Understanding Sustainable Biofuel Production, the Eu Renewable Energy Directive and International Initiatives to Verify Sustainability

Home , Sustainable biofuel

UNDERSTANDING SUSTAINABLE BIOFUEL PRODUCTION, THE EU RENEWABLE ENERGY DIRECTIVE AND INTERNATIONAL INITIATIVES TO VERIFY SUSTAINABILITY

A discussion about the global importance of ensuring biofuels are produced sustainably and the international initiatives to drive the market in a socially acceptable and environmentally friendly well-managed direction

FEBRUARY 2012

AUTHORS David Glenister Sustainability Expert, Systems and Services Certification, SGS

Vanda Nunes Market & Product Development Manager, Systems & Services Certification, SGS ABSTRACT

This document aims to provide an insight into the issues associated with the sustainable production of biofuels. It discusses the contents of the 2009 European Renewable Energy Directive (2009/28/EC) along with the subsequent European Commission Communications (June 2010), which relate to the implementation of sustainability schemes. Following this it details the first seven sustainability schemes to gain European Commission approval, as of July 2011, as covering all the criteria specified in the 2009 European Renewable Energy Directive. Organisations wishing to produce and sell biofuels that can count towards an EU member’s renewables targets need to be assessed against the sustainability criteria outlined in the Directive. This paper explains how the sustainability criteria can be broken down and details what they refer to. It also discusses the initiatives and methodology for auditing, verifying and certifying compliance with these criteria and with the EU Directive, along with other legislation around the world. Ultimately, it guides any organisation operating in the biofuels industry through the EU requirements for market support and what is considered good practice on an international scale.

CONTENTS

I. EXECUTIVE SUMMARY 2

II. SUSTAINABLE BIOFUELS 3

III. THE EUROPEAN UNION RENEWABLE ENERGY DIRECTIVE 5

IV. EU COMMISSION APPROVED VOLUNTARY STANDARDS 6

V. GLOBAL SUSTAINABILITY INITIATIVES 7

VI. THE KEY PRINCIPLES AND CRITERIA FOR SUSTAINABLE BIOFUELS 13

VII. VERIFICATION AND CERTIFICATION OF SUSTAINABILITY 16

VIII. CUSTOMISED AUDITS AGAINST SUSTAINABILITY PERFORMANCE CRITERIA AND ISSUE OF A RENEWABLE ENERGY DIRECTIVE LIMITED ASSURANCE STATEMENT 18

IX. CONCLUSIOn 20

1 I. EXECUTIVE SUMMARY

Biofuels use is widely recognised as a potential solution to the problem of greenhouse gas emissions. They are increasingly providing an alternative to traditionally used and highly polluting fossil fuels for powering vehicles and heating buildings. The increasing use of biofuels also means that the world can become less dependent on oil and gas as these natural resources deplete further. As a result of the increased focus on these issues over recent years the biofuels industry has grown exponentially. However, much of this speed has been because of the identified profit potential of the market and not because of these environment and resource driven factors. Those with a true concern for the world have now realised that there are many issues that need to be considered as part of biofuels market development and that only if the market is properly controlled can these aspirations be met. As Achim Steiner, Under-Secretary General of the United Nations and UNEP Executive Director said: “There is no doubt that we need to decrease our reliance on fossil fuels and move to cleaner, more environmentally friendly options, but we need to make sure we are not creating more problems than we solve.” The main concern associated with bioenergy is that its increased production could have severe negative impacts on biodiversity. These could be aspects such as land- use change, the introduction of potentially invasive species, the overuse of water and even by indirectly causing other agriculture production to move into conservation areas. However, at the same time the production of biofuels has positive impacts too. As the plants grow they put oxygen into the atmosphere, jobs are created throughout the whole value chain and the increased use of biofuels over fossil fuels should reduce pollution. Essentially, it is recognised that with a proper framework in place which balances greenhouse gas emissions savings against the impact on biodiversity, water and food security, it should be possible to develop a truly beneficial industry. In-depth planning, monitoring and management is required globally, regionally, nationally and on a project-by-project basis. It is in response to this need that the European Union (EU) established the EU Renewable Energy Directive – legislation that forces any Economic Operator in the EU to verify the whole value chain of their products against a clearly defined set of criteria that, when met, guarantee that the biofuel has been produced in a sustainable manner. In addition to the EU Renewable Energy Directive there are also a number of global sustainability initiatives that are helping to drive the industry in a sustainable direction. The purpose of these initiatives is to support the industry in meeting the regulations targets and requirements as well as to approach the subject with even greater depth and vision.

2 II. SUSTAINABLE BIOFUELS

WHAT IS SUSTAINABILITY? BIOFUELS FROM associated with tropical forests or recently deforested areas, drained The term ‘sustainability’ in the context SUSTAINABLE SOURCES peatland or wetland or other areas high of resources refers to the ability of the Biofuels, which can be solid, liquid or in biodiversity or carbon stock. This human race to sustain its existence on gas fuels derived from biomass, are includes any biomass plantations on planet earth. This involves taking care of internationally recognised as having a land that was previously covered in the needs and demands of the current clear role to play in the quest to reduce forest. In addition, the biofuel cannot society while continually ensuring that greenhouse gas (GHG) emissions and originate from areas designated for no damage is done to ecosystems to develop energy security. However, the protection of nature or from land or the environment. In the 1980s as the popularity of biofuels has grown, where rare, threatened or endangered when the importance of sustainable so too has the realisation that not all ecosystems or species exist. What this development was first realised the biofuels result in the same net benefit means in practice is that every entity in Bruntland Commission described it as: for the environment. Biofuels that have the production chain needs to be able ‘Development that meets the needs an undue impact or compete with to provide evidence supporting their of the present without compromising food crops are losing their political and sustainable land use and processes. the ability of future generations to market support, as they have been Starting from the farmer and the mill, meet their own needs.’ There are many revealed as unsustainable. Ultimately, moving on to the trading companies definitions of sustainability, but this only those that are sustainably produced that transport or adapt the product, is the most relevant and useful when can be considered truly renewable to the fuel supplier who delivers it to considering renewable energies such energy sources. a filling station and finally to the filling as biofuels that are now seen as critical For it to be said that a biofuel is from station – every supplier from the field to energy sources in the battle to decrease a sustainable source, the whole the end user must offer full traceability our dependency on non-renewable fuels value chain needs its sustainability of sustainability. This chain of custody such as oil and gas at the same time as guaranteed. This means that no approach to ensuring sustainability protecting the environment. part of the production, handling or means that for any given consignment transport of the biofuel can be seen of biofuels every detail of its production to be ecologically destructive in any meets the required parameters set that way. Essentially, the biofuel cannot prove its beneficial worth. be manufactured from raw materials

