Due Diligence System What can companies do? NEPCon works to ensure responsible use of natural resources and secure sustainable livelihoods by transforming land-use, business practices and consumer behaviour. Partner of Rainforest Alliance We engage in sustainable business practices Member of FSC & ISEAL We engage in sustainable business practices Member of FSC & ISEAL Develop standards We engage in sustainable business practices Member of FSC & ISEAL Develop standards Projects & Research We engage in sustainable business practices Member of FSC & ISEAL Develop standards Projects & Research Training programs We engage in sustainable business practices Member of FSC & ISEAL Develop standards Projects & Research Training programs Information and Updates We engage in sustainable business practices Member of FSC & ISEAL Develop standards Projects & Research Training programs Information and Updates FM & COC Certification • >1,200 CoC certified companies • > 20 mio ha certified forest We engage in sustainable business practices Member of FSC & ISEAL Develop standards Projects on sustainable and legal forest management Training programs Information and Updates FM & COC Certification Recognized EUTR Monitoring Organization Due Diligence proces Information Risk assessment Negligible Risk Risk mitigation Negligible Lav Risk Risiko Making Legal Wood a Market Condition Demand for legal wood Supply of legal wood Support legal practices in timber producing countries Risk Management Due Diligence system A “due diligence system” can be described as a documented, tested, step-by-step method, including controls, aimed at producing a consistent desired outcome in a business process. Operator using its own due diligence system should evaluate that system at regular intervals to ensure that those responsible are following the procedures that apply to them and the desired outcome is being achieved. Good practice suggests this should be conducted annually. EUTR Guidance Document Insufficient Due Diligence EU ? Due Diligence Guidelines A stepwise approach • Outlines a stepwise approach to due diligence • Can be used by operators and suppliers, well as auditors. Due Diligence Guidelines (DD-01) Tools: LegalSource toolbox LegalSource Standard (LS-02) LegalSource Due Diligence Guidelines (DD-01) Supplier Verification Audit Report Template (LS-04) Responsible Sourcing Policy template (DD-03) Supply Chain Information Form (DD-07) Access to Information letter and consent template (DD-06) Due Diligence Manual Template (DD-02) Supplier Management Form (DD-04) Supplier information form (DD-05) Commit to legal sourcing Establish responsibilities & assure competence Establish procedures Initiate performance monitoring Define scope of supply chain & products 1 Quality system 2 Evaluate supply chain info Identify risks: • forest management level • supplier level • risks of mixing and substitution Specify risks where identified Manage supply chain Record supply chain info: • origin • suppliers • species • legality documentation Collect additional supply chain info 3 Risk assessment 4 Mitigation options Additional documentation Replace supplier Source certified material Supply chain verification audits Risk mitigation …………… 1 Step Meet quality system requirements …… 1 Operator’s due diligence system Quality Management ”The only way to continue growing and continue being a successful business is to treat sustainabilty as a key business lever in the same way that you treat marketing, finance, culture, HR or supply chain” Santiago Gowland, Vice President, Unilever Kilde: MITSloan Management Review 2011 …… 1 Due Diligence system Applicable legislation and product scope …… 1 Due Diligence system Applicable legislation and product scope www.nepcon.net/EUTR_Products …… 1 Operator’s due diligence system Quality Management Quality requirements 1. Commitment to legal sourcing 2. Responsibilities and competence 3. Documentation 4. Performance monitoring of the established due diligence system 5. Scope of the due diligence system …………… 2 Step Manage your supply chain …… 2 Operator’s due diligence system Access to information Ensure the following information is always known and documented: • • • • • • • Product type Volumes Species Supplier (1 tier) Buyers (not applicable for retailers) Country of origin Certification/verification status …… 2 Operator’s due diligence system EU Access to information What matters is the ability to trace the timber in a product back to its place of harvest. The existence of unidentified steps in the supply chain can lead to the conclusion that the risk is non-negligible EUTR Guidance Document Key: = Flow of material = LS compliant = Not LS compliant Product 2 Product 1 certified certified uncertified, high risk