Public consultation on Enquiry Drafts of revised PEFC International Standards for Chain of Custody and Trademark Rules

ED PEFC ST 2002:201X, Chain of Custody of Forest and Tree Based Products - Requirements

Appendix 1: PEFC Due Diligence System (DDS) for the Avoidance of Material from Controversial Sources

Normative Appendix

1 General requirements

1.1 In order to help ensure that activities conducted by the organisation under the scope of this standard conform to all applicable timber legality legislation, including trade and customs laws, and to minimise the risk that the procured material originates in controversial sources, the organisation shall operate a Due Diligence System (DDS), in accordance with the following elements of this standard.

1.2 The DDS shall be implemented for all input forest and tree based material covered by the organisation’s PEFC chain of custody with the exception of recycled material.

Note:      The DDS can be implemented by an organisation for forest and tree based products from forests under its own management.

1.3 The organisation shall implement the PEFC DDS in three steps relating to:

a) gathering information,

b) risk assessment and

c) management of significant risk supplies.

1.4 The organisation procuring raw material originating from species listed in Appendix I to III of CITES shall comply with applicable international and national legislation relating to CITES.

2 Gathering of information

2.1 The PEFC DDS is based on information provided by the supplier. The organisation shall have access to the following information:

a) identification of the material/product, including its trade name and type;

b) identification of tree species included , or list of tree species potentially included, in the material/product by their common name and/or their scientific name where applicable;

c) country of harvest of the material and where applicable sub-national region and/or concession of harvest.

Note 1: Access to the scientific name of species is required in cases where the usage of a common name could pose a risk of wrong identification of the species.

Note 2: Usage of a trade name of species is considered as equivalent to the common name in cases where all species covered by the trade name have an equivalent risk of originating in controversial sources.

Note 3: Access to the sub-national level of the material origin is required in cases where sub-national regions within one country do not represent an equivalent risk relating to the controversial sources.

Note 4: The term concession of harvest means a long – term and exclusive contract for harvest on defined geographical area of the publicly owned forests.

Note 5: The term “country/region” is further used throughout this clause to identify a country, a sub-national region or a concession of harvest of the material/product origin.

2.2 Upon request by customers and PEFC certified organisations further down the supply chain the organisation shall provide the information specified in 2.1 for material passed on with a PEFC claim. If the organisation does not possess the requested information, the request shall be passed on to relevant supplier(s) of the organisation.

3 Risk assessment

3.1 The organisation shall carry out a risk assessment, assessing the risk of procuring raw material from controversial sources for all input forest and tree based material covered by the organisation’s PEFC chain of custody.

3.2 The organisation’s risk assessment shall result in the classification of supplies into “negligible” or ”significant” risk category.

3.3 The organisation’s risk assessment shall be based on the indicators for risk at origin and supply chain level listed in table 1, 2 and 3 below.

3.4 Where the organisation’s risk assessment identifies indicators specified in table 1, the organisation may consider the supplies as having “negligible risk” to originate in controversial sources, and conclude the risk assessment without having to consider the indicators outlined in table 2 and 3.

3.5 Where the organisation’s risk assessment does not identify indicators specified in table 1, the risk assessment shall be continued against indicators outlined in table 2 and 3; and where any of these indicators apply, the organisation shall consider the supplies as having “significant risk” to originate in controversial sources.

3.6 Where none of the indicators outlined in table 2 and 3 are identified, the organisation may consider the supplies as having “negligible risk” to originate in controversial sources, and conclude the risk assessment.

Table 1: List of indicators for negligible risk

Indicators

a) Certified material/products delivered with a PEFC claim by a supplier with PEFC recognised certificate

b) Supplies declared as certified against a forest certification scheme (other than PEFC endorsed), addressing the activities covered by the term controversial sources, supported by a forest management, chain of custody or fibre sourcing certificate issued by a third party certification body.

c) Supplies verified by governmental or non-governmental verification or licensing mechanisms other than forest certification schemes, addressing the activities covered by the term controversial sources.

d) Supplies supported by verifiable documentation which clearly identifies

- country of harvest and/or sub-national region where the timber was harvested, where the latest Transparency International (TI) Corruption Perception Index (CPI) score is higher than 50, and

- trade name and type of product as well as the common name of tree species and, where applicable, its full scientific name, and

- all suppliers within the supply chain, and

- the forest management unit of the supply origin, and

- documents, including contractual agreements and self-declarations, or other reliable information indicating that products do not originate from controversial sources

Table 2: List of indicators for significant risk at origin level[2]