EXAMPLE BIOFUEL VALUE CHAIN FOR SUGAR CANE DERIVED BIO ETHANOL

Sugarcane field Harvesting Transport Ethanol and Transport to Harbour depot to factory energy production harbour depot

Transport Reloading in Transport to Destination depot Transport to depot destination depot destination to customer

3 4 III. THE EUROPEAN UNION RENEWABLE energy DIRECTIVE

In June 2009, the European Union biofuels, preventing those that do not option to show compliance using a launched the Renewable Energy generate net greenhouse gas (GHG) voluntary certification scheme. The Directive with ambitious targets for savings and have negative impacts on communications go on to explain what all member states. The Directive biodiversity or land use from achieving is required of voluntary certification details how each country must assist market support. The sustainability schemes for sustainable biofuels. While in the overall goal: 20% of all energy criteria can be broken down into twelve there are other options discussed such used within the EU must come from different factors: Legality; Human and as national agreements and bilateral renewable sources by 2020 with 10% Labour Rights; Local Food Security; or multilateral agreements, voluntary of this being in the transport sector. Greenhouse Gas Emissions; Land certification schemes are discussed in Within the detail of the Directive, Rights; Rural and Social Development; the most depth. Within the Renewable development plans for the introduction Planning, Monitoring and Continuous Energy Directive and throughout these and development of renewable Improvement; Conservation; Use subsequent communications the energy sources can be found. In the of Technology, Inputs and Waste European Commission is encouraging case of biofuels, this clearly outlines Management; Water; Soil; and Air. industry, governments and NGOs to sustainability criteria that must be Shortly after the Renewable Energy use recognised voluntary schemes as adhered to if the use of a biofuel from Directive was published, the European a means of proving the origins of a particular source is to count towards Commission issued communications biofuels as well as their greenhouse a member state’s renewable energy explaining how member states and gas reductions. target. Should these criteria not be met, organisations within the biofuels the biofuel is not considered to be a industry can implement and assess sustainable renewable energy source. biofuels against the sustainability By ensuring countries within the EU criteria and counting rules. As part of adhere to the sustainability criteria this, the EU gave organisations the the EU aims to limit the expansion of

5 IV. EU COMMISSION APPROVED VOLUNTARY STANDARDS

Using an approved voluntary or national • Roundtable on Responsible Soy (RTRS) COMMON FEATURES OF scheme demonstrates an organisation’s • Roundtable on Sustainable Biofuels (RSB) THE EC APPROVED SCHEMES biofuels are certified as meeting The seven currently approved schemes the sustainability criteria, and if the • 2BSvs Biomass Biofuels Sustainability share these common features: necessary modules are used, the EU • RED Bioenergy Sustainability RED (Renewable Energy Directive). On Assurance Standard (RBSA) 1. Production Standard – each assesses for sustainable production July 19, 2011, the European Commission • Greenergy (Brazilian Bioethanol and processing announced the first batch of seven verification programme) schemes to gain its approval. Each has 2. Chain of Custody Standard – each A number of countries (i.e. Sweden, been rigorously checked to ensure all scheme provides buyers with full Germany, Hungary, Austria, Denmark, the sustainability criteria are covered supply chain insight, so that they can UK, Spain and Italy) already have effectively. The approval is valid for five make credible claims based on tracing legislation in place that requires years and confirms that the scheme can the product back to source issue a certificate for a product that is organisations and products to be verified 3. EU RED – each scheme includes all fully assessed and meets all its criteria. against a recognised scheme before they can be sold in that country. Other elements required within the EU RED Here are the seven that are confirmed to countries are preparing to introduce hold EC approval: similar legislation and it is anticipated • International Sustainability Carbon that the next batch of approved Certification (ISCC) voluntary schemes to be announced by • Bonsucro (previously the Better Sugar the EU Commission is planned for 2012. Cane Initiative)

APPROVED VOLUNTARY CERTIFICATION SCHEME METHODS

Physical compliant product is separated from physical non-compliant product in accordance with the relevant voluntary scheme/standard. Physical product may be mixed only with other lots, batches, quantities or consignments only from compliant physical product. Documentation clearly separates between compliant product and non-compliant product. The resulting batch(es) of compliant product may be tracked onward in the associated documentation through the chain of custody. This system allows those taking ownership Segregation of material to be certain that the material is (or is made from) product that originates from the certified farms. This is not only applicable to biofuel but also for product destined for food usage etc.

Continuous accounting system or a fixed inventory period.

Mass Balance

The certified product is completely decoupled from sustainability certificates, and both certified and non-certified products flow freely through the supply chain. Sustainability certificates would be issued by an independent body. Book & Claim

6 V. GLOBAL SUSTAINABILITY INITIATIVES

The EU RED links to a wide and varied California Air Resources Board (CARB) are related through an area of the range of sustainability initiatives that and the Council on Sustainable Biofuel biofuels industry, for example the are being put in place around the Production (CSBP). Internationally Roundtable for Responsible Palm world. The EU Directive is a regional there are a wide range of institutions Oil (RSPO) or through organisations initiative which covers all biofuels sold looking at sustainability projects and like Bonsucro and the Roundtable on in the EU region. This is supported initiatives, including the United Nations Sustainable Biofuels (RSB), which by the European Committee for Environment Programme (UNEP) unite organisations across the biofuels Standardisation’s (CEN) initiatives. In and the International Organisation industry. Here we look at an overview various countries across the globe for Standardisation (ISO). A further of some of the key sustainability national initiatives are in place, or are group of initiatives bring together initiatives that are currently available in being introduced. For example, the USA stakeholders from a wide-ranging the marketplace. has a Renewable Fuels Standard (RFS2) array of interested and associated along with initiatives developed by the parties. In some instances, these

