UNDERSTANDING THE FOREST PRODUCT CHAIN OF CUSTODY CERTIFICATION STANDARD A DISCUSSION ABOUT THE CHALLENGES, IMPACTS AND OPPORTUNITIES ASSOCIATED WITH FOREST PRODUCT CHAIN OF CUSTODY (CoC)

MAY 2016

AUTHORS

Gerrit Marais Director of Qualifor Program, SGS

Christian Kobel Global Product Manager Timber and Paper Industry, SGS

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I. EXECUTIVE SUMMARY

CONTENTS

ABSTRACTThe purpose of this document is to introduce the requirements of Forest Product Chain of Custody (CoC) Certification. This document is not intended to be a full explanation of the certification standard and related requirements or of its implementation. Rather, it aims to promote understanding of the requirements and the benefits the standard brings to organisations doing business at a domestic or international level within the timber and paper industry.

I. EXECUTIVE SUMMARY 1

II. FOREST MANAGEMENT 2

III. FOREST PRODUCT CHAIN OF CUSTODY 4

IV. GLOBAL SOLUTIONS FOR FOREST PRODUCT CHAIN OF CUSTODY 6

V. CONCLUSION 9

From logs to lumber, furniture to wood pulp, paper products to any other item made from wood, it is becoming more and more important to know exactly where your materials have come from. Added to that, mandatory requirements are becoming more stringent and consumers, aware of environmental issues, are demanding wood and paper products from well-managed forests. Consumers expect this information

up front, in addition to being assured that your company can continue to meet their needs now and in the long term. Yet, with more and more wood being supplied and manufactured from different global sources, the process of tracking has become more complicated.

Providing traceability of information right through the supply chain assures your customers and the consumers of your products about the origin of your

wood. The Forest Product Chain of Custody (CoC) Certification enables you to demonstrate your commitment to traceability in the supply chain (a legal requirement in an increasing number of countries): enhance consumer trust in your wood supply, satisfy your customer demands and continuously improve your corporate image.

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II. FOREST MANAGEMENTEach year about 13 million hectares (ha) of the world’s forests are lost due to deforestation. To put this into perspective, a forest the size of a football field is lost every 2 seconds, and deforestation is responsible for 20% of global greenhouse gas emissions.

Illegal logging and the associated timber trade:

• Contributes to deforestation, causing loss of biodiversity and destruction of ecosystems

• Undermines responsible, sustainable forest management

• Has serious economic and social implications for the poor and disadvantaged

• Creates unfair competition for those companies behaving responsibly and ready to play by fair rules

• Encourages waste and low productivity due to cheap raw materials

• Undermines international security due to being frequently associated with corruption, money laundering, organised crime, human rights abuses, violent conflicts, etc.

Forest Management Certification is an independent assessment of the forest management unit to check that a forest complies with the internationally recognised standards of the Forest Stewardship Council (FSC®), the Programme for the Endorsement

of Forest Certification (PEFCTM) and a number of country based standards.

Forest Product CoC Certification involves tracking the origins of wood to guarantee its authenticity through the entire supply chain. It also provides an assurance to customers, stakeholders and investors of the quality of forest management at the original source of the timber.

TRACKING TIMBER THROUGH THE SUPPLY CHAIN AUTHENTICATES ITS SOURCE.

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CERTIFICATION OF CHAIN OF CUSTODY GUARANTEES THE ORIGIN OF FOREST RAW MATERIAL

Certified forest and other responsibly sourced sources

SGS Certified product

SYSTEMS, PROCESSES AND

DOCUMENTS

CERTIFICATION OF FOREST MANAGEMENT IS A GUARANTEE OF RESPONSIBLE MANAGEMENT

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THE ORIGINS OF FOREST/FOREST PRODUCT CERTIFICATION STANDARDS

About FSC®

FSC is an independent, non-governmental, not-for-profit organisation established to promote the responsible management of the world’s forests. Established in 1993 as a response to concerns over global deforestation, FSC is widely regarded as one of the most important initiatives of the last decades to promote responsible forest management worldwide.

In 1993, the FSC also published a standard outlining 10 principles and criteria for forest stewardship and the requirements for CoC. FSC is a certification system that provides internationally-recognised standard-setting, trademark assurance and accreditation services to companies, organisations, and communities interested in responsible forestry.

