Tropical timber markets are increasingly regulated at all stages of the supply chain. Forest codes in producer countries frame the way lands are allocated for timber production, define the requirements for management plans, and set harvesting rules. At the other end of the supply chain, the European Union Timber Regulation (EUTR) and associated FLEGT[1] Voluntary Partnership Agreements (VPAs) aim to ensure that all wood that enters the European market is produced legally. Voluntary Partnership Agreements are negotiated by producer countries with the European Union to define the rules of forest management and facilitate the entry of legally produced timber into the European market. Currently, one country has put in place a timber legality assurance system – Indonesia’s SVLK or Sistem Verificasi Legalitas Kayu – that includes supply chain controls, compliance verification and independent audits. This allows for the issuance of FLEGT licences which ensure that licenced products comply with timber legality requirements in the country of harvest and spare European operators from conducting further due diligence under the EUTR.
Regulations in both producer and consumer countries have contributed to reduce illegal logging and the negative outcomes it has on forest ecosystems and communities. However, enforcement of such regulations still needs to be improved and governance strengthened to ensure that all wood that is harvested, processed and traded complies with legal requirements. As of today, it is estimated that 15 to 30% of all wood traded globally is produced illegally[2]. Greater transparency in the tropical forestry sector would improve the enforcement of legal requirements and shed light on illegal practices, including logging of protected species prohibited for commercial use, logging outside of concessions allocated for timber, or illegal activities within timber concessions, such as mining or hunting.
SPOTT and the Open Timber Portal (OTP) aim to increase transparency in the forestry sector to achieve fully legal supply chains
In order to demonstrate full legality of timber and pulp supply chains, companies in the forestry sector should be transparent about their legal compliance by making legal documents publicly available and preferably by seeking external verification. Tools like SPOTT and the OTP allow companies to better communicate their performance and practices on issues linked to legality. By tracking transparency and improving access to information, both SPOTT and the OTP incentivise legal timber and the implementation of environmental, social and governance (ESG) best practice. Deforestation and community rights violations that still occur in tropical forests can only be halted if forestry operations are fully legal, and this cannot be achieved without transparency.
SPOTT assesses tropical timber and pulp company transparency on legal compliance
SPOTT timber and pulp assessments include indicators that reflect the percentage of area controlled by companies and percentage of companies’ supply that is verified as being in legal compliance by a third party. Verification by a mandatory system such as the Indonesian timber legality assurance system (SVLK) or by voluntary standards (e.g. NEPCon Legal Source, FSC or PEFC certification) allows companies to receive points based on the percentage of their operations that are externally verified[3]. SPOTT also awards points for companies that have time-bound plans to achieve 100% verification of their legal compliance[4].
SPOTT 2019 assessments of timber and pulp companies found that only 16 companies out of 88 (18%) reported having all their controlled area verified as being in legal compliance by a third party, and a further 12 reported having more than 75% of their area verified. Among the 72 companies that have not achieved external verification of all their controlled areas, only three (4%) have a clear target to reach 100% legality verification of their concessions within 10 years. External verification of the legality of companies’ supply sourced from outside an organisation’s own concession areas shows even poorer results, as just eight companies out of 91 (9%) report any of their supply as being verified legal by a third party, including only four out of 91 (4%) that report 100% legality verified supply.
Information about on-the-ground management practices and compliance with timber legality requirements that was previously inaccessible is made public by the Open Timber Portal (OTP)
The OTP brings transparency to timber operations by compiling information from three different sources: official concession boundaries and the list of registered timber producers from the government; documents uploaded voluntarily by timber producers to demonstrate compliance based on a country-specific list of documents; and observations by third party forest monitors. The country-specific list of documents covers 10 categories: legal registration, use right, forest management, forest harvesting, impact assessments, transport, trade export and CITES, taxes, population rights and labour regulations. In countries that are engaged in the FLEGT VPA process, the OTP draws these lists from the multistakeholder-developed legality grid, which defines specific forest legality indicators and includes associated verification compliance documents. The OTP was designed by the World Resources Institute (WRI) in consultation with government, private sector and civil society actors. The OTP currently focuses on the Congo Basin and will progressively expand coverage to other relevant timber producing countries.
SPOTT has partnered with the OTP to increase the focus on legality issues in the assessments of tropical timber and pulp companies
Eight new indicators[5] have been added to SPOTT’s scoring criteria in 2019 covering eight of the ten categories covered by the OTP. For these indicators, companies assessed on SPOTT receive up to 1.0 point based on their score on the OTP within the category. For example, if a company has submitted two valid documents out of five (40%) to the OTP in the category “Timber harvesting”, it will receive 0.4 points for SPOTT indicator “Company has provided valid legal documents to OTP on timber harvesting (at the time of SPOTT assessments)”. These indicators only apply to SPOTT-assessed companies which operate in the countries currently covered by the OTP and are disabled for other companies. While OTP scores are updated daily, SPOTT assessments provide a yearly analysis on the state of transparency in the timber sector. Company scores in these eight indicators provide a snapshot of company scores on the OTP at the time of SPOTT assessments.
The 32 companies assessed on SPOTT that operate in one or more of the three countries currently covered by the OTP – Cameroon, Democratic Republic of the Congo, and Republic of Congo – received an average score of 13% in the eight indicators covering OTP scores, with scores ranging from 0 to 83%. Out of 32 companies assessed by SPOTT on OTP indicators, nine (28%) have no documents published on the OTP and only three (12%) have at least some documents published in all eight OTP categories.[6]
Companies performed best in the OTP’s “legal registration” category where 17 companies out of 32 (53%) provided more than 25% of required documentation. The lowest performing category is “population rights” where only three companies out of 32 (9%) provided more than 25% of required documentation. SPOTT and OTP look forward to stepping-up their outreach and communications encouraging more disclosure by companies to improve transparency in the tropical forestry sector, for increased economic, social and environmental benefits.
Access the Open Timber Portal (OTP)
[1] Forest Law Enforcement, Governance and Trade
[2] INTERPOL, “Global Forestry Enforcement Prospectus”, April 2019 – https://www.interpol.int/en/Crimes/Environmental-crime/Forestry-crime
[3] Indicators 111 “Percentage area (ha) verified as being in legal compliance by a third party” and 112 “Percentage of all wood/wood fibre supply traded/processed verified as being in legal compliance by a third party”
[4] Indicators 109 “Time-bound plan to source only wood/wood fibre that is in legal compliance verified by a third party” and 110 “Time-bound plan to source only wood/wood fibre that is in legal compliance verified by a third party”
[5] Indicators 23, 24, 25, 57, 96, 100, 126, 128: “Company has provided valid legal documents to Open Timber Portal on [Open Timber Portal category] (at the time of SPOTT assessments)”
[6] For companies operating in countries not covered by OTP, OTP-related indicators are disabled.
