18th Update and Stakeholder Consultation

Chatham House, 10 St. James’s Square, London 20th – 21st June 2011

Summary Report

OVERVIEW

Over 200 participants attended the Eighteenth Illegal Logging Update and Stakeholder Consultation, which took place at Chatham House on 20th – 21st June 2011. The following sessions were held: Day 1:  Session 1: Forest Certification  Keynote speech  Session 2: EU Timber regulation  Session 3: The FLEGT Regulation / The Liberian VPA  Session 4: ‟s VPA Day 2:  Session 5: A panel discussion: what are the best options for management of the world‟s remaining forests?  Session 6: Legality in the agricultural sector: lessons from FLEGT?  Session 7:

The following report summarises the presentations made at the meeting and the key points raised. The PowerPoint presentations are also available from the webpage for this meeting: http://illegal-logging.info/item_single.php?it_id=227&it=event The meeting was organised with funding kindly provided by the UK Department for International Development (DFID), the European Forest Institute (EFI), the ACP FLEGT Support Programme through the Food and Agriculture Organization, and the Centre for International Development and Training (CIDT) at the University of Wolverhampton, UK.

The views reported in this document are those expressed by participants at the meeting and are not necessarily those of Chatham House. SESSION I: Forest certification Chair: Alison Hoare, Chatham House This session included presentations from the Forest Stewardship Council (FSC), PEFC International and the Environmental Change Institute of University of Oxford. FSC described the growth of forest certification and the parallel development of initiatives being taken by consumer countries and industry to eliminate illegal wood. FSC welcomes efforts to ensure legality, but sees this as only a first step as it does not ensure the protection of the social and ecological values of forests. FSC certification does, however, provide evidence of compliance with legality. In the context of the EU Timber Regulation (EUTR), FSC has a number of objectives that it intends to meet by the end of 2011. Firstly, it aims to ensure that both FSC and Controlled Wood certified timber meet the Regulation‟s requirements by clarifying the scope in the Controlled Wood standards and by incorporating VPA requirements into FSC National Standards, thereby avoiding unnecessary duplication. Secondly, it will strive to ensure that FSC certified wood is accepted as meeting due diligence requirements, by expanding existing information requirements for certification to the whole chain of custody. Thirdly, it intends to go beyond the basic tracing requirements defined by the EUTR for traders, by developing a new Online Traceability Platform to strengthen chain of custody traceability and to support due diligence measures. Finally, FSC intends to work with existing certification bodies to enable them to gain recognition as Monitoring Organisations, as defined under the EUTR. FSC is also developing a Modular Approach Program, to be in place by the end of 2011, for moving forests from a base of a new FSC legality verification (appropriate to meet EUTR and US Lacey Act requirements) to full certification. FSC sees the introduction of a legality verification standard as a means to increase the area of tropical forests under certification, as very few are currently certified. It will, however, be made clear that legality verification is not a sufficient end goal. The presentation from PEFC outlined its vision for forest certification. Whilst acknowledging the potential value of stepwise approaches, PEFC believes that as an organisation committed to sustainable forest management it would not want to „lower the bar‟, and that such a move would confuse the market. Therefore, its approach has been to adopt a number of measures to stimulate the demand for certified products while also working to increase supply through, for example, building capacity and developing national certification schemes. This is a particular challenge in many tropical countries where governance is weak, civil society is not organised and certification has yet to be established. PEFC adopted revised standards in 2010, including standards on sustainable forest management and chain of custody. The new measures relating to sustainable forest management include: prohibiting forest conversion to other land uses; excluding plantations established by forest conversion; recognising FPIC (Free, Prior and Informed Consent), ILO Convention 169 on Indigenous and Tribal Peoples, and the UN Declaration on Indigenous Peoples Rights; requiring consultation with stakeholders; and clarifying compliance with legal requirements. This final requirement provides synergy with VPA definitions of legality. Revision of the chain of custody standard has resulted in the inclusion of social, health and safety requirements. This requires an organisation to demonstrate its commitment to these requirements, which include: the freedom of workers to associate; a ban on forced labour; respecting a minimum legal working age; equal opportunities; and good working conditions.

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PEFC is working with a range of partners on a number of international projects that either build demand for certified products or increase capacity for sustainable management of forests. One of these initiatives is working at a global level up to the Rio+20 Earth Summit in 2012 to promote sustainable forest management and certification. The PEFC General Assembly in 2010 launched the Rio Forest Certification Declaration, which sets out a common set of 10 principles for stakeholders to advance sustainable forest management. The principles seek to maximise the benefits that forest certification can offer to society, and include environmental, social and economic elements, each with associated actions, building on the aims of sustainable development and development goals set out in previous international declarations. The Declaration has been opened for signatures. PEFC believes these principles can reinvigorate the certification movement by building a common framework and aspirations amongst stakeholders, and by working in a more cooperative and focused manner. The third presentation in this session, from the Environmental Change Institute at Oxford University examined the links between certification and REDD+. It could be assumed that these two approaches would complement each other. For example, REDD+ is intended to be applicable across the whole tropical forest landscape, so mass certification could be addressed more quickly through a mechanism such as REDD+. Further, REDD+ is supported by governments in consumer and producer countries and has attracted large amounts of money, both of which could benefit certification. On the other hand, forest certification serves to link global and local goals for sustainable forest management into concrete action on the ground, while also linking production and consumption, which REDD+ does not. Certification also provides a framework which encompasses governance, standards, monitoring, reporting and verification (MRV), and chain of custody. Looking first at governance, certification could provide REDD+ with an alternative platform to negotiate disputed issues, set goals that exceed those of governments, and link legality verification and REDD+, while REDD+ could provide certification with additional financial resources. Currently, there are a range of separate initiatives to certify REDD+ projects, while certification standards and processes are also being incorporated into intergovernmental and national REDD+ policies. Focusing on standards, certification could address current gaps in REDD+, such as addressing forest degradation and lowering carbon emissions through reduced impact logging, and environmental and social safeguards, for which there are specific performance criteria under certification. There is a clear link between certification and REDD+ where MRV is concerned as certification could provide a ready-made, independent accreditation and assessment process. There is a less obvious link with chain of custody, and work needs to be done on this, however, labelling (to indicate chain of custody) could provide a way for consumers to support REDD+. There is an opportunity for REDD+ to work with a number of certification schemes, covering for example, carbon, agriculture, cattle and fair trade, so enabling consumers to support REDD+ through their purchases. By working with schemes from a number of different sectors, a wider range of issues would be covered under REDD+. There are a number of challenges to improved linkages between certification and REDD+. Firstly, they are both controversial processes, with some NGOs opposed to forest certification organisations expanding their remit to include carbon. Secondly, within forest certification alone there are a number of competing standards, of variable stringency and some of which have proved temporary, and there is little documented evidence on their environmental and social impacts. Thirdly, certification costs are high. Fourthly, there is currently a low level of trust in