The FSC label provides a credible link between responsible production and consumption of forest products, enabling consumers and businesses to make purchasing decisions that benefit people and the environment as well as providing ongoing business value.

FSC is nationally represented in more than 50 countries around the world. Globally, there are more than 180 million ha of forest certified to FSC standards, including over 30,000 CoC certificates and 1,300 FM/CoC certificates (data correct as of April 2016).

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About PEFC™

The Programme for the Endorsement of Forest Certification (PEFC) is an international, non-governmental, not-for-profit organisation dedicated to promoting Sustainable Forest Management (SFM) through independent third-party certification. It was established in 1999 in response to concerns about the preservation of the world’s forests.

PEFC works throughout the entire forest supply chain to promote good practice in the forest, and to ensure that timber and non-timber forest products are produced with respect for the highest ecological, social and ethical standards. Thanks to its eco-label, customers and consumers are able to identify products from sustainably managed forests.

PEFC is an umbrella organisation. It works by endorsing national forest certification systems developed through multistakeholder processes and tailored to local priorities and conditions. Each national forest certification system undergoes rigorous third-party assessment against PEFC’s unique sustainability benchmarks to ensure consistency with international requirements.

With more than 30 endorsed national certification systems, PEFC is the world’s largest forest certification system. More than 275 million ha of forest worldwide are certified to PEFC standards, which represents nearly two-thirds of all certified forests globally. Over 17,000 companies and organisations have achieved PEFC CoC certification, and PEFC is represented by more than 750,000 forest owners (data correct as of April 2016).

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III. FOREST PRODUCT CHAIN OF CUSTODYCoC is the path wood products take from the forest to the consumer including all processing, manufacturing, transformation, storage, and distribution links. CoC certification plays an important role in ensuring the traceability of wood from its origin throughout the entire supply chain. It enables companies to provide third-party verification of the claims they make to their customers.

CoC involves three key elements:

1. Accurate and reliable information on quantities of materials purchased, produced and sold: a central part of any CoC system is to gather, record and verify information on quantities and volumes of materials involved. Linking and cross-checking the quantities at subsequent stages of the supply chain provides evidence whether there is

CHAIN OF CUSTODY MANAGEMENT

CERTIFIED SOURCE 1

CERTIFIED SOURCE 2

CONTROLLED SOURCE 1

CONTROLLED SOURCE 2

SAWMILL MANUFACTURER PACKING PLANT

DISTRIBUTOR

RETAIL CHAIN

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any accidentally or intentionally caused irregularity and/or discrepancy in the system which has to be addressed and corrected.

2. Management of critical control points (CCPs): critical control points (CCPs) have to be managed by systems usually based on the principles of identification, segregation, and documentation. This is handled separately at each point along the supply chain or where material from a certified or controlled* source potentially could become mixed with or replaced by material from uncertified or from uncontrolled** sources. Certification identification affixed to the logs or other products are keyed to documentation so that information on wood volume, species, quality, and other attributes is available to managers of the CoC system.

3. Adequate training and supervision of personnel: a fundamental component of an effective CoC system is to have the responsible and assigned personnel adequately trained, instructed and supervised to strictly follow the established procedures for CoC control.

*A controlled wood source is the term used by FSC and PEFC to identify wood or paper products which do not originate from an FSC and PEFC certified forest but which meet the requirements for inclusion with certified products that carry FSC and PEFC claims.

**Uncontrolled sources (FSC) and controversial sources (PEFC) do not meet the requirements necessary for product inclusion with others that carry the FSC and PEFC claims.

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AIMS OF CHAIN OF CUSTODY

CoC certification provides evidence that the certified product originates from certified, well-managed forests, and/or controlled sources, and/or reclaimed sources. It also verifies that these products are not mixed with products from uncontrolled timber at any point in the supply chain. When percentage labelling or a credit system is being used, strict controls allow for the mixing of products from well-managed forests with controlled and/or recycled material.

CoC certification is required whenever a company takes physical or legal ownership of a timber based product and wishes to make claims that the product originates from an FSC or PEFC certified supplier, and/or recycled sources, and/or controlled sources.

