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The European Union Timber Regulation (EUTR) came into force on 3 March 2013. This requires any company that places timber or timber products on the EU market, including paper products, to comply with the new law.

The objective of the regulation is to prohibit timber products derived from illegally harvested forests being placed on the European market. To this end, the regulation includes a legal obligation to implement a Due Diligence System (DDS).

The DDS must gather information about the forest origin of the wood in the product, including evidence of compliance with locally applicable legislation. The DDS must include an assessment of the risk of the product originating from an illegal source and risk mitigation measures, where necessary. With this documented system in place, companies can demonstrate how they plan to satisfy the requirements of the legislation, and how they will implement the system to ensure compliance.

Guidance from the EU Commission indicates that evaluation of the due diligence system should be conducted at least annually, “by someone within the organisation, ideally independent from those carrying out the procedures, or by an external body”.

SGS has developed a due diligence system that is currently being reviewed by the EU Commission with a view to SGS becoming an approved Monitoring Organisation.

As well, SGS United Kingdom Ltd. provides a full consulting and compliance service for companies wishing to develop their own due diligence system to enable compliance with the legislation.

The two companies featured in this case study – Bunzl plc and Willis and Gambier – are both importers and distributors of products within the scope of the legislation, and both are developing their own due diligence system. They have chosen SGS to help them achieve their goal, and SGS aims to leave them with a fully functioning due diligence system that will allow them to feel confident of achieving compliance with the legislation going forward.

Willis and Gambier

Willis and Gambier is a furniture importer and wholesaler supplying to the retail market in the UK and Ireland. The company supplies well-known brand names like John Lewis, Laura Ashley, Furniture Village and DFS.

David Lane, Managing Director of Willis and Gambier, takes up the story.

“The EU regulation came in on 3 March 2013, and it required all first and second degree importers to have evidence of due diligence available. We knew the regulation was coming, and we started work on it in the last quarter of 2012. We gathered our ideas, sent people on training courses, and attended seminars. But we saw that we would need extra help, too.”

To comply with EUTR, companies must provide objective evidence about the forest origin of their timber products, taking into account any locally applicable legislative requirements. This entails designing and sending out supplier-specific questionnaires to gather the right evidence. 

The process results in a wave of documents coming back up the supply chain for review, and in most cases a company simply does not have the technical skills on board to verify a document’s authenticity – for example, a forest harvesting permit from China.

A lot of information to collect

“The biggest problem is there is a lot of information you have to collect,” says David Lane. “And it is the first time that we as a business have asked for some of that information. When you are dealing with Asian countries language is a difficulty for getting across exactly what you need. Getting information back that is accurate and in-date is a challenge. That is where SGS helped because they could overcome those problems for us.”

In fact, Willis and Gambier already had a long-standing relationship with SGS through its Far Eastern factories. The company is owned by a Hong Kong-listed organisation and enjoys long-term relationships with its Chinese suppliers where the majority of its furniture is manufactured. SGS supports and audits the Forest Stewardship Council (FSC) system, which the importer already has in place.

SGS has local personnel

Through its global network of affiliate offices, SGS has local personnel trained in forest product Chain of Custody and EUTR compliance verification, ready to carry out the technical review of completed supplier questionnaires and the associated documentary evidence submitted by suppliers.

All reporting is in the form of a Risk Assessment Feedback Form (RAFF), which lists the products covered for review and the documents provided by the supply chain and reviewed by the SGS auditor. The RAFF indicates whether or not, on the balance of probability, the documents presented for review provide satisfactory evidence of compliance with EUTR, and how the evidence can be strengthened.

“SGS helps us by following through on all the paperwork,” says David Lane. “We request full traceability of the wood material to make sure it is legally harvested. It all needs to go back to our factories, where the factories bought wood from, back through the wood mills, the saw mills – in fact, back to the forest. To offer the full system you need to go all the way back to that point. And SGS is helping us do that.”

What benefits does David Lane see EUTR bringing to the company?

“It is too early to see the commercial benefits,” he says. “But we have been asked by some of the leading UK brands like John Lewis, Laura Ashley, DFS and Furniture World to supply due diligence on the brands we supply to them. With support from SGS we can now do that. With the brand reputations of our customers at stake, it is imperative that Willis and Gambier ensures its own compliance with the EU timber regulation.”

BUNZL PLC

Bunzl plc operates in B2B niche markets of consumable products – buying in products, consolidating them, and providing them to customers. For example, a supermarket could outsource all its consumables to Bunzl – such as the till rolls, the carrier bags, and the cleaning products.