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REDD+ and certification schemes amongst many stakeholders. Finally, within both certification and REDD+ there is a risk that they could overly focus on more easily measurable values such as carbon, rather than environmental and social values. In spite of these challenges, there are already moves to link certification and REDD+ in a number of project areas in North and South America.

The PowerPoint presentations for this session are available at the following links:  Philip Guillery, Forest Stewardship Council: http://illegal-logging.info/uploads/Lazzaroni270111.pdf  Sarah Price, PEFC International: http://illegal-logging.info/uploads/Price200611.pdf  Constance McDermott, University of Oxford: http://illegal-logging.info/uploads/McDermott200611.pdf

KEYNOTE SPEECH: The Rt. Hon. Jim Paice MP, Minister of State for Agriculture & Food, DEFRA, UK Chair: Bernice Lee, Chatham House In his speech, the Minister confirmed that tackling illegal logging is important to the UK Government. In June 2011, the UK National Ecosystem Assessment report showed that we cannot afford to allow our natural environment to decline and that protecting the environment is not a luxury; for example, pollinators are worth £440 million a year to British agriculture. The UK imports 80% of its timber and, therefore, has an impact far beyond its shores; the positive benefits of a healthy natural environment are just as relevant to the wider world as they are to the UK. The Government has also launched a Natural Environment White Paper, which sets out the Government‟s vision for the future of the natural environment in England, and which also explains the Government‟s aim to provide international leadership. Tackling illegal logging is an important element in that approach and must involve rewarding those who act responsibly and punishing those who illegally plunder natural resources for short-term profits. The EU FLEGT Action Plan is an important initiative, underlining the importance of partnership between producer and consumer countries. The increasing number of VPAs that have been concluded represents a significant step in this approach. The Action Plan will be further enhanced when the EU Timber Regulation comes into force in March 2013. It places a duty on those trading in timber to take reasonable and proportionate measures to ensure that their products have come from a legal source. For this Regulation to succeed, the active participation of all stakeholders from business and civil society is, and will continue to be, needed. There is clearly a common purpose across all sectors to eradicate illegal logging and an open and constructive dialogue will help to ensure the regulatory approach is successful and practical. The EU timber market is worth approximately £0.75 billion a year and it is likely that 15-20% of timber imports into the EU are illegally harvested. Therefore the UK will have the biggest impact on tackling illegal logging by working with its European partners. The UK was at the forefront of

4 calls for tough measures, worked hard for a prohibition on the first placing of illegal timber and will continue to press for strong and robust implementation and enforcement across the EU. It will not be possible to address other policy goals if strong action is not taken on illegal logging; stopping the decline in biodiversity requires the protection of the forests that hold 80% of the world‟s species; preventing climate change requires the prevention of deforestation which accounts for a fifth of the world‟s emissions; and eradicating poverty requires preventing the leakage of finance through illegal channels. The UK must continue to work in partnership with others to ensure that those who trade in legal timber have an open, fair and environmentally sustainable market for their products.

 The full text of the speech is available at the following link: http://illegal- logging.info/uploads/MoSJPaiceSpeech20June11.pdf

SECTION II: European Timber Regulation Chair: Emily Fripp, Efeca The session began with a presentation by Stephen Lowe of DEFRA, who provided an outline of the EU Timber Regulation, followed by a presentation by Hubert Inhaizer of EFI (European Forest Institute), who presented the findings of research undertaken on options for due diligence systems. Two presentations, from Catherine Pazderka of the British Retail Consortium and Liz Crosbie of Strategic Environmental Consulting, both gave perspectives as to the impact of the regulation on industry and the challenges that will need to be overcome in its implementation. DEFRA explained that the EU Timber Regulation (EUTR) will enter into force on 3 March 2013. Two pieces of secondary legislation are currently being drafted in preparation for implementation: a Delegated Act on procedures relating to monitoring organisations, and an Implementing Act, this including clarification of the requirements for due diligence. It is hoped that final drafts will be ready by the end of 2011. The UK is working to disseminate information to industry as early as possible in recognition of the long lead-in times for timber purchasing. Implementation is the responsibility of Member States, however, ultimately it will be down to the courts and enforcement bodies to interpret and enforce the Regulation. The UK Government is providing guidance in order to provide further clarity, and to help ensure that the Regulation will not be overly burdensome to industry and will be enforceable. The EUTR presents a number of challenges and opportunities. The initial challenge for operators is to establish a system for due diligence, which will be particularly difficult for those with complex supply chains. However, the EUTR is an opportunity to drive major change down the whole chain, and there are already many examples of best practice within the industry. Secondly, the EUTR relies on uniform implementation across the EU. The UK will work with other Member States and the Commission in pushing for robust enforcement across the EU to drive standards upwards. Penalties are the responsibility of Member States, but the UK will be pushing the Commission to ensure that all states are implementing the Regulation adequately and consistently, and that no weak links exist. Thirdly, increased availability of FLEGT-licensed timber will facilitate compliance with the EUTR, but it is important to ensure that there is both a supply and demand for such timber.