ACHIEVING A SECURE CHAIN OF CUSTODY

The first step for an organisation wanting to implement CoC is to identify all CCPs. Each of the points identified needs to be controlled to ensure that mixing does not occur. The way that mixing can be prevented at CCPs is through a combination of identification, segregation and appropriate

documentation, together with adequate training. The stronger the controls are the lower the risk of uncontrolled mixing of product, which ensures a more robust CoC. Once the CCPs have been identified, the setting up of the CoC system within the certification framework can be achieved. A good documented system of procedures and controls is essential.

BASIC PARTS OF A CHAIN OF CUSTODY SYSTEM

The basic parts of any CoC system include:

• A system for the purchasing and acquiring of certified materials including the evaluation of vendors, the acquisition and maintenance of records, and ensuring traceability of the products to their source

• A system for the handling of certified materials within the scope of your business (i.e. keeping them distinct from non-certified materials)

• A system for providing certified materials to your customers including the provision of the necessary information and documentation allowing traceability and verification

SCOPE OF CERTIFICATION

The scope of a CoC certificate defines the sites, products (by product types and labelling category/material status) and processes/activities that are included in an evaluation; together with the certification standard(s) against which these have been audited to ensure that products from those sites and processes meet all the applicable requirements.

The scope determines the following:

• Where the certified CoC system starts (i.e. the point at which the certificate holder takes possession of certified and non-certified material)

• What are the basic material-related processes (e.g. processing, manufacturing, labelling, storage, and/or transport)

• When the CoC system finishes (i.e. the point at which the certified products leave the certificate holder’s control)

• Which products are within the defined scope of the certificate at the time the certificate is issued and may be considered to comply with the applicable requirements of relevant certification standard(s)

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CHAIN OF CUSTODY CERTIFICATION PROVIDES EVIDENCE THAT PRODUCTS COME FROM RESPONSIBLY MANAGED FORESTS.

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IV. GLOBAL SOLUTIONS FOR FOREST PRODUCT CHAIN OF CUSTODYWHY FOREST PRODUCT CHAIN OF CUSTODY?

Forest Product CoC Certification provides the following benefits:

• Transparency: anyone, at anytime, for anywhere in the supply chain can determine wood and paper products originate from certified forests and/ or recycled material and/or controlled sources

• Evidence: that your products originate from certified, well-managed forests or from other controlled wood sources and/or recycled material

• Access: entry to internationally recognised trademarks

• Reduces risk: mitigates the risk of using environmentally sensitive products

• Protection: for you and your customers’ brand

• Speed to market: the certification process from the evaluation to the delivery of the certificate can normally be completed within 20 days on average, subject to compliance with relevant standards

• Credibility: international recognition to boost your organisation’s credibility

• Compliance: to forestry management standards means reduced risk of product denial and possible litigation

• Improvements: for organisation-wide development and performance

HOW DOES THE FOREST PRODUCT CHAIN OF CUSTODY CERTIFICATION PROCESS WORK?

The process of Forest Product CoC Certification consists of eight steps:

• Step A – During the onsite evaluation, an opening meeting is held where the assessor briefly explains the certification process and asks to be given an overview of the CoC system before beginning the evaluation. This is to help identify points where controls are likely to be required. The assessor needs to see your procedures covering the requirements of the relevant CoC standards.

• Step B – The assessor needs to visit each part of the site covered in the scope of certification including, as appropriate for your organisation, the following:

• Purchasing department or area where information on purchasing is stored

• Areas where raw material arrives and is stored

• Processing and manufacturing facilities

• Product storage areas

• Sales department

• Training department or area where training records are stored

• Any subcontractors used for the outsourcing of production processes included under the scope of certification

• Step C – In each place visited, the assessor needs to talk to staff, examine procedures, check records and look at methods used for identification (e.g. labelling of certified material) and segregation (e.g. separate storage areas for certified material) to ensure your organisation is in compliance with the relevant CoC requirements as stated in the different standards.

• Step D – If any issues are identified, these are discussed with you and, if necessary, non-conformities raised. Where a major non-conformity is raised, certification cannot proceed until this has been addressed. The organisation normally has 12 months to address any minor non-conformities (except for PEFC where any minor non-conformities preclude certification).

