THE TIMBER TRADE FEDERATION
20. The Timber Trade Federation calls itself the
voice of the UK timber industry and states that its mission is
to help create and sustain the conditions in which its members
can prosper. It represents around 85% of the timber industry in
the UK. It lists its members as UK and overseas sawmillers, timber
importers, agents and timber merchants.
21. In its evidence to the Sub-Committee the TTF
was very keen to emphasise the economic importance of the industry
and the small proportion of timber imported into the UK from tropical
areas. We were told that " TTF and the wood industry
are wholly against illegal logging and practices that support
it"[21] and
great emphasis was placed on the TTF's Code of Conduct and the
recently introduced Responsible Producer Policy. The first line
of the Code of Conduct states:
Members are committed to sourcing their timber
and timber products from legal and well-managed forests. Members
unreservedly condemn illegal logging practices and commit themselves
to working with suppliers and other stakeholders towards their
complete elimination.[22]
22. According to the TTF failure to comply with the
Code would result in expulsion from the Federation.[23]
However, in the two and a half years of the Code's existence no
company been expelled. This we find surprising given that the
level of illegal timber in the UK market is estimated by industry
consultants at 9% and by WWF at 26%, and in the light of the difficulties
acknowledged by even those companies that are working the hardest
to eliminate illegal timber from their stocks. It would seem to
us that given that TTF membership covers 85% of the timber trade
in the UK, it is very unlikely that all its members deal exclusively
in legal timber. Given this and the lack of any expulsion of members
due to non-compliance with the Code we can only conclude that
it is more or less meaningless. By allowing its members to use
the Code of Conduct in promotional material, without thorough
and transparent enforcement, the Timber Trade Federation is in
danger of misleading customers as to the legality and sustainability
of the industry it represents.
23. Our view of the Code is reinforced by the relatively
low take up of the Responsible Purchasing Policy (RPP) introduced
by the TTF in July 2005.[24]
Twenty-six members signed up at its launch, which according to
TTF covers around 30% of the volume of wood traded in the UK.
We are concerned about those companies that have not and what
this indicates as to their commitment to the Code which they have
signed up to. The RPP, unlike the Code of Conduct, commits members
to taking meaningful action and to producing an annual report
on progress, which will be externally audited. We very much look
forward to seeing these when they are published next year for
the first time. Whilst the establishment of the Responsible Purchasing
Policy by TTF is encouraging, the low uptake at its launch is
definitely not. It also raises the question as to why it was needed
given that all its members are supposedly already complying with
the Code of Conduct and therefore sourcing their timber and timber
products from legal and well-managed forests. We have since been
told by the TTF that all its members will be signing up to the
RPP and that they will be investigating ways of auditing their
supply chains with the aim of improving their purchasing policies.[25]
This is all very welcome and we hope to see this resulting in
meaningful changes in how the UK timber trade operates and the
implementation of proper chains of custody for all the timber
products they supply
Imports from third party countries
24. Our concerns regarding the legitimisation of
the timber trade by the TTF, and also China's prominent role in
the timber market, were highlighted by a report published by Greenpeace
in October 2005, Partners in Crime. The report set out
the findings of the organisation's investigation into the use
of illegal timber from Malaysia and Papua New Guinea in making
plywood in China, which is then exported to developed countries
including the UK. Greenpeace highlighted the fact that 1 in 2
illegally felled tropical timber logs are currently exported to
China and that imports of Chinese plywood into the UK have increased
by 155% over the last few years. Greenpeace was able to purchase
plywood produced in China, made with illegal timber, from companies
such as Wolseley, who are members of TTF and have signed up to
both the Code of Conduct and the Responsible Producer Policy.
Indeed on its website, Wolseley highlights steps it is taking
to achieve Chain of Custody accreditation for its outlets and
goes on to state that even where this has yet to be achieved it
is able to "provide evidence of legal felling and sustainability
to customers, if requested."[26]
25. We were very concerned to hear the defence for
the purchase of Chinese plywood put forward by the TTF, both to
us and in a letter in The Independent.[27]
TTF confirmed that Chinese plywood has increased its share of
the UK market significantly over the last year to around 30% and
"is probably in the region of 100,000 cubic metres"[28]
and that as only the veneer on the plywood is tropical hardwood
"of that 100,000 cubic metres of timber, 95 per cent of
it comes from this plantation-grown poplar with 5 per cent from
this questionable source in Papua New Guinea about which we now
have serious concerns as a supplier country and which two years
ago was not supplying the UK".[29]
Whilst this, if correct, means that the volume of illegal timber
involved is less than might originally be assumed, it still reveals
that every single piece of plywood entering the UK from China
has a 1 in 2 chance of having an illegal timber component. This
is entirely unacceptable.
26. The above is a perfect illustration of why, if
illegal logging is to be addressed, there is a need for legislation.
Progressive timber companies struggle to ensure they have legal
supplies of timber. For those UK companies that are less committed
to ensure legality and a reliable chain of custody, the only real
drivers for improvement will be the need to comply with legislation
and a very real threat of prosecution.