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There is growing awareness of the EUTR in other producer countries and this provides an opportunity to encourage their engagement in the FLEGT VPA process. Thus, the UK Government sees EUTR as an ambitious move that will help to drive demand for legal timber. It is fully committed to robust and proportionate implementation and enforcement, whilst recognising that this will not be an easy process and will require working together with all stakeholders. Looking at the details of the Regulation, EFI presented some of its key findings on options for due diligence systems, which were investigated as part of a report produced for the . EFI considered their potential impact on SMEs (small and medium sized enterprises), the role of third party verification schemes, lessons from the Lacey Act and lessons from other due diligence systems, such as those covering food safety and money laundering. A number of tools were proposed that would help ensure compliance with the EUTR requirements:  For access to information: a signed commitment from a supplier that they will deliver legal products, a signed legal document (such as a contract with details of the product), information collection forms, and record keeping covering all documentation.  Risk assessment: internal assessment by the operator (assisted by record keeping), publicly available information sources (such as NGO reports, transparency reports, timber trade federation country or region information), requests for additional information from suppliers, and use of a decision tree to assess risk and implement mitigation.  Risk mitigation: requests for additional information from suppliers, audits, supporting those suppliers with whom there is a long-term relationship towards third party verification, and dismissing or replacing suppliers. The EUTR affects a wide range of stakeholders (including timber traders, retailers, paper companies etc) and, therefore, it is not feasible to have a single due diligence description that would be applicable to all operators. However, reference information should be available to assist operators to evaluate due diligence evidence and prepare for 2013. From the perspective of retailers and traders, as presented by the British Retail Consortium and Strategic Environmental Consulting, although ending illegal logging is clearly desirable and there is support for the EUTR, the legislation is seen as very challenging to implement and is hampered by ambiguities and uncertainties. For example, there are a number of scenarios under which it is unclear as to whether a retailer would be the first placer, for example, where they take ownership of a product at the port of export outside the EU. Retailers are the most visible part of the supply chain and are held accountable by customers for the products in their stores. To avoid reputational risk, retailers will need to reassess or put in place responsible sourcing policies. An added layer of complexity will be assessing risk for products that are not own-brand. Official UK guidance is due to be published in July 2012, however buying lead-time can be up to 12–18 months meaning that some products that would fall under the Regulation will be sourced from as early as October 2011. In the interim period, the British Retail Consortium (BRC) is developing due diligence guidelines, based on industry best practice. A further concern is that of supplier education; many global suppliers are not aware of the Regulation, with the result that retailers and traders will find it difficult to gather the information required. Switching suppliers who do not fulfil the requirements is not an easy option and could increase

6 risk in a changeover period. There is also a lack of clarity over future availability of certified and FLEGT licensed material. Retailer and trader concerns extend to traceability issues. For example, timber supply chains tend to be opaque and suppliers may wish to retain confidentiality for fear of losing competitive advantage. Furthermore, ease of traceability tends to decrease as product complexity increases, for example with pulp and paper, MDF and other composite products, and the resources required to verify hundreds of product lines in complex supply chains will be very challenging and may erode profit margins. There is a risk that a switch away from the use of timber to other (possibly less sustainable) materials will be an unintended consequence. There are a number of measures that would assist retail and other sectors to comply with the EUTR. It was suggested that: FSC and PEFC certified materials and chain of custody should be accepted as confirmation of negligible risk and as proxies for direct forest concession evidence; there must be more clarity on controlled wood assessments and issues such as how risk is assessed where a manufacturer is certified but the material source is not; there needs to be fair application and enforcement along the supply chain, across the UK and throughout the EU; assistance should be provided by governments, as well as from bodies such as GFTN and the timber trade federations, with educating suppliers through information dissemination and supplier support schemes; finally, the EUTR should be introduced via a phased approach (similar to that taken under the Lacey Act), starting with high risk products and simple supply chains.

The PowerPoint presentations for this session are available at the following links:  Stephen Lowe, DEFRA, UK: http://illegal-logging.info/uploads/Lowe200611.pdf  Hubert Inhaizer, European Forest Institute: http://illegal-logging.info/uploads/1_Maidelletal200611.pdf  Catherine Pazderka, British Retail Consortium: http://illegal-logging.info/uploads/Pazderka200611.pdf  Liz Crosbie, Strategic Environmental Consulting: http://illegal-logging.info/uploads/Crosbie200611.pdf

SESSION III: The FLEGT Regulation and the Liberian VPA Chair: Clare Brogan, IDL The session opened with a presentation from DEFRA on the FLEGT Regulation, before turning to . Three different perspectives on the recently agreed Voluntary Partnership Agreement between Liberia and the EU were presented: the Liberian Government‟s Forestry Development Authority, Liberia Timber Association and an NGO view, as represented by the Foundation Community Initiatives and Sustainable Development Institute. Stephen Lowe of DEFRA gave a presentation describing implementation of the FLEGT Regulation in the UK. The legislation will be delivered via a Statutory Instrument with UK-wide regulations, which will come into force when the first shipments of FLEGT licensed timber arrive from VPA partner countries.

