Forest Stewardship Council® Updated Memo regarding Resolute Forest Products Document: BM67.12 Annex 2 Date: 05 November 2014 Author: Kim Carstensen / Francois Dufresne Action: Decision Status: Confidential Changed text from the version of 21 October is marked in yellow Background In May 2010, the Canadian Boreal Forest Agreement (CBFA) was signed after years of difficult negotiations be- tween the forest industry and ENGOs. Bold and ambitious, it was designed to pave the way to protect large areas of the Canadian intact boreal forest. However, the agreement became quickly fragile because of lack of proper mechanisms to execute on the intended objectives and, most importantly, the absence of the aboriginal people at the table. Late 2012, Resolute and major ENGOs (Greenpeace, Canopy and others) left the CBFA over a deadlock in the ne- gotiations. This event has essentially crippled the CBFA, which is still in a dead end as of today. Early 2013, Green- peace renewed their campaign to protect high profile boreal forests in Ontario and Quebec (i.e. Broadback, Mon- tagnes Blanches) under Resolute jurisdiction. The situation worsened when Greenpeace openly targeted Resolute over its forest management and when Reso- lute Forest Products in response to the Greenpeace campaign filed a $7 million lawsuit in Ontario Superior Court against Greenpeace Canada and two of its staff. See more from Greenpeace about this lawsuit here. Some per- spectives on these issues from Resolute Forest Products can be found here or here. By the end of 2013, Resolute Forest Products was the company with the largest area of FSC certified forest glob- ally. In total, Resolute were managing 7 FSC FM/COC certificates in the Canadian provinces of Ontario and Que- bec, covering a total area of 13 million hectares. Resolute signed a partnership with WWF Canada (Climate Saver Program) and pledged to have 80% of its forest operations FSC certified by 2015. In January 2014, 3 of the certificates of Resolute Forest Products were suspended by Rainforest Alliance. These certificates covered an area of 8 million hectares (in different Forest Management Units, FMUs), and are still sus- pended. The certificates and the issues leading to suspension are: 1) Certificate #: RA-FM/COC-005956 (Lac St-Jean) in Quebec: P3: 3.1.2 – lack of agreement with the Cree nation; 3.2.2 – indigenous resources diminishing be- cause non application of the Paix des Braves provisions on Cree traplines (Baril-Moses agreement area); 3.3.2 – supports for monitoring forest management impacts not conclusive; P6 & P9 : 6.2.5 – precautionary approach for caribou; 6.3.5 – proportion of old forests; 9.3.3 – HCVF: 2 values not well protected (large core forest habitats, woodland caribou); 9.4 monitoring of 2 val- ues (woodland caribou and large core forest habitats); 2) Certificate #: RA-FM/COC-004525 (Mistassini-Péribonka) in Québec: P6 & P9: 6.2.5 - Precautionary approach for caribou; 6.3.5 – The target, the lack of a broad consen- sus for that target and the full age-range of old forest; 9.4 - Monitoring of 2 values (woodland cari- bou and large core forest habitats); BM 67, Oaxaca / Mexico, 10 November 2014 Page 1 of 11 Forest Stewardship Council A.C. · Calle Margarita Maza de Juárez 422 · Colonia Centro · Oaxaca CP 68000 · Mexico T +52 951 502 6533 · F +52 951 502 6594 · [email protected] · www.fsc.org· FSC® F000100 Public Registry of Property and Commerce: Oaxaca · Mexico, Registration No. 38602 Forest Stewardship Council® 3) Certificate #: RA-FM/COC-005587 (Black Spruce & Dog River) in Ontario: P6: 6.4.2 - Reasonable level of representativeness has not been achieved. Lack of information re- lated to the regional significance of conservation values; 6.4.5 – Lack of documentation demonstrat- ing support (for proposed protected areas to address gaps in ecosystem representation) by inter- ested parties. After these suspensions, FSC Canada was informed by Rainforest Alliance that the Caribou Forest certificate was likely to be suspended mainly because of failure of meeting the indicator 6.4.5. : “Lack of support from interested parties (ENGOs)”. This situation takes its origin in the fact that Resolute had invested all its ENGO support within the CBFA and lost that support when leaving the agreement. At the request of Rainforest Alliance, FSC Canada issued an interpretation of the indicator 6.4.5 (approved by PSU) with regards to the meaning of interested par- ties. In April 2014, Rainforest Alliance performed a Corrective Action Verification Audit (CVA) in Ontario to address: The suspended FM certificate #: RA-FM/COC-005587 (Black Spruce & Dog River) ; The potential suspension for a fourth FM Certificate #: RA-FM/COC-004570 (Caribou Forest); The request to include FMU English River with the Caribou Forest. On May 6th 2014, Resolute filed a legal injunction against Rainforest Alliance to