BIOFUELS SUSTAINABILITY INITIATIVES

REGIONAL NATIONAL

EUROPEAN RFS2 RTFO EU DIRECTIVE COMMITTEE FOR CARB LOW CVP STANDARDIZATION CSBP FUELS

CRAMER ISCC SUSTAINABLE BIOMASS

INTERNATIONAL INSTITUTIONS MULTISTAKEHOLDER For Black and White document

United Nations Environment Programme For Color document

UNEP PC 248 RSB Services FSC RTRS

RSPO BS

7 REGIONAL SUSTAINABILITY Evaluation Methods and other cross- • To include new categories of INITIATIVES cutting issues; GHG Emission Balance, renewable fuel with separate volume Fossil Fuel Balance and respective requirements for each EU Renewable Energy Directive calculations using a life-cycle approach; • To apply lifecycle greenhouse gas (EU RED) and Biodiversity and Environmental performance threshold standards The EU RED, as we have already Aspects. As a result there is a standard to ensure that each category covered in this paper, is the core in three parts in the drafting phase, of renewable fuel emits fewer document and enabling legislation each with a 2013 deadline. This ties in greenhouse gases than the petroleum for ensuring that only sustainably with the need to comply with the 35% fuel it replaces produced biofuels are successfully greenhouse gas saving over comparable st California Air Resources Board brought to market within the EU fossil fuels by 1 April 2013, for biofuels region. With the legislation becoming from production process in place prior (CARB) to 23rd January 2008. This is one of the mandatory from December 2010, launched a standard in response to greenhouse gas saving targets detailed EU countries are now in the process the Low Carbon Fuel Standard (LCFS) within the EU RED. of aligning their own legislation, Program for California which called for, standards and guidelines so that key in 2007, a reduction of at least 10% dates set out in the legislation are met. NATIONAL SUSTAINABILITY in the carbon intensity of transport INITIATIVES The European Committee for fuels by 2020. CARB then began coordinating activities between the United States of America Standardization (CEN) University of California, the California CEN develops European Standards that Renewable Fuel Standard (RFS2) Energy Commission and other state are channelled down for implementation agencies to develop and propose a draft The RFS2 has been developed by the by all CEN National Standardisation compliance schedule to meet the 2020 United States Environmental Protection bodies, who have the obligation to target. CARB also initiated regulatory Agency which implements regulations withdraw any conflicting national proceedings to establish and implement to ensure transportation fuel sold in standards when the CEN Standard is the LCFS. This regulation came into the US contains a minimum volume introduced. The 27 countries of the effect on 15th April 2010. of renewable fuel. The standard was EU, along with Croatia and three of the created as a result of the Energy Policy countries in the European Free Trade Act (EPAct) of 2005, and as stated in Association (EFTA) are members of the Act, the original RFS program (RFS1) CEN. Organisations and companies required 7.5 billion gallons of renewable wishing to purchase European Standards fuel to be blended into gasoline by 2012. are directed to their national standards The RFS2 version launched as a result of body for further information. the Energy Independence and Security Following the launch of the EU RED, Act (EISA) of 2007. This expanded the CEN has a technical committee (CEN/ standard in several key ways: TC383) working on standards for • To include diesel, in addition to petrol ‘sustainably produced biomass for energy applications’. These cover: • Increased volume targets for renewable Economic and Social Impacts; fuel blended into transportation fuel, Verification and Auditing; Indirect from 9 billion gallons in 2008 to 36 Effects; Terminology, Consistency of billion gallons by 2022

8 Council on Sustainable Biofuel suppliers these are the RTFO’s obligated Sustainable Biomass suppliers. An obligated supplier must Production (CSBP) The Netherlands introduced the first prove to the Renewable Fuels Agency system for the certification of all types The CSBP is a multi-stakeholder (RFA) that it has met its obligation by of sustainable biomass in January 2011 organisation supported in part by the producing Renewable Transport Fuel (based on NTA 8080). Natural Resource Conservation Service, Certificates (RTFCs) at the end of the U.S. Department of Agriculture. It includes year. Any company that owns biofuel The system was launched by growers, environmental and social interest for use in road transport as it crosses standardisation institute NEN and the groups and all sectors of the industry. the UK duty point, regardless of its Rotterdam Climate Initiative (RCI). It was established in 2007 to develop size, is eligible to claim RTFCs which It is based on the Dutch technical comprehensive voluntary sustainability may be traded and even the smallest agreement (NTA 8080), which describes standards for the production of biomass biofuel producers may claim certificates. requirements for assessing the and its conversion to bioenergy. Its Certificates can potentially be sold to sustainability of solid, liquid and gaseous standard is designed to serve as the obligated companies and then may be biomass for energy applications and foundation for an independent third-party used by them to meet their obligation. transport fuels. certification program. There is no guaranteed value for RTFCs, Germany The CSBP Provisional Standard for instead the value is set entirely by the Sustainable Production of Agricultural market. The potential income stream International Sustainability Carbon Biomass applies to biomass produced represented by the awarding of RTFCs Certification (ISCC) from non-food sources such as is to become the main government The ISCC, offers an international dedicated fuel crops, crop residues support mechanism for biofuels in the certification system for biomass and and native vegetation. It addresses UK (NB: on the cessation of all duty biofuels (fuels and electricity) that the full complement of sustainability incentives – expected in April 2012 describes the rules and procedures issues through principles, criteria, and when the duty incentive for biodiesel for certification. The scheme is both indicators applicable to both agriculture from used cooking oil is to end). EU RED approved and recognised by and silviculture. The Netherlands the German government. The German United Kingdom Federal Agency of Agriculture and Food The Cramer Commission (BLE) approves certification systems Renewable Transport Fuel In 2007 the Cramer Commission and certification bodies according Obligation (RTFO) provided a detailed biofuels report to Bio-Nachhaltigkeitsverordnung The RTFO requires suppliers of to the Dutch government. Using a (Bio-Sustainability). The ISCC has fossil fuels to ensure that a specified variety of criteria it proposed a biofuels established an internationally oriented, percentage of the road fuels they certification scheme. It has since been practical and transparent system for the supply in the UK are from renewable translated into policy for ‘reporting certification of biomass and bioenergy. fuel sources. Under the RTFO the requirements’ only rather than into It covers a reduction of greenhouse gas sustainability targets increase year on any mandatory standards. The Cramer emissions, the sustainable use of land, year and require companies to submit Commission’s ‘assessment framework’ protection of natural biospheres and reports on the carbon and sustainability provides criteria and indicators but does social sustainability. not detail how to ensure the criteria are of their biofuels. Any company that France supplies over 450,000 litres of fossil fuel met. It acknowledges the difficulties per annum for road transport is obligated in assessing biofuel production at the 2BSvs: biomass biofuel, under the RTFO and these companies individual organisation level and how sustainability voluntary scheme must register with the Department for often the criteria only become apparent Developed by French biofuels producers Transport (DfT). As most fossil fuel on the regional, national and sometimes as a scheme for all biomass and biofuel used for road transport in the UK is international level. producers throughout the world. It refined or imported by one of about 14

