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![Page 1: Dr Mike Packer Director, Responsible Solutions Risk management and business development Illegal logging up-date RIIA Chatham House 20 January 2006.](https://reader036.fdocuments.net/reader036/viewer/2022062518/56649e355503460f94b233ef/html5/thumbnails/1.jpg)
Dr Mike PackerDirector, Responsible Solutions
Risk management and business development
Illegal logging up-date
RIIA
Chatham House20 January 2006
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Timbmet Group
• UK’s largest hardwood importer/distributor• sawn, machined and engineered hardwood
product range, clear softwoods, panel products, flooring, doors, other manufactured products
• purchasing from about 30 countries in all regions• strategic commitment to sustainable
development
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Corporate responsibility
sustainable development in practice• conducting our business responsibly to:
• provide sustainable economic benefit• maintain environmental values within the forest sources
of our products; avoid, minimise and mitigate environmental effects of company UK operations
• ensure within source forests and within company UK operations that local community and employee interests and rights are served
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Why the commitment?• Ethical
– problems of forest loss and degradation, illegal logging, social threat– driven by the CEO
• Business risk management– high risk and controversial sources– pressures from stakeholders
• Business opportunity: emerging markets– UK Government and Local Authority timber procurement policy– new Code for Sustainable Building under development– voluntary commitments of contractors, retailers, house builders, sub-
contractors to buy sustainable timber product• Strategic business importance
– differentiation through being a leader, supply chain development, product innovation, solution provision
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Private sector demand
• Retailers – Travis Perkins 75% of all timber & wood product to be certified by end 2006 more demanding targets for tropical species product
• Main contractors – Balfour Beatty Construction demand independently certified, legal and sustainable sources hierarchy of requirements where not possible – independent
verification of ‘risky’ sources
• House builders – Countryside Properties independently certified, legal and sustainable sources –
evidence requirements demanding
• Joinery contractors – Soundcraft
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Public sector demand
Three categories of timber:
1. Legal2. Legal and progressing to sustainable3. Legal and sustainable
Current requirements:
1. Legal as a condition of contract2. Sustainable as an optional extra3. Independent verification of evidence
may be required, depending on supply
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Timber purchasing policy
Our goal is that all our timber and wood products will derive from sustainably managed forests. To achieve this goal we are committed to: • progressively increasing the proportion of our timber and wood
products that come from credibly certified legal and well-managed forest sources;
• working with suppliers worldwide to eliminate timber and wood products that are not credibly certified or from independently verified legal forest sources that are actively progressing towards credible certification;
• continually improving our performance according to explicit targets set within our environmental management system; and
• regularly reporting our performance to internal and external interested parties.
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A categorisation of certified & verified timberSustainable FSC (generally considered by timber users to be the bench-
mark standard, and certainly the most credible standard for tropical forestry)
CSAPEFCSFI
Progressing to sustainable
Verified Progress (independently audited timbers from Timbmet Silverman: traceable, legal harvesting and active progress to FSC)
Semi-sustainable MTCC (considered to be traceable and ‘legal’ for government contracts)
Traceable and legal
Independently audited (eg SGS, Eurocertifor, VPA licenced product)
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Timbmet Silverman purchasing performance
Solid timber product 2004 2005
% of product from tropical sources
40 43
% of tropical product that is certified/verified
23 22
% of temperate product that is certified/verified
12 31
% of product that is certified/verified
17 27
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Supply risk
Unknown
Known
Legal
Progressing
Sustainable
credible evidence - independently verified for high and very high risk purchase lines
risk assessed‘risky’
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• country-related risks: levels of illegal logging• species-related risks: ecological status• producer practices:
• traceability from forest of origin• legal right to harvest, relevant legal
compliance post-harvest• planned, sustainable forest management
Non-verified wood sources: elements of risk
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Risk assessment process• product-specific source risk• basis of assessment:
• country risk and species risk – combined where possible as country-species risk• forest source information – questionnaires to producers, site visits, publicly available information, consultation with environmental groups, and, increasingly, using independent consultant opinion and verification
• risk categorisation: none, low, medium, high, very high
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Risk management: supply footprint
• footprinting – objective measure of risk associated with a product purchase
• combines assessed risk factor with volumes of product purchased
• forms basis of individual purchaser and whole company target for improved performance
• Enables ready and auditable target setting, monitoring and performance management
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Risk management: purchasing
• product purchasing decision takes account of product-specific source ‘risk’ category
• cross-functionally determined targets for reduction of overall ‘risk’
• regular performance measurement and review• intensely data driven process• active development in collaboration with
producers of low and no risk sources
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Supply constraints: availability
• Disagreement among stakeholders about what certification standards are acceptable as evidence of sustainable forestry
• Certified forest worldwide is only about 6% of forest area
• Tropical certified forest is only about 1% of forest area (and much of this forest provides lesser known species)
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• cost differentials for softwood species are negligible in most cases
• hardwood species often cost more to purchase when certified; differences can be high for tropical species
• an independent study indicated that tropical forestry requires a 10-25% premium to offset direct and opportunity costs of certification
• but significantly higher costs of sawn timber translates into marginal increase in costs of value-added manufactured goods such as windows and doors
Market constraints: costs
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• disagreement among stakeholders about which certification schemes are credible
• poor communication of public and corporate procurement policy requirements
• poor understanding among end users about the economic, environmental and social benefits of specifying certified timber
Market constraints: communication
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Making progress: a discerning market
• we need a discerning market – one which will demand and pay for guaranteed legal and sustainable product
• value-adding, efficient use of raw material, appropriate quality expectations, composite materials – among many – can contribute to development of value chain solutions
• supply chains need to make credible, clear performance claims for products
• ultimately, progress is in the hands of timber end users, public and private – weak, ambiguous, entirely cost-driven market demands will stifle progress