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Many of the details are still to be finalised, but it is confirmed that the UK Competent Authority will be the Animal Health Veterinary Laboratory (AHVLA), which will be responsible for overseeing implementation. Enforcement will be carried out at the UK borders by the UK Border Agency, which will have the authority to allow or seize shipments once the license is checked and HM Revenue and Customs have processed the imported products. Failure to comply with the Regulation will result in the application of criminal penalties, including fines, suspension of business and imprisonment. Penalties have yet to be determined, including the question of what will happen to any timber seized under the Regulation. The UK has been sharing information and consulting other EU Member States on penalties and the systems that are being put in place. The need for strong penalties was raised during discussion, and it was noted that a number of countries have strengthened their proposed penalties following these exchanges. The need to ensure that more effort is put into raising awareness amongst all sectors of the timber trade was also highlighted. The focus of the session then moved to Liberia, beginning with a presentation from the Government‟s Forestry Development Authority. The timber sector in Liberia has a troubled recent history, with UN sanctions being imposed in 2003 due to a lack of transparency in concession allocation, weak governance and law enforcement, and money generated by the sector being used to fund conflict. Following a sustained programme of reform, sanctions were lifted in 2006. The reform programme included the cancellation of all existing forest concessions, legal and institutional reforms, the establishment of a Forest Reform Monitoring Committee, a new Code of Harvesting Practices, and the establishment of a timber traceability system. The timber industry is now beginning to rebuild but exports are still at a very low level and there are significant capacity challenges for the efficient operation of the sector. Liberia‟s VPA was negotiated over a period of two years and negotiations concluded in May 2011, with ratification pending. Once the VPA is ratified a Joint Implementation Committee (JIC) will be established to oversee implementation. There are also a number of outstanding issues to be addressed, including workers rights and welfare, social agreements with local communities, community rights law and the management of chainsaw loggers. It is expected that the first FLEGT licenses will be issued in 2014. The representative of the Liberian Timber Association confirmed the difficulties facing the timber sector in Liberia which was described as “starting from zero” following the lifting of sanctions. There are currently only eight timber companies operating, each at very low capacity. The Liberian Timber Association fully supports and participated in the VPA process. The reasons for this support include industry reputation (which was ruined during the civil war with the assumption that all companies were operating unethically), the support a VPA gives to sustainable forest management, an improved market for timber products, and the opportunity to build capacity within the industry. The primary objective of industry is the promotion of sustainable forest management, ensuring that goods and services derived from the forest meet present-day needs and that their continued availability is secured, whilst protecting the rights of affected communities. The industry sees significant challenges to achieving this, including the low level of technical, financial and human resource capacities, a high tax regime, the short timeframe in which to develop forest management plans, a complicated and expensive chain of custody system, limited or damaged infrastructure and complex regulations. In order for the VPA to succeed, the timber industry believes that the forest law reforms of 2006, including the core regulations and Code of Harvesting Practice, need to be re-visited and

8 a framework established that would encourage further investment in the Liberian forest industry. From the civil society perspective, represented by the Foundation for Community Initiatives and Sustainable Development Institute, the VPA is a positive step towards improving governance in the forest sector. It was pointed out that although Liberia is a resource-rich country, over 80% of the population lives on less than US$1.25 per day, a result of poor governance to date. The key issue for civil society is, therefore, whether the VPA will bring benefits to local communities. The negotiation process was very positive; it was stakeholder- driven and created a space for communities to have their voices heard, including via direct participation. The VPA could be a springboard for improved governance by drawing in international support for forestry, addressing poverty and development needs through benefit sharing and redistribution of state revenues, improving capacity across all stakeholders and improving regulation for the domestic market. However, civil society organisations are concerned about a number of issues that remain to be addressed. These include conflicting laws, existing – and possibly illegal – forest concessions, and ensuring that „tainted‟ companies are not allowed to operate within the sector. There is also concern that the consultation process for developing the REDD R-PP (Readiness Preparation Proposal), which was directed by the President‟s office, was not inclusive and that this has the potential to create competition between the two different processes, particularly as it is unclear how local communities will benefit under REDD+. The civil society representatives set out seven recommendations for ensuring that the VPA process results in better governance and brings benefits to communities. These are:  The government and its partners must ensure that the consultative VPA model is also used in other processes, such as REDD+;  The Government must ensure governance reform is introduced in other extractive industries;  The EU and other donors must ensure the coordination of VPAs with other initiatives and across different countries;  The Government must demonstrate and maintain the political will to drive the VPA implementation process including the commitment made to transparency;  CSOs and other stakeholders must continue to work together constructively;  The private sector must step up its activities to meet international forest management standards; and  The EU and civil society organisations in Europe should raise awareness of FLEGT and ensure the full acceptance of FLEGT licenses.

The PowerPoint presentations for this session are available at the following links:  Stephen Lowe, International Forestry Team DEFRA, UK: http://illegal-logging.info/uploads/LoweFLEGTUK20062011.pdf  Victoria Cole, Head of Law Enforcement, Forestry Development Authority, Liberia: http://illegal-logging.info/uploads/Cole200611.pdf  John Deah, Liberia Timber Association: http://illegal-logging.info/uploads/Deah200611.pdf

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 Julia Weah, Foundation for Community Initiatives, Liberia & Nora Bowier, Sustainable Development Institute, Liberia: http://illegal-logging.info/uploads/BowierWeah200611.pdf