• Step E – On completion of the onsite evaluation, the assessor provides feedback during the closing meeting on the findings of the audit and whether a recommendation for certification can be made. The assessor then completes the evaluation report, which is submitted to an SGS accredited office for review and subsequent certification decision.

• Step F – In the event of a positive certification decision, a certificate is issued and in the case of FSC, the website (www.info.fsc.org) shall be updated to reflect this new certificate. In the case of PEFC, the organisation is notified and the PEFC website (www.pefc.org) shall be updated.

• Step G – Surveillance audits are conducted on at least an annual basis to ensure continued compliance with the requirements of the relevant standard.

• Step H – The certificate is valid for five years. Before the expiry of the certificate, a re-evaluation is conducted which allows for the reissuing of a certificate.

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THIRD PARTY CHAIN OF CUSTODY CERTIFICATION VERIFIES TRACEABILITY CLAIMS.

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FOREST PRODUCT CHAIN OF CUSTODY CERTIFICATION PROCESS*

Surveillance

STEP A

Onsite Evaluation

STEP B

Site Visits

STEP C

Site Interviews

STEP D

Non-Conformities Raised and Addressed

STEP F

Certificate Issued for

5 years

STEP H

Recertification Audit on

Completion of 5th Year

Assessment and Certification

STEP G

Annual Surveillance Audits

STEP E

Audit Completed

*For PEFC chain of custody certification, a review of the documented system by SGS is required, prior to first onsite evaluation.

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REQUIREMENTS FOR ALL ORGANISATIONS

The requirements for all organisations include:

• A company commitment relating to the values of FSC and/or PEFC

• A person or position having overall responsibility for the CoC system

• General staff awareness of the company’s CoC procedures

• Written procedures or work instructions showing compliance with the standard

• An up-to-date manual with all the procedures necessary for maintaining the system (CCPs of the CoC system) and records for the implementation of the system (all records for the system must be maintained for a minimum of five years)

• Assigned roles and responsibilities of staff in relation to their role in maintaining the CoC system

• A formal training plan with records of training for staff as defined for each procedure in the system

• The maintenance of a product group list (the certified products for sale)

• A verification procedure for identifying potential certified suppliers using the FSC website (info.fsc.org)

• A verification procedure for incoming raw materials from certified suppliers (checking of documentation to see that it complies with procedures)

• A process of controlling identification and segregation during the manufacturing/processing stages and documentation to confirm the conversion ration from raw material to finished products

• Identification of outputs (sales documentation, invoices, transport and delivery notes)

• Labelling and logo use, and procedures and permissions for use if intended

• PEFC Due Diligence System, operate the system which is based on risk management techniques to minimise the risk that the

procured material covered by the scope of certification originates in controversial sources

• At the time of the PEFC COC main evaluation, evidence that the company has conducted an internal audit of their CoC system and that this system and the results of the audit have been reviewed by management

• As required by South African National Accreditation Services (SANAS) regarding the evaluation against the PEFC standard: it is required that the company must have processed certified material before SGS conducts the main evaluation

OTHER OPTIONAL REQUIREMENTS

These other optional requirements also have their own sets of procedures relevant to the standard:

• Controlled wood: the purchase and use of controlled materials (uncertified) in the production process for FSC certified products

• Reclaimed material use: when a company sources reclaimed materials for use in manufacture

• Outsourcing: when companies outsource certain types of work to specialist companies for the material processing of their certified products

• Multisite operations: when there are more than two sites operated across a centrally controlled network of facilities

WHAT IS INVOLVED IN ATTAINING CHAIN OF CUSTODY?

For most companies, CoC certification is a simple process that can be easily managed in a short period of time. The heart of the process is basic inventory control procedures. In most cases, in-place business procedures are sufficient, with slight modifications, to meet the requirements of the standards.

For large organisations with formalised operating procedures, CoC implementation usually requires minor adaptation of existing procedures and training of key personnel.

For smaller organisations with informal operating procedures, CoC implementation usually requires drafting of simple, written procedures to cover the standard requirements, training of key personnel, and the development of some customised record-keeping systems.