27. The TTF told us about the work it has been doing
with producers in Indonesia, a country whose Government has declared
that 80 per cent of timber is illegally logged, to assist them
in working towards producing verified legal timber. As a result
of its work there is now a supply of FSC certified plywood from
Indonesia available in the UK. Unfortunately, according to reports
from the Tropical Forest Trust, due to its inability to compete
with Chinese produced plywood, which undercuts most other producers
by around 25%, it did not initially find any buyers.[30]
Whilst buyers have now been found for the FSC plywood, this is
a perfect illustration of the problems faced by sustainably produced
timber products competing in a market of illegal and unsustainable
products, an issue to which we will return to later on in this
report.
28. It is clear that the companies that form part
of the timber industry are a very diverse and differing group
of organisations, at least when it comes to their environmental
record. Given this and the significant efforts being made by some
progressive timber companies, such as those involved in the G8
industry and ministerial round table, to move towards sustainable
and legal timber suppliesindependently of any trade associationit
is surprising to us that they is not greater co-ordination amongst
them to publicise their efforts. Companies who have taken the
long view and have realised that their survival depends on maintaining
a sustainable supply of timber worldwide would surely benefit
from increasing awareness both in the private sector and among
the general public of the differences between themselves and less
conscientious companiesand the impacts of the timber they
supplywith the aim of increasing their market share. We
urge these companies to consider greater investment in this approach.
This could be done directly or through supporting credible certification
schemes, such as the FSC, to raise awareness. It was apparent
from their evidence to us that FSC is an organisation that is
achieving a great deal with very limited resources, but which
could do much more. In our view, FSC is ideally positioned to
expand its role and work to raise awareness of sustainable timber
and related issues, if increased resources were made available
to it.
Destructive Forest Activities
29. The flow of finance into industries that have
a serious impact on illegal logging is a complex issue, but one
that has profound impacts on the world's forests. It is also an
area for which there is little clear and comprehensive data on
the scale of investment.
30. The private sector has in the past invested
heavily in the timber processing industry, which is often dependent
on illegal timber. In Indonesia this investment resulted in a
significant processing over-capacity which fuelled the need for
timber. The scale of the problem is illustrated by the fact that
after the economic collapse in Indonesia in 1998, £1.8billion
was owed to US and EU investors by timber-processing companies
that did not have any access to secure or demonstrably legal sources
of raw materials.[31]
Agri-business, which in tropical regions is heavily linked to
forest clearance to access land, is also an area of significant
investment. For example, of the 6.5 million hectares of oil-palm
plantations across Sumatra and Borneo in 2004 almost 4 million
hectares where originally forest cleared for plantation.[32]
31. Extracts from a recent International Herald
article, from November 2005, on Indonesia's intention to seek
$3billion from investors for three paper pulp factories illustrate
the scale of the problem and the increasing influence of China
and other developing countries on the trade in timber and timber
products:
Indonesia wants to lure investors to build three
pulp mills on the island of Borneo at a cost of at least $3 billion,
according to government officials. The building of new mills would
fulfil a longstanding government ambition of significantly expanding
the Indonesian pulp and paper industry. Jaakko Poyry Group, a
leading consultancy in the pulp and paper industry, expects demand
in China to grow 5 percent a year from 2004 to 2020 But forest
researchers and environmental activists say the industry is already
running above its capacity because of a shortage of plantation
timber. A study by Barr estimated that only 10 percent of the
wood harvested for the pulp industry from 1988 to 2000 was from
plantations. He estimates that the industry still relies on natural
forest for as much as three-quarters of its feedstock. International
Paper, the world's biggest paper manufacturer, says it refuses
to buy wood or pulp from Indonesia because of concerns about illegal
logging and encroachment into natural forests. Some foreign investors
are [
] likely to be attracted by the relatively cheap supplies
of timber, which normally account for 60 percent of the cost of
running a pulp mill.[33]
This is in a country which has recognised it has
a serious problem and has banned the export of unsawn timber
to try to tackle the issue of illegality. This also illustrates
the fact that whilst it is important that logging activities comply
with national legislation this is in no way a guarantee of sustainability
and raises the question of whether there is a need for an internationally
agreed definition of legalityrather than simple compliance
with national legislationto ensure that requirements to
purchase legal timber have meaningful impacts.
32. In 2003, ten major world banks signed up to
the Equator Principles, which include a commitment to ensuring
safeguards are in place when carrying out investments that affect
forestry, natural habitats and indigenous peoples.[34]
However there is little information on how these commitments are
being implemented and monitored and when one hears, for example,
that analysts have been recommending investing in China, again
in the pulp and paper mills industry (despite the fact that the
industry is already at overcapacity if only legally available
pulp supplies are considered), it raises the question as to whether
these principles are having any significant impact.[35]
33. Public sector finance includes finance available
through national Export Credit Agencies (ECA). Development banks
such as the World Bank and the Asian Development Bank (ADB) also
play a role in forest destruction. Whilst there have been efforts
to ensure that environmental and sustainability issues are taken
into account when considering funding projects that may affect
forests directly, this has not always translated into good practice
on the ground, particularly with the ADB.[36]
There have also been concerns that imposing strict standards on
ECAs puts a country at a competitive disadvantage when competing
with countries whose ECAs set lower standards.