SESSION IV: Central African Republic’s VPA Chair: Lea Turunen, European Forest Institute This session was opened with a presentation by Alain Pénelon of COMIFAC, who gave an overview of Central African Republic‟s (CAR) VPA. This was followed by two presentations giving the perspective of NGOs: Jean Bruno Ngougnogbia representing the organisation Maison de l’Enfant et de la Femme Pygmées (MEFP) and Jean Jacques Mathamale, representing Centre pour l’Information Environnementale et le Développement Durable (CIEDD). The presentation of COMIFAC explained that the Central African Republic has 4.6 million hectares of tropical forest, 3.8 million ha of which is currently being exploited under 14 concessions. Forest revenue accounts for 6.3% of GDP and 41% of earnings from exports. It was the private sector which put pressure on the Forest Ministry to consider negotiating a VPA, since they were concerned that forest companies risked losing their European markets, particularly as no companies were engaged in forest certification. The key challenges for CAR‟s VPA were to strengthen the application of the 2008 Forest Law and eradicate illegal forest activities, and to achieve a higher level of forest management and governance. The negotiations took four years and the VPA was initialled in December 2010. The VPA has had dedicated involvement and support from the political hierarchy, including the Prime Minister, and the process has also been a major contributor to the emergence of a civil society platform. The VPA has developed as the coordinating structure for national forest policy. All stakeholders are now working towards implementation of a fully operational system by December 2013. From the perspective of NGOs and civil society organisations, as presented by MEFP and CIEDD, the multi-stakeholder process was very valuable; it was the first time that civil society had had the opportunity to work closely with the Ministry and to develop a mutual understanding. Civil society representatives were also encouraged by the fact that the negotiators on the EU side came from DG Development and not DG Trade, creating the opportunity for the VPA to be formulated as a development tool. However, the process moved too quickly at the start and local communities and indigenous peoples were not initially included. This was, in part, due to a lack of coordination and dialogue amongst civil society groups, and between these groups and indigenous communities, as well as a lack of funding for travel and organisation. These difficulties were overcome and they subsequently played a full role in the negotiations. The VPA contains principles which have a direct impact on local communities and indigenous peoples, setting out rights of access, rights to land and of exploitation of forest resources, and the contributions of businesses to ocal development projects. There was much debate over the clarification of use rights, and a considerable amount of work was undertaken by NGOs and CSOs to put in place stronger legislation and procedures on community forests.

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However, there are still concerns over aspects of the text and the process. For example, the notion of free consent by local people is not included, (only „information‟ and „participation‟ are mentioned), the text is weak in regard to customary rights and uses, and community forests and artisanal craftsmen are excluded from the legality framework. Yet CAR was the first country to sign the ILO Convention 169, which sets out the rights of indigenous peoples. In the context of implementation, more work needs to be done on building capacity amongst stakeholders to enable greater understanding of the complex legality verification system, effective traceability and monitoring, and effective participation in the reform of legal texts. Civil society representatives would also like to see a study undertaken into the causes of illegal forest exploitation. Civil society sees many parallels between the VPA and REDD+. FLEGT focuses on legality and REDD+ on measurable performance improvements, but both are concerned with the sustainable use of forests and reducing their degradation, both involve a range of stakeholders and both are concerned with the rights of communities. However, on the ground there is no coherence between these two approaches; FLEGT is overseen by the Ministry of Water and Forests, and REDD+ is overseen by the Ministry of the Environment, and the rights of indigenous peoples. Communication and coordination is lacking between these ministries. The question remains as to whether, at the end of the negotiations, the VPA document that has been produced will be sufficiently „owned‟ by the different stakeholders.

The PowerPoint presentations for this session are available at the following links:  Alain Pénelon, COMIFAC: http://illegal-logging.info/uploads/Pnelon200611.pdf  Jean Bruno Ngougnogbia, Maison de l‟Enfant et de la Femme Pygmées: http://illegal-logging.info/uploads/Ngougnogbia200611.pdf  Jean Jacques Mathamale, CIEDD: http://illegal-logging.info/uploads/Mathamale200611.pdf

SESSION V: A panel discussion: What are the best options for management of the world’s remaining forests? Chair: Richard Black, BBC A panel discussion was held to consider the question of what are the best options for management of the world‟s remaining forests, given the challenges faced of increasing resource constraints, climate change and a growing world population. There were four panellists: Gerhard Dieterle of the World Bank, Tom Picken of Global Witness, Rodney Taylor of WWF International and Silas Siakor of the Sustainable Development Institute. Each gave brief presentations on this topic, which were elaborated on in response to questions from the audience. The key points were as follows. The World Bank believes the debate about forests needs to be more balanced rather than being overly focused on climate change and REDD+, as has been the case in recent years, to consider the whole range of functions and benefits of forests. Further, the discussion about forests cannot happen in isolation of other land uses, such as commodities, energy, infrastructure and forest products, also considering the global public goods that they provide. In

