Memorandum submitted by Duncan Brack,
Associate Fellow Energy, Environment and Development Programme,
Chatham House
SUMMARY
— Procurement policies aimed at excluding
illegal and unsustainable timber products are already proving
a valuable weapon in the armoury of consumer states. The UK's
central government timber procurement policy in particular is
proving successful, and is a good model for other countries to
emulate.
— A wide range of figures tend to be
quoted for the size of public procurement (and, therefore, the
impact of public procurement policy on the market). In fact, in
developed countries public-sector purchasing of products and services
from third parties amounts to about 10% of GDP. Although it is
not known whether this is an accurate figure for timber and timber
product procurement, studies suggest that suppliers' preferences
for relatively simple supply chains can magnify the direct impact
of public purchasing.
— The domination of the government
procurement market by the two major timber certification schemes
(FSC and PEFC) is tending to render differences between countries'
procurement policies (including over the inclusion of social criteria)
to be less important. However, it is also leading to growing incentives
to defraud the system, and it is not clear whether the schemes
can police effectively their own certificates. The focus on sustainable
products also risks impeding the take-up of FLEGT VPAs, which
guarantee only legal products.
— Building standards can be useful
in encouraging take-up of legal and sustainable timber, but as
points-based systems they are less effective than they could be.
Government can go beyond the minimum requirements in using them
as the basis for funding policies, such as the Building Schools
for the Future programme, which could, for example, have a requirement
for legal and sustainable timber incorporated in it.
— Implementation of timber procurement
policies by local authorities is limited and patchwork, but there
are some good stories, and many opportunities for central government
to exercise influence. As well as direct communications and encouragement
through DEFRA and CPET, these include the inclusion of sustainable
procurement within the Audit Commission's CPA rating system, encouragement
for regional development agencies to require legal and sustainable
timber in construction projects, and engagement with elected councillors.
1. INTRODUCTION
1. One major policy instrument that consumer
countries can use to address illegal logging and unsustainable
forestry—as commented on at some length by the Environmental
Audit Committee in its January 2006 report[64]—is
public procurement policy. Effectively this is the creation of
a protected market in which only legal and/or sustainable timber
products can be bought for government contracts.
2. Several EU member states, and a number
of other countries, now possess government procurement policies
aimed at ensuring that public purchasers source only legal and/or
sustainable timber and wood products. As of October 2008, these
include Belgium, Denmark, France, Germany, Japan, the Netherlands,
New Zealand, Norway and the UK; a number of other countries, mostly
EU member states, are considering adopting similar policies.
3. Chatham House has worked on the issue
of timber procurement, as part of our broader programme of work
on illegal logging, for several years. Recent outputs include
a concise summary of timber procurement policies (June 2008)[65]
and a series of case studies of the implementation of timber procurement
policies in English local authorities (September 2007).[66]
A study of social issues in timber procurement policies is currently
under way and should be finished by November 2008.[67]
Drawing on these studies, this submission highlights key issues
in a number of areas relevant to the EU and its member states,
and in particular the UK.
4. What should be stated at the outset is,
procurement policies aimed at excluding illegal and unsustainable
timber are already proving a valuable weapon in the armoury of
consumer states. Although to date only two countries—the
Netherlands and the UK—have undertaken market research studies
on the impacts of public procurement policies on overall supply,
both showed that the volume of certified timber products imported
had grown steadily since their introduction. In the UK, certified
products now account for over 50% of the market (both domestic
production and imports),[68]
though only 8% of global forest area is certified. Although the
effect of other government policies, NGO and public pressure and
a growing industry commitment to environmental and social responsibility
should not be discounted, it seems likely that procurement policy
has had the greatest single impact.
5. Procurement policies are effective because
they can be developed and implemented more rapidly than most other
policy options, and the evidence suggests that they can have a
much broader impact on consumer markets than simply through the
direct effect of government purchases (see further below). The
UK's central government timber procurement policy in particular
is proving successful, and is a good model for other countries
to emulate. And as well as the direct impact on markets, another
effect of the introduction of procurement policies has been on
forest certification schemes themselves; modifications in some
of the major schemes have resulted from the need to meet countries'
criteria for sustainable timber.
6. Governments everywhere are displaying
increasing interest in the development of sustainable procurement
policies across a wide range of product sectors. In many ways
timber procurement policy has been developed in more detail than
in many other sectors, and valuable lessons can be learned from
this experience for procurement policies aimed at other product
areas.
2. SCALE
7. Figures quoted for the size of public
procurement (and, therefore, the impact of public procurement
policy on the market) in the debate around the control of illegal
logging have varied widely, from over 40% to less than 3%.