EUROPEAN UNION TIMBER REGULATION

The European Union has recognised that the trade in illegal timber and timber products is a significant problem that contributes to deforestation, global CO2 emissions and loss of biodiversity. Additionally, illegal trade undermines attempts by the forest and timber industries to move towards more sustainable forest management practices and good forest governance.

European Union Regulation 995/2010 is a law that prohibits the supply of illegally harvested timber products to the European Union market. The regulation came into effect across all European Union member states as of 3 March 2013.

The regulation also lays down the legal obligations for organisations that place timber and timber products on the European market. Any organisation that places timber or timber products on the market for the first time must implement a due diligence system to assess the risk of their products originating from illegal sources.

The due diligence system has to include information about the origin of the product being supplied, including details on the local legislative requirements at source. It must include an assessment of the risk of the product originating from an illegal source. Further to this, the due diligence system must include risk mitigation measures to prevent illegally harvested timber being placed on the European market.

CoC certification does not in itself provide evidence of compliance with timber legality requirements but it can support compliance by providing visibility through the supply chain for timber products.

To learn more about the European Union Timber Regulation: http://www.sgs.com/EUTRwhitepaper

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V. CONCLUSIONForest Product CoC Certification combines the benefits of a business management tool linking forest management and business processes, with the ability to meet growing global customer requirements for certified, responsibly managed forests.

Forest Product CoC Certification ensures the authenticity of timber and wood- based products as they travel through the supply chain from processing to the consumer. The international recognition that certification brings is a boost to any organisation’s credibility.

Compliance with forestry management standards reduces the risk of product denial and possible litigation.

Certifying* your CoC/forestry management enables your organisation to develop and improve performance.

ABOUT THE AUTHORS

Gerrit Marais Director of Qualifor Program, SGS

Gerrit Marais has more than 30 years experience in the forestry business including forest and environmental management, and has been directly involved with the certification business since 2002. He is currently the head of SGS South Africa’s Accredited Forest Management and Chain of Custody Certification Programme: SGS Qualifor. Gerrit holds a BSc degree in Forestry and a Master’s degree in landscape architecture.

Christian Kobel Global Product Manager Timber and Paper Industry, SGS

Christian Kobel has more than 20 years experience in forestry. Since 2002, he has been running the Swiss local forestry and chain of custody certification business, and developed and implemented the European FSC and PEFC Chain of Custody Accreditations for SGS. He is currently Global Product Manager for Timber and Paper Industry

for the SGS Corporate Office. Christian holds a Forest Engineer ETHZ (Master’s degree).

ABOUT SGS

SGS is the world’s leading inspection, verification, testing and certification company. SGS is recognised as the global benchmark for quality and integrity. With more than 85,000 employees, SGS operates a network of over 1,800 offices and laboratories around the world.

Enhancing processes, systems and skills is fundamental to your ongoing success and sustained growth. We enable you to continuously improve, transforming your services and value chain by increasing performance, managing risks, better meeting stakeholder requirements and managing sustainability.

With a global presence, we have a history of successfully executing large-scale, complex international projects. Our people speak the language, understand the culture of the local market and operate globally in a consistent, reliable and effective manner.

As the world’s leading certification body in Forest Management, SGS has granted over 7,000 Chain of Custody (CoC) certifications worldwide. SGS is also a global certification body that certifies wood from forest to market against the most recognised forestry standards (FSC, PEFC, SFI). With CoC certification from SGS, anyone, anywhere in the supply chain, can determine the origins of wood products. It provides evidence that your products originate from certified, responsibly managed forests, or from other controlled wood sources, and/or recycled material. In addition, the process is efficient and can be completed within 20 days on average. SGS can also certify forestry management programmes and standards of forestry practice together with CoC, saving both time and money.

To learn how SGS can help you prove your Forestry Management Practices meet customer expectations, visit www.sgs.com or contact forestry-certification@sgs.com

FORESTRY MANAGEMENT AND CHAIN OF CUSTODY CERTIFICATION ARE LINKED TO BUSINESS PROCESSES.

*For more information on our accreditation and TLA details visit: www.sgs.com/forestCoCcertification www.sgs.com/forestmanagement www.sgs.com/forestryaccreditations

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PEFC/01-4-12

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