prevent the publication of the audit report, along with damage claims against the auditors and RA. FSC Canada and FSC international received a letter (letter attached) from Resolute explaining their rationale not to follow the FSC Complaint resolution pro- cess. Essentially, Resolute claims that it had been treated unfairly and without impartiality. Little information about the audit has been made available so far due to the injunction and the confidentiality agreement between the parties. For this reason, no action has been immediately possible related to the Caribou Forest certificate, which therefore remains valid. However, the increasing risk to FSC brand and credibility from not taking action against a certificate holder by- passing our normal dispute resolution system, is brought up by many observers and interested parties. The court case between Resolute Forest Products and Rainforest Alliance is still ongoing, and it is not known how long it may take to reach a conclusion. We know that there are active discussions out of court between Resolute Forest Products and Rainforest Alliance, and we know that a proposal for a way forward is under negotiation, but we cannot tell when conclusions – if any – might be reached. Situation regarding FM certification As long as the Caribou Forest certificate is valid in our database, Resolute Forest Products can continue to sell wood from this area as FSC FM certified. The certificate was first issued on 21st December 2009, and is therefore going to expire on December 20th, 2014. We do not know of any attempts to prepare an audit for this time, it seems likely that the certificate will just expire, after which the area will no longer be certified after our stand- ards. In that sense it seems certain that the situation around this certificate will not drag on unresolved. Resolute have 3 other valid FM certificates, two with QMI and one with SAI. These certificates are not affected by this situation Situation regarding Controlled Wood At the same time, Resolute Forest Products are continuing to source wood from the areas with suspended certifi- cates as controlled wood. This is allowed under our current rules for the certificate holders who obtained the cer- tificate before 2012 and until the revised controlled wood standard is in force (we currently expect the revised 2 of 11 Forest Stewardship Council® standard to have its effective date on 1 July 2015, after which there would be a transition period to allow compa- nies to shift to the new rules. We have not yet decided the transition rule, so the length of this transition period is uncertain. Normally it would be one year from the effective date): FSC decided in 2012 that Certificate Holders (CHs) certified according to the CoC-CW standard shall not be allowed to risk-assess and source CW from the forests they own/manage, including their affiliated companies (ADVICE-40- 005-18), unless the forests are certified according to the FM-CW standard. The FM-CW standard is not based on risk assessments, but on a model quite similar to FM certification applies, whereby the CW requirements are im- plemented directly at the forest level and evaluated by a Certification Body (CB). Under these rules, Resolute would not be allowed to implement the CoC-CW standard in the suspended FMUs, because these FMUs are owned/managed by Resolute (or affiliated companies). However, there is an exception to these rules for CHs who had been implementing CoC-CW in their own forests before the requirement (ADVICE-40-005-18) came into the force in 2012. These CHs may still use the CoC-CW Standard for their own risk assessment until the revised version of the CoC-CW standard comes into force (planned approval March 2015). Resolute’s certificates were issued in 2009, and therefore Resolute may still source CW from the suspended FMUs, according to the CoC-CW standard. However, sourcing controlled wood from suspended areas shall only take place when it is confirmed that the vio- lation of FM requirements that led to the suspension do not involve any violation of CW requirements: Implementing the CoC-CW standard still requires Resolute and other sourcing companies to re-assess their sus- pended areas within 2 months of the suspension in order to verify whether the reasons for the suspension prove a violation of CW requirements. The CB is to evaluate the company’s re-assessment within an additional month – this requirement has been introduced in January 2014 via a standard interpretation to address reported problems with sourcing CW from suspended areas. This shall prevent unacceptable material from suspended FMUs entering the supply chain, irrespective of the ownership of the forest from where CW is sourced. From our database we can see that two QMI CoC certificates provide confirmation that the revision was done with a view to source from the suspended area.