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Illegal logging and what it means for timber businesses

Illegal logging is unfortunately a prevailing problem in forestry, actively contributing to deforestation and climate change while bearing significant negative impacts on the timber market.

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Illegal logging is unfortunately a prevailing problem in forestry, actively contributing to deforestation and climate change while bearing significant negative impacts on the timber market. According the Food and Agriculture Organisation of the United Nations, its impact on biodiversity loss over the last three decades is reflected in the destruction of an area larger than the EU between 1990 and 2020. Meanwhile, the WWF has found that illegally extracted timber has become a multi-billion US dollar industry, worth between USD $30 and USD $100 billion annually. On the ground, illegal logging strips local communities and businesses of economic livelihoods while timber logged without following the correct course of tax and duties disproportionately pulls down its market price.

Criminal activity in our industry is not only actively damaging our planet, but it’s also wreaking havoc on our trade and encouraging market instability - so, when it comes to combating illegal logging, it’s clear that it’s now or never. Starting with following the newly emerging regulations being rolled out in the EU, we took a look at how illegal logging can be identified, the red flags to look out for, and what we as businesses can do to promote sustainable forestry practices today.

Combating deforestation in the EU

In Europe, illegal forestry activity has become a catalyst for official efforts being made to safeguard supply chain transparency. In 2022, the European Parliament voted to agree on the EU Commission’s 2021 long-awaited proposal for a new law aiming to stop commodities such as palm oil, leather, cocoa, and - most importantly for us - wood produced through deforestation or human rights abuses being placed on the EU markets. Flagging illegal logging as a global problem bearing significant negative economic, environmental, and social impacts, this move will help stop a significant share of global deforestation and forest degradation. In turn this will reduce greenhouse gas emissions and biodiversity loss while requiring all relevant businesses to conduct strict due diligence in the EU market.

According to the EU, this means that operators and traders will have to prove that their products are both deforestation-free, meaning produced on land that was not subject to deforestation after 31 December 2020, and legally complying with  meaning compliant with all applicable laws in force in the country of production. This will also involve collecting precise geographical information on the land where the timber is sourced in order for it to be checked for compliance.

Businesses and forests alike are therefore under pressure to deliver enhanced transparency, safeguarding trust in their operations and boosting legal forestry. Greater supply chain transparency will help the forestry industry to combat the impact of illegal logging from deforestation and climate change to biodiversity loss. This is good news for the planet and the timber market alike, with the market competition emerging from less illegal logging likely to stimulate ethical and competitive  market activity.

What does this mean for businesses?

Research has found that, depending on the product, illegal logging depresses world timber prices by between seven and sixteen percent. According to the World Bank, the annual global market loses USD$10 billion annually due to illegal logging.

In the past, businesses found to have sourced timber illegally have faced millions in fines, something set to increase across North America and Europe as global regulations tighten. In the EU, organisations found violating the Forest Law Enforcement, Governance and Trade (FLEGT) Action Plan risk merchandise confiscation and severe fines.

What businesses can look out for:

Endangered and protected timber

The Convention on International Trade in Endangered Species of Wild Fauna and Flora (CITES) is a key international conservation instrument for ensuring the timber trade does not threaten the survival of international wildlife species and biodiversity. All trade executed in breach of CITES is illegal, making the convention an essential means by which importing countries can seize illegal sourced wood. Every year, CITES updates its lists of controlled species implicated by the agreement, stipulating endangered wood species for which trade is illegal as well as those for which it is controlled. This is an important distinction, with timber from species such as Brazilian  rosewood explicitly prohibited, and mahogany strictly controlled. CITES also identifies species that are protected in at least one country, such as Korean Pine and Japanese Oak.

Regions reputed for corrupt practices

Illegal logging is happening all over the globe, but there are certain countries which have been identified as producing disproportionate amounts of timber from illegal logging practices. Of the total production in Cambodia, for example, as high as 90 percent can be traced to illegal logging. Similarly, 80 percent of production in Bolivia and Peru has been found to be illegal, with additional reports of illegal harvesting taking place in Bolivia and being trafficked across borders before being exported from Brazil. Where enforcements and penalties are weak in such countries, illegal logging continues to persist. If the country you are sourcing your timber from is high on the Transparency International Corruption Perceptions Index, extra diligence is crucial to verify the wood’s origin.

Untrustworthy and opaque supply chains

The shorter the supply chain, the more straightforward it is to detect any errors, fraud, or failures in compliance. Illegal activity often takes place where weaknesses in a supply chain can be exploited, whether that is in fraud, money-laundering, or counterfeiting. Fostering transparency regarding the movement of timber from source countries to end consumers is essential for every business in the timber trade. Blockchain technology today is enhancing the traceability of timber supply chains by enabling stakeholders across the supply chain to utilise secure blockchain-powered applications which store all relevant information in one place. The result yields improved efficiency,  transparency, and overall security. This is also important for a business’ relationship with its consumers: according to Deloitte, 35 percent of consumers trust businesses that have a transparent, accountable, and socially and environmentally responsible supply chain.

Non-certified timber

Perhaps one of the most obvious yet paramount things to look out for is globally recognised certification for responsibly forestry practices, including the Forest Stewardship Council (FSC) certification or the Programme for Endorsement of Forest Certification (PEFC) schemes. For businesses in the timber industry, securing these certifications is currently the only standardised, gold-standard way of ensuring that you are committed to supply chain transparency and sourcing wood products from responsibly managed forests. Any wood product without the such labels, whether it’s timber or toilet paper, has a much larger chance to come from regions where forests are being cleared illegally, negatively impacting indigenous populations, and wreaking havoc on natural ecosystems and biodiversity. VonWood is proudly FSC and PEFC Chain of Custody certified, meaning we can verify that exclusively FSC or PEFC-certified material is used in our supply chain from forest to market.

“As an important tenet of corporate sustainability, us in the timber industry can make a difference by taking the practical steps to work with governments, NGOs, and lawmakers alike to demonstrate that protecting our forests is the only way to safeguard the future of our industry and our planet." 

What next?

Public policy changes and new regulations being rolled out are key to combating deforestation on a large-scale. Stopping illegal logging in its tracks is absolutely essential for the protection of our planet’s biodiversity. For businesses, pledging to promote supply chain transparency and follow regulations will also create market certainty and level the playing field, ultimately contributing to a more dynamic and stable industry.

As an important tenet of corporate sustainability, us in the timber industry can make a difference by taking the practical steps to work with governments, NGOs, and lawmakers alike to demonstrate that protecting our forests is the only way to safeguard the future of our industry and our planet.

From certification to fostering relationships with only the very best sustainable timber sawmills, combating deforestation is a core priority for us. With a more transparent supply chain, we focus on connecting buyers with the right sawmills while working efficiently with a made-to-order approach rather than made-to-stock. What we take from our forests we also promise to give back, and once a delivery has been successfully completed, we return the favour by planting back trees on top of what is required through the FSC and PEFC certification process. As our industry takes greater strides towards combating illegal logging, we believe in promoting responsible forestry every step of the way.

For more information, please feel free to contact us at info@vonwood.com

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