “strengthening” criteria. 4.Listen to the supply chain – don’t bully it! (Market orientation). 5.Don’t create unrealistic perceptions. 6.Illegality thrives on confusion!

12. PEFC Action Proposals Action 1.Engagement via WWF GF & TN with FSC to simplify current C-O-C and label/ logo processes. 2. Governance Review. 3. Implementation of Panel of Experts review of all scheme endorsements and re-endorsements. Panel includes market representation. Objectives Status Offer made in writing to GF&TN. March ‘07 1.Achieve common positions on key issues. 2.Limit opportunities for illegality in the supply chain. 1.To update and simplify PEFC’s rules and processes. 2.To strengthen transparency and credibility in the supply chain. In hand. Delivery Q3 ‘07 Implemented and in operation. Unique within certifications schemes. 1.Ensure robustness of certification processes. 2.Provide linkage to supply chain issues. 3. Continuous improvement.

13. PEFC Action Proposals (cont’d) Action 1.Independent and credible review of social issues in the development of Public Procurement Policy criteria. Objectives Status Chatham House commissioned to conduct review for delivery Q4 07/Q1 08. 1.To obtain an independent, 3 rd party assessment of the issues on a global basis, with no predetermined outputs. 2.To resolve current uncertainties. 3.To enable Procurement Policy Makers and Certification Schemes to focus on the key deliverables. 4.To avoid unnecessary and non-productive debate.