8. In fact, in developed countries, purchasing
of goods and services by public authorities is generally estimated
to account for an average of about 10% of GDP. (Figures of 15-20%
which are frequently quoted relate to total public-sector consumption
(ie government expenditure excluding transfer payments, such as
welfare benefits), which includes substantial expenditure on "employee
compensation": salaries, pensions, etc. Government purchasing
of products and services from third parties is significantly smaller:
about 9% of GDP for OECD countries during 1990-97.[69]
UK public expenditure statistics for 2005-06 showed 10.48% of
GDP devoted to public procurement.
9. Government purchasing varies significantly
across product sectors, of course—from very high proportions
(eg defence, transport infrastructure) to very low (eg consumer
goods). Since it is generally very difficult to get hold of detailed
figures for different sectors, the assumption is often made that
public procurement in any one sector is the same proportionally,
as public procurement in the economy as a whole. For example,
since UK public procurement accounts for about 10% of GDP, most
reports on timber procurement assume that the UK public sector
accounts for about 10% of the market for timber and timber products.
10. This is a dubious assumption; but nevertheless,
given the scale of public purchasing of products such as timber
for construction (including contractors' disposable material),
office and park furniture, and paper, the overall impact of government
activity is still likely to be significant. And as is being demonstrated
in some EU countries, this can be magnified by suppliers' preferences
for relatively simple supply chains; if they need to supply sustainable
timber for public purchasers, for example, the evidence suggests
that they are tending to prefer to supply the same products to
their other customers too. (Anecdotal evidence from the UK suggests
that as a result they are currently supplying more than the market
is actually demanding.) Food and Agriculture Organisation research
estimates that government procurement can achieve market leverage
of 10-25% when knock-on impacts such as these are included.[70]
11. It should be remembered that the 10%
figure relates to the entire public sector, which includes regional
and local government, and often many quasi-independent agencies,
alongside central government. Across the OECD as a whole, central
governments account for about 30-35% of total public sector expenditure.
However, this varies substantially between countries, from highly
centralised states such as the UK, where central government account
for about 70% of the public sector, to more decentralised ones
such as Germany, where the corresponding figure is about 20%[71]—another
reason for the relative success of UK policy.
3. CRITERIA AND
PROOF
12. All countries with timber procurement
policies have adopted the aim of purchasing timber which is sustainably
produced—either as the only requirement or as a desirable
one. Precise definitions of "sustainability" vary but
in general revolve around forest management designed to avoid
harm to ecosystems, maintain forest productivity, ensure forest
ecosystem health and vitality and maintain biodiversity. The definitions
often require that the standards specific to any given timber-producing
country have been developed through a consultative process, open
to participation by all affected parties, including commercial,
environmental and social stakeholders. Recycled wood and paper
are also generally acceptable. Definitions of sustainability also
tend to include the requirement that all national and international
laws must be respected; these products should therefore be legal.
13. The environmental components of the
sustainability criteria have proved relatively straightforward.
The question of including social criteria, however, over and above
those legislated for in the producer country itself—for
example, the customary land tenure rights of indigenous forest
communities, or the rights of the logging workforce—has
sometimes proved controversial. In particular, UK policy does
not currently allow timber purchasers to specify criteria that
are not directly related to the subject matter of the contract;
this excludes social or ethical issues which, it is argued, generally
have no discernible effect on product quality or performance.
Unless such issues are covered by law, therefore, they cannot
be included in UK contract specifications, selections of suppliers
or awards of contracts.
14. This is based on an interpretation of
EU procurement rules which other EU member states do not share;
their policies all include some social criteria in their specifications.
The ongoing Chatham House study referred to above is designed
to illuminate this argument and to suggest which social criteria
are of importance in timber procurement policy, and which could
be considered to be permitted under EU and WTO procurement rules.
15. Up to a point, however, this argument
is academic. The main route through which timber products can
be assessed in terms of sustainability are the various private
certification schemes that have developed since the mid-1990s,
in response to the growing demand for environmentally friendly
timber. The area of the world's forests that is certified is growing
rapidly, albeit from a low base; as at May 2007, 8% of forest
area was certified, a figure that has doubled since 2002. (However,
only 7% of certified forests were in developing countries, a proportion
that has not changed since 2002.[72])
16. In practice, certification is now dominated
by two schemes at the global level: the Forest Stewardship Council
(FSC), which accounts for 28% of certified forests; and the Programme
for the Endorsement of Forest Certification Schemes (PEFC), which
acts as a recognition mechanism for national schemes world-wide,
and accounts for 65% of certified forests. One of the main developing-country
schemes outside the PEFC, the Malaysian Timber Certification Council
(MTCC) scheme, is currently applying for PEFC endorsement.