11 thinking about ways forward, the drivers of deforestation need to be looked at: 40% of deforestation currently occurs as a result of shifting agriculture, which is poverty-related; the second largest threat to forests is from conversion for agribusiness and cattle ranching. Illegal logging is a comparatively small factor, accounting for around 12–15% of deforestation, the same as fuelwood and charcoal. Therefore, there needs to be simultaneous action on conservation, afforestation and reforestation, and better management of forests. One particular issue that has been ignored is that of fuelwood, which accounts for 80% of energy needs in Africa – the potential of forests to provide a sustainable source of energy needs much more discussion. In addition, the focus to date has been on areas that are forest-rich and population- poor, such as the Amazon and Congo Basin; with a growing population, more focus needs to be on those areas that are population-rich and forest-poor, that is the forest frontiers that are continuously being eroded. If these areas cannot be protected, the world will not be able to protect its high conservation value forests. WWF has a target of zero net deforestation and degradation by 2020. At today‟s population and consumption levels, there is more than enough land to meet all needs and so the problem is primarily one of governance. This is resulting in sub-optimal land-use, for example, due to arable lands not being cultivated because they are mired in conflict, illegal logging, frontier forests being cleared, and dysfunctional planning systems. Moving towards 2050, trade-offs between the needs of ensuring food and energy security and providing ecosystem services will become increasingly important. Thus, the world needs to find ways of producing more whilst using less land and water and producing less pollution; this means more intensification of agriculture and the use of fast-growing plantations. Extending the amount of forest under sustainable forest management may also be required, to produce more wood and energy, and also reducing their vulnerability to conversion. Forest conservation will also be important, and the CBD target to protect 17% of the world‟s lands is more than achievable for forests. However, care needs to be taken that the protection of forest lands does not result in increased pressure on other ecosystems, such as grasslands and shrublands, and so forests must not be considered in isolation from these other biomes, Shifting consumption patterns will also have a crucial role to play in reducing pressure on forests and helping to achieve a balance between the different demands on forest lands. One fundamental question that needs to be addressed is how to reconcile global priorities with the aspirations and needs of those living in and around forests. The development of principles for good land-use decision-making could help in dealing with those situations where global and local priorities diverge, and also in those situations where there is no effective governance. Global Witness believes that there is a lack of credible evidence to justify the continued support, both policy and financial, for industrial forestry. This support results in the expansion of industrial forestry into intact forests. However with only 20% of the world‟s intact forests remaining, there is a real need to re-examine this model to consider if it is truly sustainable. Support for this model of forestry is based on two assumptions: firstly that industrial logging results in economic development; and secondly that it brings benefits to local people. However, the evidence for these is questionable. In the first case, the economic argument is often exaggerated, based on overly-optimistic claims that ignore the many examples where such predictions have not been met. For example, in Liberia and Cambodia the actual returns from the forest sector in recent decades were significantly lower than those predicted by these countries‟ governments and by the World Bank. Similarly, for the second assumption that logging brings local development, Global Witness has found in its investigations that promises to local communities are frequently not fulfilled – for example, few jobs are made available and, where they are, working conditions are poor, goods offered as compensation are of poor

12 quality, while forest access for local uses is restricted and there is degradation of the land and forests. There is a need for a credible re-evaluation of the forest industry so that there can be a proper debate about its future role, including an examination of the concept of sustainability and an assessment of viable alternatives. Silas Siakor of the Sustainable Development Institute stated that we need to take a step back, and consider to what extent sustainable management has been achieved for the world‟s forest up to today. In Liberia, and indeed across the Central African region, he suggested that the crucial issue to be dealt with in the forest sector is that of politics and governance, rather than technical capacity. Thus, proposals to conserve forests as carbon stocks are not going to address the problem, as the core governance problems first need to be resolved. So the question is how can governance be improved in these countries so that a functional system is put in place? One part of the solution is that there is a need for a frank and honest debate about the sector. Such a debate should not be based on a view of forests as commodities, since this risks limiting discussions to economic issues. Rather, forests must be considered as a resource on which people depend and live, an approach that will also provide space for local people to engage in the debate. The question was raised as to why so much attention and support continues to be given to industrial scale logging, given the failures to improve its performance, and also, the fact that in many countries the informal sector is significantly larger than the formal industrial sector – for example, in Liberia, and the Democratic Republic of Congo. Looking at many of the most successful projects from around the world, in terms of environmental, economic and social sustainability, these are those in which local communities have been truly implicated at all stages. Such approaches need to be supported, rather than continuing with the industrial scale model of forestry. Thus, communities need to be given a true say, and genuine rights, over forests. Further, zoning of forest lands needs to undertaken in such a way that the interests of communities are placed at the heart of the process. Western countries also need to have a debate about their consumption patterns, and further steps need to be taken to ensure that markets for forest products demand sustainable products. This will help to exclude illegal operators and create incentives to establish a more equitable system.

SESSION VI: Legality in the agricultural sector: lessons from FLEGT? Chair: Alison Hoare, Chatham House This session focused on how legality is being addressed in the agriculture sector and considered the potential for sharing lessons between the forestry & and agricultural sectors. Presentations were made by Proforest, Forest Footprint Disclosure, DFID and the European Commission. Proforest began the session, setting out five key legality issues in forestry and comparing these with the agricultural sector. Firstly, it was noted that theft of timber is widespread, and thrives where there is a weak sense of ownership or collusion by officials. Theft of agricultural products occurs less frequently due to a stronger sense of ownership and the constraints of the growing cycle. Secondly, there are similar concerns in both sectors over the acquisition of tenure or use rights; for example, corruption in the allocation system, illegal use of land, and

13 inadequate recognition of community rights. Thirdly, management is influenced by a wide range of laws covering both forestry and agriculture, for example environmental protection and social welfare issues. However, there are differences: there is a greater mandate to provide oversight by forestry departments than agricultural departments, but there is a greater incentive to have continuity of production in agriculture than in natural forests. Fourthly, there are similarities in the ways in which these two sectors interact with local communities in terms of tenure and rights issues, the impacts from operations and potential benefits. However there is more scope for smallholder production in agriculture. The fifth legality issue is that of supply chain control; for timber, monitoring is often carried out by a forest department or similar body and the trade is relatively fragmented, whereas in agriculture, there is less government monitoring and significant involvement of large global trading companies. It was suggested that the FLEGT LAS Legality Assurance System (LAS) approach (covering legality, supply chain control, verification, licensing and independent monitoring) would be very applicable to agriculture. There is also considerable scope for learning from FLEGT‟s success in involving stakeholders and encouraging transparency; key for agriculture would be the inclusion of the private sector and developing approaches suitable for different agricultural commodities. Many of the issues of concern in agriculture are different from those in forestry, for example, illegality is not seen as a major issue, rather the industry faces pressure over sustainability in the context of deforestation. Indeed, much deforestation for cultivation is not illegal and there is no evidence of illegal agricultural products undermining legal products on international markets. However, elements within the FLEGT approach could provide useful pointers for agriculture, such as improvements to the legal framework, increasing transparency and addressing illegal deforestation where it does occur. There are good examples of legality-based approaches within the agricultural sector; for example, legality is a basic requirement in certification regimes for oil palm, soy, sugarcane, cotton, coffee, cocoa and rubber. New laws have also been introduced within consumer countries to address sustainability concerns, for example, the EU Renewable Energy Directive requirements for sustainable production of feedstocks. It was proposed that there should be a review of current practices and a consultation with all stakeholders to identify the best and most effective approaches to addressing legality concerns within the agricultural sector. Two initiatives that are addressing forestry issues in the context of other commodities were then presented. The first of these was the Forest Footprint Disclosure (FFD) project which asks companies to declare how deforestation risk is managed within their operations and supply chains. The key commodities covered are timber, soy, beef and leather, palm oil and biofuels. FFD aims to bring companies on board and then drive improvement through raising awareness of the global policy agenda and the challenges for the private sector to respond to this, providing opportunities for dialogue and for learning from best practice. The number of companies responding to FFD‟s disclosure request increased by 31% from 2009 to 2010 and FFD has expanded from its initial EU focus to the US, South America and SE Asia. Improvement was seen in most areas covered amongst companies responding in both 2009 and 2010. The areas showing greatest progress were:  Managing for performance improvement;  Sustainable supply chain development and support;  Public reporting.

