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Sourcing Legally Produced Wood a Guide for Businesses

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Sourcing Legally Produced Wood a Guide for Businesses SOURCING LEGALLY PRODUCED WOOD A Guide for Businesses EDITED BY RUTH NOGUERÓN AND LORETTA CHEUNG WRI.ORG This guide is an excerpt from a more comprehensive publication, Sustainable governments to know that their purchases and Procurement of Wood and Paper-based Products: Guide and Resource Kit, consumption of wood-based products are making which provides an overview of ten key issues and related resources to consider positive social and environmental contributions when procuring wood and paper-based products. This guide was developed to the local environments and peoples. At the core for users with particular interest in understanding the legality requirements for of this trend is the issue of illegal logging and the sustainable procurement. To view the Sustainable Procurement of Wood and Paper- based Products Guide, please visit www.SustainableForestProducts.org. associated trade. ILLEGAL LOGGING AND INTRODUCTION ASSOCIATED TRADE Almost half of the Earth’s original forest cover has There is no universally accepted definition of illegal been converted to other land uses (Bryant et al., logging and associated trade. Strictly speaking, 1997). Although estimated rates of net loss seem to illegality is anything that occurs in violation of the indicate a slowdown, the total forest area continues legal framework of a country (Box 1). to decrease; today forests extend over an estimated 30% of the total land area (FAO, 2006). A serious matter The supply chains that bring products to end Illegal logging results from a complex set of legal, users can start at far-away places and end in many historical, political, social, and economic issues. countries. More and more often, the trade of these Illegal logging is a fundamental problem in certain products affects local economies, local environ- nations suffering from corruption and/or weak ments, and local peoples. Over the past years, there governance. Poverty, limited education, financial has been a growing interest among concerned issues, economic instability and population growth consumers, retailers, investors, communities and are enabling factors for illegal activity as well. BOX 1 | EXAMPLES OF ILLEGAL LOGGING Illegal origin (ownership, title, or origin): Violations, bribes and deception in Violations of international trade the bidding process to acquire rights agreements (e.g., CITES species, see L ogging trees in protected areas to a forest concession. Appendix 1). without proper permission (e.g. in I llegal documentation (including Failure to pay legally prescribed taxes, national parks). trade documents). fees and royalties. L ogging protected species. L ogging and trading logs and forest L ogging in prohibited areas such Lack of compliance throughout the products in spite of logging and trade as steep slopes, riverbanks and supply chain (harvesting, manufacturing, bans (See Appendix 2). water catchments. and trade): I llegal transfer pricing (e.g. when it is L ogging in non-compliance with Violations of workers’ rights (e.g. to avoid duties and taxes), timber theft, specifications of the concession illegal labor, underpaying workers, and smuggling. permit or harvesting license (e.g. etc.), labor laws and international Money laundering. harvesting volumes below or above standards, and violation of traditional Failure to fully report volumes har- the specifications, or before or after rights of local populations and vested or reporting different species the period authorized for logging). indigenous groups. for tax evasion purposes. Harvesting wood of a size or species Violation of international human not covered by the concession permit. rights treaties. Trespass or theft, logging in forests W ood transported or processed in without the legal right to do so. defiance of local and national laws. Sources: Contreras-Hermosilla, 2002; Miller et al., 2006; GFTN, 2005. 2 WRI.org Illegal activity has many drivers that make it chal- Poverty—indirectly. Governments deprived lenging to address. Government officials at local of revenue by illegal logging have fewer resources and national levels, companies, and local people to invest in social and public policies. can all have a role to play in illegal forest activities. Unfair competition: illegal logging and illegal Government officials, often with very modest trade can distort the market and reduce the prof- official salaries, may receive additional income in itability of legal goods; the World Bank puts this bribes to allow illegal logging. cost at more than US$ 10 billion per year (World Bank, 2002). Companies trading illegally logged wood may have a market advantage over their competitors Conflict: the proceeds of illegal logging may be