Rule-tightening over illegal forest products will require companies to tighten up their supply chain monitoring
Back in the spring of 1900, Iowa congressman John Lacey was growing hot under the collar about poachers. So he proposed a bill to make it a federal crime to kill wildlife in one state and sell them in another.
A recently amended version of the subsequent Lacey Act now extends the prohibition to all illegally sourced forest goods coming into the US. Tough enforcement by federal agents is giving teeth to the May 2008 revision. Companies, beware.
The rule-tightening in the US comes just as the European Union has passed similar legislation. Back in July, the European parliament overwhelmingly voted on a new law to block the import of illegally felled timber.
The precise size of illegal forest imports remains uncertain. According to estimates from environmental non-profit group WWF, at least a fifth of forest products reaching the EU market are illegally sourced. In market value terms, that equates to about $1.1bn.
The proportion of illegal imports in the US stands at closer to 10%, according to the World Resources Institute, an environmental non-profit group.
The implications for business are potentially serious. Violators in the US could face fines of up to $500,000, plus confiscation of property. Unlike EU regulation, Lacey is a criminal act meaning guilty parties could also face jail.
Corporate offenders in the EU are likely to face heavy fines, although the precise details await the coming into force of the regulation in late 2012. What is certain is that the severest penalties will be reserved for those who first place an illegal product on the market.
The legal requirements of the two laws also differ slightly. The Lacey Act holds any US company in possession of illegally imported forest goods as guilty, full stop. Ignorance, the regulation holds, is no excuse.
In the EU companies will be liable only when they have demonstrably failed to take reasonable steps to curtail illegal imports. In that sense, the US law is probably the tougher of the two.
In both regions, however, companies are going to be required to monitor their supply chains more diligently, says Adam Grant, senior associate at the World Resources Institute.
Homework
“The fundamental thing is to better understand your supply chain and find out the actual origin of your timber … there’s no better guarantee than doing your homework,” he says.
How companies choose to do that will differ from business to business. General precautionary steps might include third-party audits of suppliers, improved internal risk management systems and certified-only procurement.
The latter will help in demonstrating due care. But certification is no guarantee. For one, not all forest certification standards are equally rigorous. Number two, not all certification documents in the open market are genuine.
Corporate readiness for the changing legislative landscape is patchy. Some companies, such as the 37 members of WWF’s Global Forest and Trade Network, have taken a lead in rationalising their supply chains. Others, especially those for whom forest products represent only a minor part of their operations, are woefully behind.
Given the complexity of the timber trade, even first-movers face challenges, says Julia Young, manager for the Global Forest and Trade Network.
“There are still difficulties in finding better sources of supply or helping suppliers improve their own output,” she says.
Ultimately, however, the law change bodes well for companies moving fast. Traders in illegal forest goods consistently undercut their more ethical competitors. Tighter rules should see the playing field levelled as the modern day poachers begin to pay the price.