17. Procurement policies have used certification
schemes in one of two ways. Some countries, including Denmark,
the Netherlands and the UK, have developed their own criteria
for legality and sustainability, and then assessed the extent
to which the certification schemes meet them. In the UK, for example,
the Central Point of Expertise on Timber (CPET) has found FSC
and PEFC to be adequate to guarantee sustainable timber. MTCC
has been assessed as good enough to guarantee legal, but not sustainable
products, though CPET is currently conducting a reassessment.
Other countries, including France and Germany, have adopted a
less elaborate system, deciding that particular certification
schemes—always FSC, and generally PEFC—are adequate
to meet their criteria.
18. EU procurement rules require that procurement
policies must rest on criteria, not on membership of any particular
scheme. All these countries must also possess some system for
assessing claims by suppliers that their products meet the sustainability
criteria even if they are not certified by any recognised scheme.
In the UK, for example, CPET carries out these assessments (of
the so-called "Category B" evidence). In practice, this
assessment of "equivalent evidence" has been relatively
little used by suppliers to date, and it is so much easier to
prove sustainability through certification schemes that it seems
likely that this will continue to be the case.
19. This domination of the government procurement
market by two effective schemes has three implications. First,
although in theory it would certainly be desirable for consumer
countries to harmonise their procurement policies, so that suppliers
are not faced with information barriers when exporting to these
markets, in practice this matters only rarely, as whatever the
details of the policies, the same certification schemes will be
used to meet their criteria. (Similarly, the UK's reluctance to
include social criteria in its policy is muted in its impact,
as both the main certification schemes incorporate a wide range
of social criteria.)
20. Second, it can be expected that there
will be growing incentives to defraud the certification schemes.
The schemes were developed originally as voluntary instruments
for relatively niche markets, not as the mandatory requirements
for market access that they are steadily becoming. This growing
use of the schemes is of course a desirable development, but raises
the question of whether the schemes themselves possess the ability
to monitor closely the issue and use of their labels and to detect
fraudulent versions of them. There are already anecdotal stories
of suspiciously high volumes of FSC-certified timber being exported
from China, and the problem is likely to get worse.
21. Third, it is important not to place
at a disadvantage those countries agreeing Voluntary Partnership
Agreements (VPAs) with the EU under the Forest Law Enforcement,
Governance and Trade (FLEGT) initiative. FLEGT-licensed timber
will be legal but not necessarily sustainable and will not, therefore,
be acceptable for most EU countries' procurement policies. Within
the EU, only Denmark and the UK accept legal or sustainable timber,
and from April 2009 the UK will purchase only sustainable products,
although, with the aim of ensuring that the FLEGT process is supported,
until April 2015 products covered by a FLEGT licence will also
be acceptable. However, the volume of FLEGT-licensed timber seems
likely to be limited for some time to come; as of October 2008,
only one country (Ghana) has agreed a VPA, and more time will
be needed for implementation. The 2015 cut-off date therefore
seems likely to come too soon, and in any case most EU countries
do not possess even this exemption. The EU should not be encouraging
countries to sign VPAs on the one hand and refusing to purchase
FLEGT-licensed timber for public contracts on the other.
4. BUILDING STANDARDS
22. Governments have the power to establish
standards for both public and private construction, and increasingly
these relate to environmental performance. The systems used generally
award points for satisfying various environmental criteria, and
then assess particular designs according to the total number of
points accumulated. For example, BREEAM, the UK Building Research
Establishment's Environmental Assessment Method, awards points
for the use of sustainable and recycled timber in new and existing
buildings. Such systems do not absolutely guarantee that the timber
used is legally or sustainably produced, since high total scores
can always be reached even if zero points are scored for timber.
23. In the UK, since March 2005 it has been
a condition of central government funding that all major school
projects, both new build and refurbished schools, must achieve
a minimum BREEAM rating of "very good" (the second highest).
For domestic housing, the Code for Sustainable Homes was launched
in December 2006; compliance with the Code is currently voluntary
but may become mandatory. As with the other schemes mentioned
here, the Code uses a points-based system encouraging, rather
than requiring, the use of timber which is reclaimed, re-used
or "responsibly sourced"—though there is a mandatory
requirement that all timber must be legally sourced. The points
are based mainly on the CPET assessment of certification schemes.