because illegally logged wood can be sold at lower used to support and fund conflict (Thomson and prices, depressing the profitability of legally har- Kanaan, 2004). vested wood (Tacconi et al., 2004; Seneca Creek Unplanned, uncontrolled and and Wood Resources International, 2004). unsustainable forest management; Local people may derive direct income from forest destruction. illegal forest activities (Tacconi et al., 2004). Between 8-10 percent of global wood production is Illegal logging and illegal trade can create estimated to be illegal, although it is acknowledged serious problems: that there is uncertainty in these estimates (Seneca Creek and Wood Resources International, 2004). Illegal logging and organized crime: Estimates of illegal logging in specific countries organized crime syndicates are largely respon- and regions vary, depending on the nature of the sible for illegal logging in many countries activity, and the variability of laws and regulations (Nellemann, INTERPOL, 2012). (Figure 1). Most of the illegally produced wood is Government revenue losses: it is estimated used domestically, although a significant portion that organized crime groups launder $30-100 bil- enters the international market, either as finished lion worth of illegal timber annually (Nellemann, products or raw materials (Seneca Creek and Wood INTERPOL, 2012). Resources International, 2004). Legality Guide 3 Figure 1 | Corruption and illegal logging activity (2004) Over 20% Over 50% 0 Indonesia Brazil China Malaysia W/C Africa Acceding EU Other Asia Japan Russia EU-15 Other Latin USA America Canada Transparency International’s Transparency Corruption Perception Index Corruption Perception 10 0 10 20 30 40 50 60 70 80 High % Suspicious Log Supply In a widely accepted, in-depth multi-country study, Seneca Creek Associates and Wood Resources International compared corruption and illegal logging activity. In the above graph, the y-axis displays Transparency International’s Corruption Perception Index (CPI), where corruption tends to be higher (i.e., having lower CPI) in countries with lower per capita incomes. The x-axis displays the proportion of the total supply of suspicious logs, while the size of a bubble shows the absolute volume of suspicious logs that reach the market in a country or region, including imported logs. EU-15 refers to the 15 countries in the European Union before May 2004: Austria, Belgium, Denmark, Finland, France, Germany, Greece, Republic of Ireland, Italy, Luxembourg, Netherlands, Portugal, Spain, Sweden and the United Kingdom. EU countries include EU-15 countries plus Bulgaria, Cyprus, Czech Republic, Estonia, Hungary, Latvia, Lithuania, Malta, Poland, Romania, Slovakia, and Slovenia. Source: Seneca Creek and Wood Resources International (2004). DEFINING ILLEGALITY trade regulations. Overall, legality definitions and requirements cover themes such as authorized Since laws vary between countries, so does what is access to the resources, compliance with laws that legal and what is illegal. Many countries also have protect the resources, compliance with laws that highly complex laws with contradictions between regulate the harvesting operations, payment of different regulations. One approach to define what appropriate fees and taxes, compliance with trade constitutes illegal logging in a country is to conduct regulations such as CITES species (See Appendix a national review to identify and develop agreement 1 for a full list of CITES timber protected species) between key stakeholders about which laws are or logging/export bans (See Appendix 2 for a list of most relevant and should be included in a definition logging and export bans). of legality. Over the past few years several countries have LEGALITY REQUIREMENTS IN THE defined illegal logging in terms of the legality GLOBAL MARKETPLACE requirements in public procurement policies and Demand for legally sourced wood and paper-based products in global markets has increased, as a result of changes in public and private procurement policies and trade regulations. 4 WRI.org Public procurement policies Industry associations encourage their members to exclude unsustainable and illegal wood from their Public procurement policies to address legality supply chains through members’ code of conduct, and/or sustainability began to emerge in the early industry statements, or associations’ purchasing 2000s, becoming more prominent in Europe, but policies. One drawback, however, is that trade now expanding to other countries in Asia and Latin association policies and guidelines are often America. Most policies seek to ensure that products voluntary. See Table 3 for examples of trade come from legal and sustainable sources. In some association policies. instances, processes are defined and/or entities are established to help inform and implement the Trade
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