“We supply a number of paper and pulp-based products. And when EUTR came in to force this year, we wanted to support our customers in providing product in compliance by developing our own due diligence system,” says Christine Bowman, HR Executive at Bunzl.

The company began work toward developing their DDS in October 2012, and Chris Bowman quickly put together a strong team.

“We are a devolved business so I went to the Business Area Heads for UK and Ireland and for Continental Europe and I asked them to nominate people from their teams to work on the due diligence process. This gave me a group made up of members of the purchasing and procurement teams from Bunzl group companies within the UK and the Procurement Director for Continental Europe.”

Bunzl needed more expertise

But after looking at the regulations, Chris Bowman decided she needed more expertise in the area. She turned to SGS for help.

“When I spoke to Charles Townsend at SGS he was the person who could talk to me with some knowledge about EUTR,” says Chris Bowman.

“He also has experience of the timber industry. We needed subject experts because the regulations are not straightforward. We wanted a commercial pragmatic approach to further develop our partnership with suppliers to enable us to implement these regulations.”

Bunzl also wanted to put in place a system that going forward the company can use to identify low-risk suppliers, and where it identifies high-risk suppliers to be able to call on greater expertise.

Guidance on local legislation

Like Willis and Gambier, Bunzl needed guidance on local legislation. “When you start talking about local legislation we are clearly not sufficiently expert to explain the due diligence process to our suppliers, nor able to review what comes back,” adds Chris Bowman.

After sending out questionnaires to some of its suppliers in October 2012, Bunzl was finding it difficult to explain their needs.

“This was the first time we had asked a supplier to identify its supply chain for us. So they naturally felt a little uncomfortable about that.”

And continuing to build trust with suppliers is vital. “To us, this is all about the partnership with our suppliers, and we want to give them comfort that we will not ask them for more information than we need to demonstrate compliance. In future we want it to be a system we can apply to any new supplier,” says Chris Bowman.

Bunzl has also now started to involve its global sourcing office in Shanghai in the process. “At this stage we have made them aware of the regulations, and we have involved them in designing our questionnaire, but we are now developing our risk assessment process,” says Bowman.

So far, Bunzl has approached four suppliers about the questionnaire and risk assessment. “In future, we would expect to be able to assure our customers that the goods they are getting are compliant. There is a developing awareness and even among some of our larger suppliers there is restricted knowledge – but that is also developing.”

What advice do the two companies have for businesses planning to develop a due diligence system?

“At some point this will just be part of what everyone does. But for now it is about developing trust with your suppliers and customers, letting them know that this is something we all need to work towards,” says Chris Bowman.

“There is a lot of education required for our suppliers to understand the requirements of the legislation and we have some way to go. But once the system is agreed and approved we can start involving all our suppliers.”

“Keep your request as simple as possible,” advises Chris Bowman. “It is not straightforward because it is not just about what the regulations say. It is about working out what you need from suppliers. When you are talking in different languages and the topic is complex, a lot of effort has to be made to ensure that letters and questionnaires are succinct and comprehensible.”

David Lane at Willis and Gambier has more advice: “Do it quickly because it is already legally binding now. And use experts because it is hugely complicated in some of the supply chains.

It does not matter whether you are coming from Eastern Europe, or Latin America, or the Far East – the actual process to track down the relevant information through factories, suppliers, logging operations, and forest sources is quite a task, especially when you put language into the mix.

You need to have access to experts in the system and experts with the language capabilities, and an understanding of local legislation. It differs by region and country. In some countries it might be legal to cut down trees on your own land and you get authorisation to do it. But in other countries – even though it is your land – you may not be allowed to do that.”

SGS can support companies wishing to develop their own due diligence system through a consultative process, and can then review the supply chain information to help companies arrive at a risk designation for its products.

If risk mitigation is required SGS can assist with the identification of solutions, including Chain of Custody certification of the supply chain, or legality verification of the forest harvesting and the product.

WHY SGS?

SGS is the world’s leading forest management certification body with more than 7,000 Chain of Custody certificates worldwide.

Chain of Custody certification from SGS provides transparency throughout the supply chain and confirms the forest origins of timber products in order to demonstrate your products originate from certified, well-managed forests and other controlled wood sources.

SGS offers a range of EUTR related services; from consulting to technical reviews of supply chain documentation; from training to auditing services, that will facilitate compliance for operators.

An EUTR Best Practice Implementation Guide has also been produced, to provide a step-by-step demonstration of what is required.  This is available at www.sgs.com/EUTRguidebook.

SGS is the world’s leading inspection, verification, testing and certification company. Recognised as the global benchmark for quality and integrity, we employ over 80,000 people and operate a network of more than 1,650 offices and laboratories around the world.