uncertified, high risk Secondary manufacturer Secondary manufacturer Secondary manufacturer Secondary manufacturer certified certified uncertified, low risk uncertified, high risk uncertified, high risk Primary processor Primary processor Primary processor Unknown processor certified uncertified, low risk uncertified, high risk uncertified, high risk Known forest operation Unknown forest operation Unknown forest – known country Known forest operation Unknown forest – low risk country …… 2 Step Manage your supply chain Consent from uncertified supply chains LegalSource consent letter template (DD-06) …… 2 Step Manage your supply chain Record supplier information Supplier Management Form (DD-04) …… 2 Step Manage your supply chain IT Solutions …… 2 Manage your supply chain Step Collecting documentation must be done for the risk assessment • NOT a self-standing requirement!! LegalSource is performance based • NOT document based …………… 3 Step Assess risk in your supply chain …… 3 Step Assess risk in your supply chain Annex 1: Risk assessment guide 3.1 Evaluate supplier information 3.2 Sort supplier information for certification status 3.3 Identify risks: Annex 1a 3.4 Specify risks: Annex 1b 3.5 Record the risk conclusion Certifi cation Origin Info Information gaps …… 3 Step 1 FOREST ORIGIN 2 SUPPLY CHAIN 3 MIXING Assess risk in your supply chain Defining risk Risk of legal violation in connection with the forest management and harvesting operations Risk of legal violation during trade and transport of the material throughout the supply chain (supply chain risks) Risk of illegal material mixed in, though the supply chain (CoC risks) …… 3 Step Assess risk in your supply chain Defining risk: Indicators for supply chain • Complexity of supply chains • Known cases of illegal activities in the supply chain • Corruption • Lack of information about CoC • Lack of transparency • Poor quality information or documentation …… 3 Step Assess risk in your supply chain Defining risk: indicators for forest origin …… 3 Step Assess risk in your supply chain Defining risk: Certification • • • • • Is the supplier and product covered by an active credible 3rd party certification scheme? Does the certification scheme cover all applicable legislation required by the EUTR? Does the certification system provide access to the species and country of origin? Is the product received accompanied with the required claim information that confirming the certification status of the material/product? Is the CoC system unbroken and can the active certification status of the supplier be confirmed? …………… 4 Step Mitigate identified risk …… 4 Mitigating identified risk Step 4.1 Identify risk mitigation measures; justification needed 4.2 Plan risk mitigation measures 4.3 Implement risk mitigation measures; monitor status …… 4 Step Mitigating identified risk Plan risk mitigation measures Change supplier Source certified or verified material Collect additional documentation about the supplier, supply chain or forest operation Carry out supplier or forest verification audits to verify legal conformance …… 4 Step Mitigating identified risk Implement risk mitigation measures Supplier verification Supplier Evaluation Guidelines (DD-01 Annex 4) Evaluation Report Template (LS-04) …… 4 Step Mitigating identified risk Implement risk mitigation measures Documents Interviews Observations ………… 5 What is next? …… 5 • • • • • • What is next? Supply chain management Define supplier requirements and communicate them to suppliers and to the public (Code of Conduct ) Inform and educate your suppliers Work with your own suppliers to identify and document origin and timber species Actively seek information and evidence of compliance with applicable legislation for areas where your products are harvested Risk assess your supply chains in line with requirements of EUTR Implement risk mitigation o Exclude material from unknown sources o Exclude material where there is an identified risk of illegal activities …… 5 What is next? Source certified material Legal verification Certified Sustainable …… 5 What is next? Further information and update …… 5 What is next? Inform and train staff and suppliers …… 5 What is next? Use available tools, guidance and service Requirements ……………… Standard Tools ……………… Due diligence system Services ……………… Training DD Support Auditor tools Supplier evaluation Report templates Certification Thank you Michael K Jakobsen Customer Relations Manager [email protected] | + 45 2124 3852 FSC-SECR-0047 | PEFC/09-44-02 | Presentation © NEPCon NEPCon works to ensure responsible use of natural resources and secure sustainable livelihoods by transforming land-use, business practises and consumer behaviour.
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