34. Some effort is being made within Europe to address
the issue of investment, although progress so far has been minimal.
We would like to see the UK Government take the initiative within
Europe on working towards ensuring multinational companies make
more considered investment in activities that could finance forest
destruction. Unfortunately there appears to be little willingness
outside DEFRA to tackle the issue of corporate responsibility
head on. This was exemplified by the Chancellor's announcement
in November 2005 that he would be dropping the proposed Operating
and Financial Review reporting requirements that were due to come
into force in April 2006. This would have obliged large companies
to report on, among other areas, their environmental performance
and impacts. The Government has also recently been criticised
for failing to properly implement the OECD's guidelines on corporate
responsibility for multinationals.[37]
Both of these could be - if properly implementedpowerful
tools, not only in ensuring the investment decisions of companies
based in the UK are not harmful to forests worldwide, but in protecting
the environment generally.
35. This lack of willingness to make companies accept
responsibility for their environmental impacts is short sighted
indeed. In the case of illegal logging significant effort is going
into addressing the issue through the FLEGT Action Plan, but the
lack of willingness to impose restrictions on how companies operate
through legislation threatens to jeopardise all the hard work
undertaken. There is a double standard operating that we find
deplorable. We are expecting other national Governments to change
their laws and implement significant changes in how their industries
operates to prevent us from consuming their illegal timber. At
the same time in this country we are unwilling to properly implement
international guidelines, which we have signed up to and agreed
to enforce, as to how multinationals should operate abroad or
simply to make large companies report on their environmental performance.
It is shameful.
3 Forest biomass is estimated to contain around 283
Gigatonnes (Gt) of carbon. Back
4
FAO, Global Forest Resources Assessment 2005. http://www.fao.org/newsroom/en/news/2005/1000127/index.html
Back
5
FAO Forestry Paper 145, Best Practices for Improving Law Compliance
in the Forestry Sectors, 2005 Back
6
Emily Fripp, Overview of Market Drivers, Ghana Timber Trade
Forum, Kumasi, May 2005 Back
7
FAO, Best practices for improving law compliance in the forestry
sector (145), 2005 Back
8
FOE, The oil for ape scandal: How palm oil is threatening the
orang-utan, September 2005 Back
9
International Tropical Timber Organisation, Annual Review and
Assessment of the World Timber Situation, 2004
http://www.itto.or.jp/live/PageDisplayHandler?pageId=199
Back
10
FAQ, FAOSTAT data, 2005. http://faostat.fao.org/ Back
11
International Tropical Timber Organisation, Annual Review and
Assessment of the World Timber Situation, 2004 Back
12
ibid Back
13
The UK apparent consumption of wood products in 2004 was 45,000thousand
m3 of timber, imports where 52,000 thousand m3, whilst domestic
production and export where 8600 and 15600 thousand m3respectively.
The UK imported 18,000 thousand m3 of wood, 7,100 thousand m3of
pulp, 8,000 thousand m3of pulp and 18.4 thousand m3of paper. Back
14
Q110 Back
15
Q70 Back
16
Forestry Commission, UK Timber Market Statement, September
2004 Back
17
The Amazon Basin, the Baltic states, the Congo Basin, West Africa,
Indonesia and Russia. Back
18
WWF-UK, Failing our forests - Europe's illegal timber trade, November
2005 Back
19
FII, An Independent Appraisal of the WWF "Failing the
Forests" Report, 25 November 2005 Back
20
Q102 Back
21
Q110 Back
22
TTF Code of Conduct, http://www.ttf.co.uk/buying/conduct/ ,13
January 2006 Back
23
Q119 Back
24
TTF Press Release, '26 Members sign up to RPP', 18 July 2005 Back
25
Ev31 Back
26
http://www.wolseley.co.uk/corp/news/news52.html Back
27
The Independent, 'Letter: carbon emissions exported to
China', October 21, 2005, Back
28
Q161 Back
29
ibid Back
30
TFT Press Release, 'Turning Our Backs: FSC Indonesian plywood
fails to find a buyer', 3 October 2005 Back
31
Jade Saunders, Improving Due Diligence in Forestry Investments,
Chatham House, 1 June 2005 Back
32
FOE, The oil for ape scandal: How palm oil is threatening the
orang-utan, September 2005 Back
33
International Herald Tribune, 'Outcry as Jakarta tries to revive
paper industry', 2 November 2005 Back
34
On 4th June 2003 ten leading banks from seven countries announced
the adoption of the "Equator Principles", a voluntary
set of guidelines developed by the banks for managing social and
environmental issues related to the financing of development projects.
The signatories where: ABN AMRO Bank, N.V., Barclays PLC, Citigroup,
Inc., Credit Lyonnais, Credit Suisse First Boston, HVB Group,
Rabobank, Royal Bank of Scotland, West LB AG, and Westpac Banking
Corporation. Back
35
Q218 Back
36
Jade Saunders, Improving Due Diligence in Forestry Investments,
Chatham House, 1 June 2005 Back
37
Friends of the Earth, Christian Aid and Amnesty International
UK, Flagship or failure?10 January 2006 Back