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A significant number of responses to date have come from timber producers and users – which in part reflects the maturity of certification systems and the ability to quantify a sustainable footprint in this area, compared to other commodity areas. However, many participants have a long way to go to achieve a target of 100% certified products, and many did not have a clear capacity building strategy for future sustainable sourcing to meet certification targets. In terms of legality verification, very few companies, other than those in the forestry sector, recognise „due diligence risk‟. If companies are engaged in the import of products containing wood into the EU, or the export of products containing wood to the US, the costs of meeting the requirements of the EUTR and the Lacey Act will have to be managed down the supply chain, which will be a significant challenge for many FFD respondents. FFD is working to build awareness of timber legality risks across the different commodity sectors through events, commodity specific webinars and information dissemination. The second initiative presented was DFID‟s Forest Governance, Markets and Climate project (FGMC). This is a key element of the UK Government‟s International Climate Fund, which has recently been set up with a budget of £2.9 billion for 2011-2015, 20% of which is earmarked for addressing international forestry and climate. DFID‟s programme aims to support governance and market reforms that reduce the illegal use of forest resources and benefit poor communities, through improved forest policies and governance, reducing the amount of illegally sourced timber and other commodities, and increasing the area of forest under non-State rights, including under local community control. The UK Government believes that the successes of the FLEGT Action Plan on forest governance, illegal logging and trade must be expanded and the momentum sustained, and that the lessons from this should be extended to other agricultural commodities that drive illegal deforestation. It was noted that between one- and two-thirds of forest clearance for agriculture does not follow due process. A combination of measures should be introduced, including a focus on legality and law enforcement, demand and supply side measures that help markets discriminate, multi-stakeholder processes that tackle governance issues and raising awareness. The FGMC programme has four key outputs:  Increasing and maintaining multi-stakeholder engagement in producer and processor countries;  Tackling trade in timber and other commodities sourced from illegal forest practices through public policies and business standards;  Increasing knowledge and momentum for change; and  Ensuring coherence between programmes on forests and deforestation (for example, FLEGT and REDD) at national and international levels. The European Commission also sees lessons from FLEGT that can be applied to other commodities, as was outlined in the fourth presentation. FLEGT is not just about illegal logging; it encompasses law enforcement (for example, the rule of law and taxes), governance (for example, decision-making, accountability, human rights, corruption and resource allocation) and trade (for example, access to markets and unfair competition). Many of these aspects are also relevant for other commodities. There is a clear link between the governance and market failures that drive illegal logging and those which drive deforestation, and the challenges that face those tackling the problem, for example, unclear land tenure, lack of institutional capacity, weak regulatory regimes and corruption. However, given the difficulties seen in building cooperation between FLEGT and

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REDD processes, it would require much greater political will than currently exists for similar processes to be adopted for agricultural commodities. However, there are limitations of using the FLEGT approach to tackle deforestation. FLEGT is focussed on legality of production, rather than the legality of forest clearance, and trade is the lever with which actions are framed; however, the products of forest clearance are not necessarily traded internationally. In Liberia wood chips are sourced mainly from agricultural concessions but as they are a wood product they are covered by the VPA legality framework; however, in the Republic of Congo, bushmeat is not addressed in the VPA as there is no legal international bushmeat trade. Thus, actions under the VPAs are constrained by what stakeholders bring to the table and by the focus on trade in forest products. The Commission agrees with the UK Government on the need to build coordination between FLEGT and REDD processes to halt illegal deforestation, although there was a general recognition that this would not be easy and that it would be even more challenging to develop synergies with other commodities.

The PowerPoint presentations for this session are available at the following links:  Ruth Nussbaum, Proforest: http://illegal-logging.info/uploads/Nussbaum21062011.pdf  Katie McCoy, Forest Footprint Disclosure: http://illegal-logging.info/uploads/McCoy21062011.pdf  Penny Davies, DFID, UK: http://illegal-logging.info/uploads/Davies21062011.pdf  Julia Falconer, European Commission: http://illegal-logging.info/uploads/Falconer21062011.pdf

SESSION VII: Indonesia

Chair: Penny Davies, DFID This session included presentations from CIFOR, Transparency International, Indonesia‟s Anti- Mafia Task Force and the Ministry of Forestry. The first presentation from CIFOR explored potential lessons that can be learned from measures to control illegal logging in Indonesia and applied to REDD+. It was suggested that both processes share many key challenges: monitoring, reporting and verification, social and environmental safeguards, access to information, institutional reforms and capacity building, ownership, and broader governance challenges. Crucial for addressing illegal logging is effective law enforcement, and Indonesia has demonstrated strong political commitment to tackling corruption and money laundering. There are still weaknesses in the judicial system, primarily that illegal logging is still seen as an administrative, not a criminal, crime. However, it is hoped that the new illegal logging law, which is currently in draft form, will be a useful addition to the arsenal of tools for tackling illegal logging. The stated aims of the law are to prevent forest destruction and address other sectoral drivers of deforestation; this is also highly relevant to REDD+.