[2] Examples of external references and more detailed explanation can be found in the recent issue of PEFC GD 2001 Chain of custody of forest-based products – Guidance for use.

a) Activities not complying with applicable local, national or international legislation on forest management, including but not limited to forest management practices; nature and environmental protection; protected and endangered species; property, tenure and land-use rights for indigenous peoples, local communities or other affected stakeholders; health, labour and safety issues; anti-corruption and the payment of applicable royalties and taxes.

i. The latest Transparency International (TI) Corruption Perception Index (CPI) score of the country is lower than 50.[3]

 

[3] Transparency International has indicated that its corruption perception index is not always appropriate for forestry. And therefore, where more appropriate indicators exist, these can be used with a prior agreement with the PEFC Council in consultation with Transparency International. These indicators will be listed in the chain of custody guidance document.

ii. The country/region is known as a country with low level of forest governance and law enforcement.

iii. Tree species included in the material/product is known as species with prevalence of activities covered by the term controversial sources (a) or (b) in the country/region.

iv. The country is covered by UN, EU or national government sanctions restricting the export/import of such forest and tree based products.

b) The capability of forests to produce a range of wood and non-wood forest products and services on a sustainable basis is not maintained or harvesting levels exceed a rate that can be sustained in the long term.

i. According to publically available data, such as FAO Forest Resource Assessments, the amount of annual harvest of industrial roundwood exceeds the amount of annual growing stock of the country/region of origin.

c) Management planning does not aim to maintain, conserve or enhance biodiversity on landscape, ecosystem, species and genetic levels growth.

d)  Inventory, mapping and planning of forest resources do not identify, protect, conserve or set aside ecologically important forest areas.

i. The Environmental Performance Index (EPI)[4] score for “Biodiversity & Habitat” of the country is lower than 50.

 

[4] The EPI is produced jointly by Yale University and Columbia University in collaboration with the World Economic Forum. https://epi.envirocenter.yale.edu/about-epi

e) Forest conversions occur, in other than justified circumstances, where the conversion:

i. is in compliance with national and regional policy and legislation applicable for land use and forest management and is a result of national or regional land-use planning governed by a governmental or other official authority including consultation with affected stakeholders; and

ii. does not have negative impacts on ecologically important forest areas, culturally and socially significant areas, or other protected areas; and

iii. does not destroy areas of significantly high carbon stock; and

iv. makes a contribution to long-term conservation, economic, and social benefits.

 

i. The country/region has been identified as having had an annual net loss of forest area >1% within the last five years, according to publically available information, such as provided by the FAO.

ii. In the country/region the net area with conversions from forests to forest plantations exceeds the forest area increase of the country/region, according to publically available information, such as provided by the FAO.

f) The spirit of the ILO Declaration on Fundamental Principles and Rights at Work (1998) is not met.

i. The country has not ratified the ILO Declaration on Fundamental Principles and Rights at Work (1998) and studies are available demonstrating that the spirit of this declaration is not met through applicable legislation, including unresolved ILO complaint reports.

g) The spirit of the United Nations Declaration on the Rights of Indigenous Peoples (2007)  (including its requirements for Free Prior Informed Consent) is not met.

i. Studies demonstrate that the spirit of the United Nations Declaration on the Rights of Indigenous Peoples (2007) is not met or that Free Prior Informed Consent is not required in the country.

h) Conflict timber is generated.

i. The country / region has a prevalence of armed conflict according to publicly available data sources such as Fragile State List.

 

i) Genetically modified trees are generated.

i. According to publicly available data genetically modified forest and tree based organisms are produced and placed on the market in the country/region.

Table 3: List of indicators for significant risk at supply chain level

Indicators

a) Actors and steps in the supply chain are unknown.

b) Countries/regions where the timber and timber products have been traded are unknown.

c) Tree species in the product are unknown.

d) Evidence of illegal practices by any company in the supply chain 

3.7 The risk assessment shall be carried out for the first delivery of every individual supplier, or for several suppliers, with the same characteristics listed in 2.1, and the same applicability of indicators according to Table 1-3.

Note:      Where deliveries from suppliers from the same region share the same characteristics listed in 2.1, and the same applicability of indicators according to Table 1-3, the risk assessment can be implemented as an assessment for a whole region.

3.8 The organisation shall keep an updated list of characteristics listed in 2.1 and indicators according to table 1-3 for supplies of individual suppliers and suppliers that share the same characteristics.

3.9 The risk assessment shall be reviewed and if necessary revised at least annually, and when changes regarding the characteristics listed in clause 2.1 occurred.