9 was devised to give biofuels producers regional situation. It covers lifecycle MULTISTAKEHOLDER throughout the supply chain a means analysis, water as a limiting factor, SUSTAINABILITY INITIATIVES through which they can demonstrate the land use change issues and impacts, sustainability of their products, in line plus ways that relevant factors can be Roundtable on Sustainable with the requirements of the EU RED. approached sustainably. Finally it calls Biofuels (RSB) The 2BSvs scheme was included in the for mandates, targets and standards The RSB is an international initiative first seven schemes to be granted EC to be science based and to cover all initially set up and coordinated by the approval. It covers the verification of of the effects, direct and indirect, that Energy Center at EPFL in Lausanne, biomass production and collection by increased biofuels production could Switzerland. It was created in 2007 to biomass producers and first gathering cause if it is not precisely managed. coordinate international efforts to ensure entities as well as the requirements for International Organisation for biofuels are produced sustainably. It mass balance systems for production brings together farmers, companies, Standardisation (ISO) plants and other economic operators. non-governmental organisations, The ISO develops and publishes experts, governments, and inter- INTERNATIONAL INSTITUTIONS International Standards. It is a network governmental agencies. of the national standards institutes SUSTAINABILITY INITIATIVES In 2008 the RSB launched a ‘version- of 163 countries, one member per zero’ third-party certification system United Nations Environment country, with a Central Secretariat for biofuels. The standard is a set of Programme (UNEP) in Geneva, Switzerland. ISO is a principles and criteria developed through non-governmental organisation that UNEP is the arm of the United Nations a multi-stakeholder process. It covers brings together the public and private (UN) focused on the environment. It all aspects of environmental, social and sectors to enable consensus solutions aims to lead the world in caring for the economic issues relating to biofuels. that meet the requirements of both environment by inspiring, informing, business and society. A second version of this voluntary and enabling people to improve their standard was then issued on 12th quality of life without compromising The ISO is in the process of developing November 2010. This latest version that of future generations. UNEP an International Standard (ISO 13065) describes the social and environmental works in many areas within this to address sustainability issues linked requirements operators must meet scope. A key focus when it comes to to bioenergy. The standard is being in order to be certified currently. As biofuels is environmental assessment, produced by the ISO project committee of March 2011 the RSB certification monitoring and reporting. UNEP ISO/PC 248 which held its first meeting scheme became fully operational, assists the international community in April 2010. This committee includes with organisations throughout the by providing access to environmental participating delegations of ISO biofuels supply chain expected to data and it helps governments to use national members from 20 different receive certification in 2011. The RSB this information for the benefit of their countries, with a further 13 countries scheme is recognised by the German societies in terms of planning and holding ‘observer’ status. It aims to Federal Agency of Agriculture and Food sustainable development. achieve standardisation in the field of (BLE) for meeting the German Bio- sustainability criteria for production, UNEP has established an International Sustainability requirements and approved supply chain and the application of Panel for Sustainable Resource by the EU Commission for meeting the bioenergy. ISO/PC 248 brings together Management, which, after in-depth requirements of the EU RED. international expertise and best practice research, produced in 2009 a report to discuss the social, economic and titled: ‘Towards Sustainable Production environmental aspects of bioenergy, and and Use of Resources: Assessing identify criteria that could prevent it from Biofuels’. The report examines options being environmentally destructive or for more efficient and sustainable socially aggressive. production of biomass, covering first generation biofuels and the global and

10 In 2012, the RSB completed a transition Roundtable on Responsible National Interpretation. Producers are process to create a new legal entity, Soy (RTRS) certified through strict verification of RSB Services. This represents an the production process to the Principles independent entity from the EPFL and The RTRS is an international multi- and Criteria by accredited certifying is incorporated in the State of Virginia, stakeholder initiative founded in 2006 agencies. All other companies in USA. The new RSB Services takes over that promotes the use and growth of the global palm oil supply chain that the management and development of responsible production of soy through process or use sustainable palm oil the RSB Standard. a global standard for responsible products need to be certified to ensure production. As of 2011, the global that market claims are valid and can FSC™ Forest Management and market will be able to buy RTRS certified be verified. Through supply chain Forest Product Chain-of-Custody soy. The RTRS Standard’s certification certification, a company proves that system for CoC was created in the FSC is an independent, non- its operations comply with the rules second half of 2010 to allow for this governmental, not-for-profit organisation governing the entire supply chain of certified soy to go to the market. established to promote the responsible RSPO-certified palm oil products. Before its launch the RTRS carried management of the world’s forests. Bonsucro (previously named the Established in 1993 as a response to out extensive field-testing as well as concerns over global deforestation, producing national interpretations of Better Sugar Cane Initiative) FSC is widely regarded as one of the the documents for countries such as Bonsucro (BS) aims to improve the most important initiatives of the last Argentina, Brazil, Paraguay, India, and social, environmental, and economic decade to promote responsible forest recently Bolivia, Uruguay and China. sustainability of sugar cane by promoting management worldwide. The RTRS program also covers CoC sustainability through a global standard, that includes the components of mass Forest management certification is with the aim of continuously improving balance and non-GM (segregation). In an independent assessment of the sugar cane production and downstream particular, the standard implements forest management unit to check that a processing. BS is focusing on significant the requirements of the EU RED and is forest complies with the internationally social and environmental issues EC recognised. recognised standards of the Forest associated with sugar cane cultivations Stewardship Council (FSC™). Roundtable on Sustainable such as: soil productivity; rational water use; effluent management; biodiversity In 1993, the FSC also published a Palm Oil (RSPO) maintenance; and equitable labour. standard which outlined 10 principles In response to the global call for BS promotes the implementation of and criteria for forest stewardship and sustainably produced palm oil, the sustainable sugar production to reduce the requirements for Chain-of-Custody RSPO was formed in 2004 to promote these social and environmental impacts (CoC). Forest Product CoC certification the growth and use of sustainable while maintaining or enhancing the involves tracking the origins of wood to palm oil products through credible economic status of farmers. guarantee its authenticity through the global standards and the engagement BS launched its sustainability standard entire supply chain. It also provides an of stakeholders. This not-for-profit assurance to customers, stakeholders in July 2010 as the result of a multi- association unites stakeholders stakeholder process. and investors of the quality of forest from seven sectors of the palm oil management at the original source of industry: oil palm producers; palm Along with the ten key principles and the timber. oil processors or traders; consumer criteria the BS Standard is designed FSC is a certification system that goods manufacturers; retailers; banks to comply with the EU RED and is provides internationally recognised and investors; environmental or nature recognised as achieving this by the standard-setting, trademark assurance conservation NGOs; and social or European Commission. As a result of and accreditation services to companies, developmental NGOs. BS’s work sugar cane buyers are able to choose sugar that has been produced organisations, and communities The RSPO Principles and Criteria interested in responsible forestry. according to agreed, transparent and for Sustainable Palm Oil Production verifiable criteria. The FSC label provides a credible were adopted in November 2005, link between responsible production pilot implemented for two years, and and consumption of forest products, released for use from November 2007. enabling consumers and businesses to They provide generic standards for make purchasing decisions that benefit sustainable palm oil production and people and the environment as well as have been further adapted for use providing ongoing business value. by each producer country through