24. Building standards such as BREEAM can
be very useful in encouraging the take-up of legal and sustainable
timber. But they would be more effective if the use of legal—and
in due course sustainable—timber was a mandatory requirement,
rather than simply one which accumulated more points. Even if
the assessment systems themselves do not change, government can
go beyond the minimum requirements in using them as the basis
for funding policies, such as the Building Schools for the Future
programme—which could, for example, have a requirement for
legal and sustainable timber incorporated in it. In this connection,
the failure of the government's green paper, Homes for the
Future: More affordable, more sustainable (July 2007), and
the accompanying policy statement Building a Greener Future, even
to mention the topic of timber use was a missed opportunity.
5. LOCAL GOVERNMENT
25. Local and regional government is not,
of course, covered by central government procurement policy, and
the extent to which sub-national authorities possess any form
of timber procurement policy has not been widely studied. In the
UK, a WWF study of London boroughs in 2005 found that half had
no policies in place at all, and less than a fifth claimed to
be fully implementing one.[73]
It was against this background that, in 2007, DEFRA provided funding
to Chatham House to conduct a series of case studies of local
authorities in two English regions, the North East and Yorkshire
& the Humber.
26. The 12 councils studied were chosen
on grounds which should have selected those most interested in
the issue within these two regions, yet only two of them had a
full timber and timber products procurement policy, and only one
was systematically monitoring its implementation. Four others
had a partial timber procurement policy, for specific products
or departments. Although several authorities expressed an interest
in developing their policy further, knowledge of central government
policy, and of CPET and its services (which include the provision
of advice and training to local authorities) was very low; only
one council appeared even to have heard of it, though it was planning
to develop a policy explicitly modelled on central government's
procurement approach.
27. The study examined the reasons for this
lack of progress—including a very wide diversity of council
structures and responsibilities, a lack of data on purchases and
specifications, and the general low priority given to this area,
but it also highlighted the many opportunities for central government
to influence local authorities positively. DEFRA and CPET have
responded by improving their communications strategies and convening
a group of interested local authorities. There remain, however,
a number of areas for which DEFRA itself is not directly responsible
but where action could still be usefully taken. These include:
— Inclusion of sustainable procurement
within the Audit Commission's Comprehensive Performance Assessment
(CPA) rating system. This is probably the single most helpful
step that could be taken, setting a clear incentive to develop
policies in this area.
— Inclusion of requirements or incentives
to use sustainable building materials in construction projects
funded by central government (see above).
— Encouragement for regional development
agencies to require legal and sustainable timber in any construction
projects which they support.
— Engagement with elected councillors,
for example through the Local Government Association political
groups and/or the political parties' own councillor organisations.
Civil servants may not be best placed to pursue this route, which
is probably better suited to MPs, including ministers and shadow
ministers—and members of the EAC itself.
October 2008
64 House of Commons Environmental Audit Committee,
Sustainable Timber (HC607, January 2006) Back
65
Duncan Brack, Controlling Illegal Logging: Using Public Procurement
Policy (Chatham House, June 2008); available at http://www.illegal-logging.info/item_single.php?item=document&item_id=633&approach_id=1 Back
66
Duncan Brack, Local Government Timber Procurement Policies:
Case Studies from the North East and Yorkshire & the Humber
(Chatham House, September 2007); available at http://www.illegal-logging.info/item_single.php?item=document&item_id=517&approach_id=1 Back
67
The third draft of the study (June 2008) is currently available
at http://www.illegal-logging.info/item_single.php?item=document&item_id=634&approach_id=1 Back
68
See the series of studies of price premiums for verified legal
and sustainable timber produced by Forest Industries Intelligence
Ltd for the UK Timber Trade Federation and DFID; available at
http://www.illegal-logging.info/item_single.php?item=document&item_id=177&approach_id=1. Back
69
See Donald Marron, "Greener Public Purchasing as an Environmental
Policy Instrument", in The Environmental Performance of
Public Purchasing: Issues of Policy Coherence (OECD, 2003). Back
70
Marku Simula, "Public procurement policies for forest products
and their impacts", presentation at Joint UNECE/FAO Policy
Forum on Public Procurement Policies on Wood and Timber Products,
Geneva, 5 October 2006; available at: http://www.unece.org/trade/timber/docs/tc-sessions/tc-64/01_Simula.pdf. Back
71
Marron, "Greener Public Purchasing as an Environmental Policy
Instrument", p. 43. Back
72
Alan Purbawiyatna and Markku Simula, Developing Forest Certification:
Towards Increasing the Comparability and Acceptance of Forest
Certification Systems World-Wide (ITTO, 2008). Back
73
Rich Howorth, Beatrix Richards and Christian Thompson, Capital
Offence: Is London Failing the Forests? (WWF, 2006). Back
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