4 Substantiated concerns

4.1 The organisation shall ensure that substantiated concerns about the potential origin of material covered by the organisation’s DDS in controversial sources are promptly investigated.

NOTE:    Substantiated concerns can be concerns by third parties, as well as concerns of the organisation itself.

4.2 If the concerns cannot be resolved by the organisation’s investigation, the risk of the relevant material being from controversial sources shall be determined as “significant” and managed in accordance with clause 5 of this appendix.

5 Management of significant risk supplies

5.1 General

5.1.1 For supplies identified as “significant” risk, the organisation shall request the supplier to provide additional information and evidence, which allows the organisation to classify the supply as negligible risk. The organisation shall request the supplier to,

a) provide the organisation with necessary information to identify the forest management unit(s) of the raw material and the whole supply chain relating to the “significant” risk supply,

b) enable the organisation to carry out a second party or a third party inspection of the supplier’s operation as well as operations of the previous suppliers in the chain.

Note:      These procedures can be ensured e.g. by contractual agreements or a written self-declaration by the supplier.

5.1.2 The organisation shall establish a second or third party verification programme for supplies classified as “significant” risk. The verification programme shall cover:

a) identification of the whole supply chain and forest management unit(s) of the supply’s origin;

b) on-site inspection as appropriate; and

c) risk mitigation, corrective and preventive measures as required.

5.2 Identification of the supply chain

5.2.1 The organisation shall require, from all suppliers of “significant” risk supplies, detailed information on the whole supply chain and forest management unit(s) of the supply’s origin.

5.2.2 In cases where the supplies can be verified as negligible risk according to the indicators in Table 1 at one step in the supply chain the organization is not required to track the whole supply chain to the forest management unit, except in case of substantiated concerns, which shall be addressed as outlined in 4.5 of this appendix.

5.2.3 The information submitted shall allow the organisation to plan and execute on-site inspections.

5.3 On-site inspections

5.3.1 The organisation’s verification programme shall include on-site inspections of suppliers delivering “significant risk” supplies. The on-site inspections can be carried out by the organisation itself (second party inspection) or by a third party on behalf of the organisation. The organisation may substitute the on-site inspection with documentation review where the documentation provides sufficient confidence in the material origin in non-controversial sources.

5.3.2 The organisation shall demonstrate that personnel carrying out inspections has sufficient knowledge and competence in the local business, cultural and social customs, and applicable treaties, conventions legislation, governance and law enforcement, relevant to the origin of “significant” risk supplies and to the risk(s) identified.

5.3.3 The organisation shall determine a sample of significant risk supplies from one supplier to be verified by the verification programme. The size of the annual sample shall be at least the square root of the number of “significant” risk supplies per one year: (y=√x), rounded up to the nearest whole number. Where the previous on-site inspections proved to be effective in fulfilling the objective of this document, the size of the sample may be reduced to y=0.8 √x, rounded up to the next whole number.

5.3.4 The on-site inspections shall cover:

a) the direct supplier and all previous suppliers in the supply chain in order to assess compliance with the supplier claims on the origin of the raw material; and

b) the forest owner / manager of the forest management unit of the supply origin or any other party responsible for management activities on that forest management unit in order to assess their compliance with legal requirements.

5.4 Corrective measures

5.4.1 The organisation shall define written procedures for implementing corrective measures for non-compliance for suppliers identified by the organisation’s verification programme.

5.4.2 The range of corrective measures shall be based on the scale and seriousness of the risk that timber or timber product(s) may be from controversial sources and shall include at least one or more of the following:

a) clear communication of the risk identified with a request for addressing the risk identified within a specific timeline so as to ensure that timber or timber product(s) from controversial sources is not supplied to the organisation;

b) requiring suppliers to define risk mitigation measures relating to forest management units compliance with legal requirements or efficiency of the information flow in the supply chain;

c) cancellation or suspension of any contract or order for timber or timber product(s) until the supplier can demonstrate that appropriate risk mitigation measures have been implemented.

5.5 No placement on the market

5.5.1 Forest and tree based material/products from unknown sources or from controversial sources shall not be included in product groups covered by the organisation’s PEFC chain of custody.

5.5.2 Forest and tree based material/products known or reasonably suspected as coming from illegal sources (controversial sources, 6 a) shall not be processed and, shall not be traded and/or shall not be placed on the market unless appropriate documented evidence has been provided and verified which allows the timber supplied to be classified as presenting "negligible risk”.

5.5.3 The organisation shall define, document and implement a commitment and a procedure, to implement clause 5.5.2 also for forest and tree based material/products which are not covered by the organisation’s chain of custody and DDS.