11 STANDARD CLASSIFICATIONS FOR BIOFUEL SUSTAINABILITY INITIATIVES

The table below clarifies where each standard originates from and whether it is a certification, verification or guidance standard.

Well-known Sustainability Initiatives Certification Verification Guidance Initiating Body for Biofuels Standard Standard Standard

Renewable Fuel Standard (RFS2) United States x

California Air Resources Board (CARB) United States x x

Council on Sustainable Biomass Production United States x (CSBP)

Renewable Transport Fuel Obligation (RTFO) United Kingdom x

LOW CVP FUELS United Kingdom x

CRAMER Netherlands x

Sustainable Biomass (based on NTA 8080) Netherlands x

Stockholm Environment Institute (SEI) Sweden x

International Sustainability and Carbon Germany x Certification (ISCC) Bioenergy and Food Security Criteria and Germany x Indicators (BEFSI)

Roundtable on Sustainable Biofuels (RSB) Multi-stakeholder x

FSC Forest Management Multi-stakeholder x FSC Forest Product Chain-of-Custody

Roundtable on Responsible Soy (RTRS) Multi-stakeholder x

Roundtable on Sustainable Palm Oil (RSPO) Multi-stakeholder x

Bonsucro - Better Sugarcane Initiative (BS) Multi-stakeholder x

2BSvs Biomass Biofuels Sustainability France x

RED Bioenergy Sustainability Assurance Abengoa x Standard (RBSA) Greenergy (Brazilian Bioethanol Brazil x verification programme)

12 VI. THE KEY PRINCIPLES AND CRITERIA FOR SUSTAINABLE BIOFUELS

The sustainability criteria initially detailed • Minimum Age for Admission after 23rd January 2008. Any in operation in the EU RED and later discussed further to Employment before this date needs to comply with the st in the June 2010 EC Communications • Prohibition and Immediate Action for 35% savings by 1 April 2013. The saving can be broken down into twelve major the Elimination of the Worst Forms required is set to increase to 50% or st areas or key principles. By ensuring that of Child Labour more with effect from 1 January 2017, organisations operating in the biofuels with a requirement that by 1st January industry meet these sustainability criteria 2018 this rises again to at least 60% for 3) LOCAL FOOD SECURITY the use of their products can be counted biofuels that have come into production towards renewable energy targets and The impact from biomass cultivation on or after 1st January 2017. needs to be closely monitored. One obligations as well as receiving financial In other parts of the world, such as the area of concern is that of its effects on support and investment. U.S. there is separate legislation that food production and local prosperity covers the biofuels that are being sold. as a result of land-use changes such 1) LEGALITY Any suppliers into these regions need to as displacement. This needs to be ensure that the appropriate GHG saving Member states must adhere to the considered very carefully for any biofuel targets are being met in line with the EU legislation, namely the EU RED, seeking to be qualified as sustainable. regulations in place. introducing or adapting national legislation The Directive requires that all relevant to support it where appropriate. This sources of information on this subject may apply to laws on land rights, is investigated, including the UN Food 5) LAND RIGHTS environmental protection, labour issues, and Agriculture Organisation (FAO) Often it is unclear as to the ownership chemical use and waste disposal. All world hunger map. The biofuels that are of the land that producers are looking to organisations operating within the promoted to gain market support are turn into areas for growing biofuels raw biofuels industry are then obliged to work intended to be those that use degraded products. This change in land-use may within the national legislation rules for land, which is not suitable for food mean that local people are displaced the countries in which they are doing crops and is therefore a development of and with that lose their ability to feed business and with this they meet the agricultural productivity. It is also critical themselves and their families and to requirements of the EU legislation. On that the biofuel production does not maintain a reasonable quality of life. It a wider scale organisations also need to have a significant impact on food prices. may also mean that legal battles are comply with any relevant international For any groups or communities that are entered to determine who holds land treaties or conventions. As discussed susceptible to food insecurity this is a rights and can therefore decide on the below, these could be relevant to human crucial factor. It could be that they struggle land usage. Minority groups are likely and labour rights, but equally they could with food supplies as the result of farming to be the worst effected by this with be about biological diversity issues, practices, the change in the way their women and vulnerable indigenous wetlands or climate change. community manages food availability or people of the most concern. because of the ways in which food or 2) HUMAN AND LABOUR RIGHTS other resources are traded as a result 6) RURAL AND SOCIAL DEVELOPMENT of biofuel production. All the related EU member or third party countries The European Commission is, as outlined food security issues need very careful must understand and implement in the Directive, tasked with monitoring evaluation and some schemes (i.e. RSB) the Conventions of the International the impact of biofuels on social already contain specific food principles. Labour Organisation (ILO). These are sustainability. Part of this is ensuring that Conventions concerning: community environmental requirements • Forced or Compulsory Labour 4) GREENHOUSE GAS EMISSIONS for agriculture are not compromised for • Freedom of Association and EU member states are required to prove any communities producing the raw Protection of the Right to Organise that any organisation operating in their materials. This means environmental and country is working in accordance with social minimum requirements must be • Application of the Principles the GHG saving requirements outlined respected, something that is not always of the Right to Organise and to in the EU RED. The sustainability the case in countries outside the EU. Bargain Collectively criteria include an increasing target for Organisations need to ensure that their • Equal Remuneration of Men and Women GHG emissions saving from the use of products present no risk to the livelihood Workers for Work of Equal Value biofuels compared with their fossil fuel of local people and the opportunities • The Abolition of Forced Labour equivalents. Currently the required GHG for rural and social development are all saving is 35% for any biofuels produced examined, targeted and documented. • Discrimination in Respect of from plants that have come into operation This applies whatever the size of the Employment and Occupation