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The aim of FLEGT is to ensure that timber production is legal, using the incentive of access to international markets, whereas the aim of REDD+ is to reduce deforestation and forest degradation using performance based incentives. The need for credibility is key to both schemes. This means not only credibility of data and baselines, but also of traceability systems, safeguards and the need for independent verification. Ensuring the credibility of both processes is maintained amongst all stakeholders will require improvements in governance and law enforcement. Under the VPA, the development of the multi-stakeholder platform, civil society capacity building and greater transparency have all contributed to governance reform. However, other issues such as tenure uncertainty and regulatory loopholes remain unaddressed; it needs to be decided whether REDD+ will tackle these concerns or whether other areas of reform are focused on. A vital aspect of the VPA process has been allowing sufficient time for proper consultation, to address conflicts and to build ownership among stakeholders. The REDD+ process, conversely, has been fast-tracked, risking the alienation of sections of society (some of whom see REDD+ as undermining sovereignty), and potentially leading to a lack of attention to detail with the risk that fundamental governance issues are not adequately addressed. It is important that lessons are learned from the VPA process. A presentation from Transparency International focussed on the need for transparency and integrity to combat illegal logging driven by corruption. TI‟s Forest Governance Integrity Programme is working in Indonesia, Papua New Guinea, Solomon Islands, China and to identify how corruption affects forests and what can be done to tackle it. The project works through multi-stakeholder consultations to map the risks, identify priority areas, assess how existing anti-corruption instruments tackle these risks, and identify gaps and possible improvements. Local stakeholders in Indonesia identified the main risks as: laws and regulations, licensing, revenue, forest management / timber supply and enforcement. If these risks are not addressed, they could result in the issuance of licenses without proper checks, undermining systems that promote SFM, and removing the social and economic benefits from forests. This has implications both for illegal logging and for REDD+. The project has identified a number of potential improvements to help minimise these risks. These include stronger sanctions, harmonisation of legislation at local and national levels, capacity-building, developing local capacity to monitor governance, public access to information on licensing, developing tracking and monitoring systems for forest governance, and the use of one-stop licensing services. The next phase of the project will involve working with local communities to design practical solutions. The Indonesian Government‟s Anti-Mafia Task Force is also working to combat corruption and organised crime in the forestry sector, establishing a working group to examine how to eliminate the mafia from the sector. The mafia operates in many ways, for example: using illegal procedures in the licensing process for forestry and forest conversion to „legalise‟ deforestation, manipulating the forest provision fund and tax system, using illegal documentation at all levels of administration, and provoking conflict between communities, the private sector and government to avoid production costs and taxes. These activities vary across the different provinces and require targeted action in each. The working group has developed a series of recommendations for the Indonesian Government to tighten up regulations and procedures to eliminate these activities. Firstly, the Minister of Forestry should seek a moratorium on all licensing in Central Kalimantan until the forest area has been fully mapped and an improved regulatory system is in place. Secondly, the Minister

17 should coordinate improvements to the legal framework on permitting, sanctions, harmonisation of regulations, and transparency. Thirdly, the Task Force and the Government must work with the police, judiciary and Corruption Eradication Commission to tighten up law enforcement, and investigate and litigate to reclaim losses from illegal activity. Finally, the Timber Legality Assurance System (TLAS) and the VPA must be implemented to drive improvements in governance. Finally, the Ministry of Forestry gave an update on Indonesia‟s VPA. After a lengthy negotiation process, Indonesia has signed the VPA with the EU, and is working towards full implementation in January 2013. In terms of trade volume, the VPA is the largest of those signed to date; Indonesia-EU trade in timber products is worth US$1.2 billion a year. The VPA covers all timber products, except recycled products and handicrafts, and covers all export destinations (worth US$9 billion a year). The process was driven initially by NGOs, who drafted the first legality definition, but has gained the support of government and industry through a process of sustained consultation and negotiation. The TLAS will be controlled by a robust auditing system at the forest and factory levels. 250 auditors have been trained to date and five audit companies accredited, with five more undergoing the accreditation process. An Independent Forest Monitoring Network has been established to enable more than 40 NGOs to undertake independent monitoring. Training is in place for industry, government and civil society. The VPA has strengthened existing systems as well as introducing new approaches. A new export licensing system will strengthen existing export laws, a new information system is being introduced for the issuing of licenses, transparency requirements are being introduced to enable effective independent monitoring and a number of identified loopholes are being closed to ensure that sustainable forest management certification fully meets legality requirements. The Ministry of Forestry also sees lessons that can be learned from the VPA process for climate change initiatives. Thus, the Ministry agrees with the Anti-Mafia Task Force that the VPA and TLAS are important steps towards improved forest governance; secondly, independent auditing is a powerful tool for ensuring the system is robust; thirdly, independent monitoring for illegal logging could also work in a REDD+ context; fourthly, having clear market requirements (in the context of the VPA, access to the EU market) is an important driver; and finally, multi-stakeholder processes are slow but worth the effort.

The PowerPoint presentations for this session are available at the following links:  Krystof Obidzinski, CIFOR: http://illegal-logging.info/uploads/Obidzinski21062011.pdf  Michel Gary, Transparency International: http://illegal-logging.info/uploads/Gary21062011.pdf  Diah Raharjo, Anti-Mafia Task Force: http://illegal-logging.info/uploads/Raharjo21062011.pdf  Iman Santoso, Ministry of Forestry: http://illegal-logging.info/uploads/Santoso21062011.pdf

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