13 organisation and wherever they sit within • Primary forest or undisturbed Another key issue with regard to the supply chain. It is then up to the wooded land water is the prevention of excessive organisations to ensure they work with • Nature protection areas water consumption, especially in areas the local authorities to help communities where water is scarce. According grow and develop with the opportunities • Land that is internationally recognised to the United Nations Environment that the biofuels production brings. as important for the protection of rare, Programme (UNEP), the water needed threatened or endangered ecological for biofuels production can be up to 400 systems or species (e.g. on a 7) PLANNING, MONITORING AND times greater than that needed for the international conservation of nature list) CONTINUOUS IMPROVEMENT production of the equivalent traditional • Natural grassland with natural species fossil fuels. This means that ensuring By incorporating this rising scale of and ecological characteristics biofuels can be produced without over required GHG saving the Directive • Non-natural grassland which is exploiting or damaging water resources demands the continual improvement and species rich and not degraded is a major challenge for the industry. monitoring of biofuel sources and with Supply chains need to be better it organisations will need to implement Information on the measures taken for managed so that water use as well as planning to increase the GHG saving to the restoration of degraded land is also water quality impacts are minimised. levels required. However, consideration required. It is this degraded, marginal for planning, monitoring and continuous or abandoned land that is considered 11) SOIL improvement goes further than this and ideal and the most suitable for biofuel stretches into every other key principle. crop growth. For biofuels to be classed as Best practice, screening processes and ‘sustainable’ they cannot originate quality assessments need to be put in 9) USE OF TECHNOLOGY, INPUTS from land that was peatland on or after January 2008. Undrained soil must place across the board and improvement AND WASTE MANAGEMENT targets should be set in all areas. As a not be drained in order to cultivate and stakeholder in a local area any organisation The EU RED sets out rules to support harvest the raw materials for biofuels. in a biofuels value chain should be looking farmers, which fall under common Information on the measures taken for at ways to improve the region, in terms agricultural policy. These are supported soil protection is required and soil impact of reductions in poverty and improved by farmers’ schemes, which are designed must be monitored. Practices should resources. As such, plans to implement to structure the minimum requirements be put in place that prevent or reverse these goals in practice should be drawn for agricultural good practice. soil degradation. A continuing plan for up, along with long-term objectives. To be able to prove agricultural good assessing the ongoing capabilities of practice, members of a biofuels value producers to maintain soil quality is also 8) CONSERVATION chain need to monitor the use of necessary. Both soil where the crops are chemicals and potentially hazardous produced and soil around any area that Any land used or planned-to-be used technologies. They need to ensure that is affected by any part of the production for biofuels production is required throughout all production processes process must be assessed for impact. to be cross-checked against the any technologies or chemicals used Millennium Ecosystem Assessment. are improving efficiencies and do not 12) AIR This assessment is compiled from damage the environment or cause harm data detailing those areas that need Information on the measures taken for to the local community in any way. conservation because they provide air protection is required so that pollution basic ecosystem necessities in times can be monitored and minimised of crisis. These could be such things as 10) WATER throughout the supply chain. It is watershed protection or erosion control. The sustainability criteria require that important that technologies used are It is important that these areas are left where biofuels raw materials are being evaluated, along with each supplier’s unaffected by biofuel crop growth. produced, the groundwater and surface knowledge and capabilities to operate them in a beneficial manner. Pollutants Biodiverse land is very important to the water quality is protected. Also, if land has released could impact the GHG future wellbeing of the planet. Land been wetland, e.g. covered or saturated emissions saving calculation and as such with a high biodiversity value is detailed with water for all or most of the year, it need reviewing both from an air-polluting within the Directive as not being suitable cannot be used for biofuel production. standpoint and for GHG emissions. for sustainable biofuels and must be This is because the land has a high carbon conserved. The following land should stock. Information on the measures taken not be used for the cultivation of the raw for water protection is required. materials for biofuels:

14 15 VII. VERIFICATION AND CERTIFICATION OF SUSTAINABILITY

The sustainability of biofuels is responsibility to ensure that all related • Ask that variations are explained measured across the whole chain documentation is prepared and ready • Ensure claims and calculations are of custody with sustainability claims for auditing revised and corrected as necessary required for raw products, intermediate • An Auditable System: this should • Provide a final verification conclusion products and final products, ensuring normally be a Quality System that that every link in the chain from field covers quality assurance, supplier Once this assessment process has been to distribution is covered. According approval, full record documentation completed and the final verification to Article 18.1 of the EU RED, and traceability conclusion has been made, some economic operators should assess the voluntary schemes are then able to sustainability of biofuels using a mass • Auditing Skills: any auditing and provide the organisation being assessed balance system which: verification body used must have the with a sustainability certification to appropriate specific skills to audit support their claim. • Allows consignments of raw material each sustainability criteria as well as or biofuels with differing sustainability the necessary generic auditing skills characteristics to be mixed to assess and verify organisations • Requires information about the and biofuels sustainability characteristics and Any auditing and verification body sizes of the consignments assigned making a sustainability assessment to the mixture of an organisation does so using the • Provides for the sum of all following process: consignments withdrawn from the • Identify the organisation’s activities mixture to be described as having the relevant to the sustainability criteria same sustainability characteristics, in the same quantities, as the sum of all • Identify the organisation’s systems consignments added to the mixture and general organisation in relation to the sustainability criteria Both the Mass Balance System and the Sustainability Criteria that inform it • Check the effective implementation of for a given biofuel need to be verified, control systems related to the above ideally through a voluntary scheme • Assesses the organisation to that is recognised by the European an established ‘limited assurance Commission (and potentially other level’ and make a risk based legislation bodies) for this purpose. statement on the organisations sustainability performance VERIFICATION REQUIREMENTS • Perform a risk analysis of material Any voluntary scheme verifying the misstatement from the organisation’s sustainability of the criteria needs to information provided evaluate claims using the methodology • Verify related to the risk analysis outlined in the EU Communication • Verify and sample the organisation’s documents. This essentially means activities, covering its full scope an assessment of the management and complexity of documents within an organisation needs to be made along with an • Gather evidence in line with the external, independent audit of the sampling methods and the information sustainability criteria: needed for full verification of greenhouse gas, mass balance • Document Management: chain of custody, land use change, organisations are required to have environmental and social principles an auditable system related to sustainability claims they make, • Request that the organisation showing evidence from the previous provides further or missing five years as a minimum. It is their information for the audits

16 THE CORE ELEMENTS OF A SUCCESSFUL BIOFUEL SUSTAINABILITY CERTIFICATION PROGRAMME

Auditor Training Accreditation & Governance Complaints & Certification Protocol Grievance

Standard Audit Secretariat

Transport Consumer Producer Support Sustainable Production

Traceability & Chain of Custody Claims

17 VIII. CUSTOMISED AUDITS AGAINST SUSTAINABILITY PERFORMANCE CRITERIA AND ISSUE OF A RENEWABLE ENERGY DIRECTIVE LIMITED ASSURANCE STATEMENT

Organisations that cannot easily be A CUSTOMISED AUDIT OF BIOFUEL Once the criteria had been outlined assessed against the structured SUSTAINABILITY FOR THE SEKAB turned to the recognised sustainability criteria outlined in the SEKAB GROUP international auditing body, SGS, EU RED and the supporting voluntary to help set up and manage the The Swedish SEKAB Group prides itself certification schemes can be evaluated by audit programme, verifying that the on taking the lead in environmentally a Customised Audit Solution. Essentially, production meets the sustainability friendly, well-managed ethanol the same requirements still stand for requirements at every stage. It is with production. It was one of the first a biofuel to be classed as sustainable, the experience and knowledge of this companies in the world to supply however the way they are analysed can auditing body that the auditing process verified sustainable ethanol. SEKAB’s be different in terms of the information was fine-tuned and brought to fruition. ethanol is from Brazilian sugarcane used, the calculations performed and the and is used in fuels for cars, buses and As a result, SEKAB can now show its analysis of the GHG saving. trucks. Through an audit and verification clients, NGOs and other interested As with the voluntary schemes, the process SEKAB is able to guarantee that parties a totally transparent process. auditing body needs to have the its ethanol production meets specific The company has increased assurance appropriate skills and expertise to requirements for sustainability. As a that they are supplying ‘sustainable’ assess organisations against the result of the verification, SEKAB has ethanol. With this approach SEKAB also areas of sustainability that need to be seen an increase in consumer trust in demonstrated its proactive stance in verified. Any auditing body that has this the overall sustainable benefits of the the market while educating all suppliers capability is then in a position to work biofuels they produce. in its chain about the requirements of with an organisation that requires a sustainability. An added benefit was that Swedish consumers buy ethanol-based customised audit to develop a process the criteria also provided best practice fuels mainly because they want to and assessment that meets their needs examples to all kinds of agriculture. decrease their dependency on fossil and those of the EU. This is effectively fuels and move to renewable energy Overall, this put the SEKAB suppliers the development of a comprehensive sources. But there has been a lot of at the front of this movement, able to set of instruments based on the debate in Sweden, as in many other learn with their clients and the auditing framework of the EU RED. countries, about how sustainable body about how to prepare for the future During the development of a Customised ethanol really is. In the Swedish press demands of the global biofuels market. Audit Solution checklist, minimum there were a lot of articles about forced evidence levels, guidance and training labour in Brazil, and deforestation of for expert auditors are put in place. As the rainforest. a result of a successful Customised But, back in 2007 when the negative Audit an organisation receives a Limited press hit its peak, there was no auditing, Assurance Report. For Customised certification or international standard as Audits that have been developed to to how ethanol should be produced in a prove regulations compliance this report sustainable way. SEKAB therefore spent provides the evidence. 18 months developing a framework – Verified Sustainable Ethanol – with criteria that cover the entire lifecycle of ethanol from the sugarcane fields all the way through to its use in cars.

18 A CUSTOMISED AUDIT PROVING with many other biofuels producers, wide schemes available. SGS was LANTMÄNNEN AGROETANOL’S began to look for ways to meet the therefore asked to develop and conduct EU RED COMPLIANT SUSTAINABLE requirements it laid out. Lantmännen a customised audit solution, tailored to Agroetanol recognised that to continue the organisation, industry and location. BIOFUEL PRODUCTION operating successfully in the biofuels By working with SGS, Lantmännen Lantmännen Agroetanol is the energy industry it needed to have transparent Agroetanol was able to prove its division of the Swedish Lantmännen fully sustainable operations and operations meet the requirements of Group, which operates across the Nordic evidence to prove it. the EU RED. region. Owned, by around 36,000 Lantmännen Agroetanol takes As a result of gaining the limited Swedish farmers, Lantmännen is a responsibility for all parts of the assurance statement verifying its large-scale farmers’ co-operative. Over production process and with this EU RED compliance, Lantmännen a number of decades, Lantmännen has is able to control the variables that Agroetanol has experienced a very developed and diversified into what biofuels produced by supply chains with positive reaction from its customers. it is today and as such Lantmännen many different parties involved may Its ability to sell EU RED compliant Agroetanol produces and markets find difficult to do. For Lantmännen material from the beginning of 2011 bioethanol from the excess grain Agroetanol the major aspect of was necessary for the continued sale produced in Sweden. With the growing compliance with the EU RED was to of bioethanol across Europe, but at international demand for biofuel for the take its direction and intention and to the same time customers in Sweden transport sector especially, Lantmännen use it to put a management and quality recognised how quickly it had reacted to Agroetanol has been well placed to grow system in place. the regulations and the industry needs. with the industry. In Sweden, all regular petrol already includes 5% bioethanol. When Lantmännen Agroetanol first needed its capabilities assessed in Following the introduction of the EU 2010, there were no approved industry- RED, Lantmännen Agroetanol, along

19 IX. Conclusion

The EU Renewable Energy Directive provides a very detailed and beneficial framework for guaranteeing that only sustainably produced biofuels gain market support within the EU region. It is clear from the legislation and from all the global sustainability initiatives that providing guarantees for biofuels is a very complex issue that involves detailed and in-depth assessment of the whole value chain. Looking at the EU Directive requirements in terms of the criteria and calculations it quickly becomes apparent why the EU Commission strongly recommends the use of a voluntary scheme to perform the biofuel value chain analysis. By choosing to work with a recognised body that can verify and certify production processes, organisations can feel confident that they do truly meet all the requirements that are laid out. In addition to this, it allows them to prepare ongoing development plans to meet each legislative target date that is specified and to generally improve in relation to each sustainability criteria. It is clear from the vast number of international initiatives that the sustainable production of biofuels is a growing issue that will increase in visibility over the coming years. However, with the EU and other related legislation in place it should be the case that only truly sustainable biofuels can survive. With only these gaining international support, biofuels should be able to fill the gap for an environmentally sound and sustainable fuel for the future.

ABOUT THE AUTHORS David Glenister is a Qualified Lead Vanda Nunes is a Social and Auditor of ISO 14001 Environmental Environmental Auditor and has David Glenister Management Systems, ISO 9001 participated in many schemes and Sustainability Expert, Systems and Services Quality Management Systems. In standards for code of conduct and Certification, SGS addition David Glenister is a qualified social audits in Brazil, the Americas David Glenister was appointed Sustainability Report Assuror to Global and Europe. She is also a tutor for International Sales Manager for SGS Reporting Index (GRI G3), AA 1000 and SA 8000 and sustainability issues for Systems & Services Certification Renewable Transport Fuel Obligation. agribusiness. during January 2007. In this capacity, David Glenister graduated in 1985 from Vanda Nunes leads Latin America David Glenister has responsibilities for Kings College, University of London with Business Development in Sustainability the development of major international a BSc (Hons) Degree in Natural Sciences. for Biofuels, and has contributed Certification (3rd Party) and towards the main schemes in Customised Audit Solutions (2nd Party) development such as ISCC, BSI, RSB. Audit Programmes. David specialises Vanda Nunes RTRS, ISO PC 248, IETHA and ABIOVE. in Chemical, Finance, Mining and She has also participated in many global Energy Sectors. Market & Product Development Manager, Systems & Services Certification, SGS conferences on sustainable biofuels. David Glenister is an expert in Vanda Nunes has held the position She holds a bachelor in Business Sustainability Audit Programmes and of Market & Product Development Administration, with a specialisation has developed major international Manager for SGS Systems & Services in International Trade and Sustainability contracts in the Chemical, Clean Energy Certification for nine years. She is Management from the Fundação and Mining Sectors working with responsible for the development and Dom Cabral. companies such as BP, Chevron and sales of major international Certification Exxon Mobil, Procter & Gamble and (3rd Party) and Customised Audit Newmont Mining Corporation. Solutions (2nd Party Audit Programmes). David Glenister is leading the International Vanda is also Head of the Food sector Business Development in Sustainability in Brazil for certification, testing and as part of Global Project Finance and inspections. She started her career in is developing projects incorporating SGS three years before the Systems & the Social and Environmental Risk Services Certification role began. During Management approach of the Equator this period she worked in the Consumer Principles adopted by major Global Testing, Minerals and Industrial Business Financial Institutions and Industry Units, always in sales management, Sector Sponsors. marketing and business development.

20 ABOUT SGS SGS is the world’s leading inspection, verification, testing and certification company. Recognised as the global benchmark for quality and integrity, we employ over 70 000 people and operate a network of more than 1 350 offices and laboratories around the world. We are constantly looking beyond customers’ and society’s expectations in order to deliver market leading services wherever they are needed. Partnering with SGS opens the door to better performing processes, increasingly skilful talent, consistent and compliant supply chains and more sustainable customer relationships delivering profitable competitive advantage. Work with the global leader and take your commitment to the next level in managing sustainable biofuels. We have a history of undertaking and successfully executing large-scale, complex international projects. With a presence in every single region around the globe, our people speak the language and understand the culture of the local market and operate globally in a consistent, reliable and effective manner. SGS is a leading independent body helping organisations improve their performance related to sustainable development.

For more information, visit www.sgs.com or email [email protected]

COPYRIGHT NOTICE The information contained in this document represents the current view of SGS SA on the issues discussed as of the date of publication. Because SGS must respond to changing market conditions, it should not be interpreted to be a commitment on the part of SGS, and SGS cannot guarantee the accuracy of any information presented after the date of publication. This White Paper is for informational purposes only. SGS makes no warranties, express, implied or statutory, as to the information in this document. Complying with all applicable copyright laws is the responsibility of the user. Without limiting the rights under copyright, no part of this document may be reproduced, stored in or introduced into a retrieval system, or transmitted in any form or by any means (electronic, mechanical, photocopying, recording, or otherwise), or for any purpose, without the express written permission of SGS. SGS may have patents, patent applications, trademarks, copyrights, or other intellectual property rights covering subject matter in this document. Except as expressly provided in any written license agreement from SGS, the furnishing of this document does not give you any license to these patents, trademarks, copyrights, or other intellectual property. ANY REPRODUCTION, ADAPTATION OR TRANSLATION OF THIS DOCUMENT WITHOUT PRIOR WRITTEN PERMISSION IS PROHIBITED, EXCEPT AS ALLOWED UNDER THE COPYRIGHT LAWS. © SGS SA 2011. / REVISED ON 2012. ALL RIGHTS RESERVED.