The final Guidance Document for the EU Timber Regulation, though it has been out for many months, makes it clear that a “due diligence system” can be described as a documented, step-by-step methodology to produce a consistent outcome. The implication of such a system, is that a second-person should be able to follow the same steps as a separate person conducting the same activity, and should therefore come to the same conclusion.
Many companies one year on from the EUTR may have overlooked the due diligence system requirements and may be focussing on the risk assessments and not paying sufficient attention to regular monitoring of supply chains and products, including species testing, in addition to not conducting an evaluation of their due diligence system.
The point should of a step-by-step methodology should be taken with a degree of practicality and in general terms only. An automated system such as a software tool may provide an inference of risk but it takes a person with knowledge and industry experience to make specific informed decisions. Not all cases are ‘black and white’, and understanding what species are frequently used in small-holding plantations as a resource in parts of the world, the likelihood of potential paper sources being 100% recycled and other useful pieces of knowledge and industry experience, cannot be substituted by a ‘matrix’ and a set of procedures. The list of information and variables would be exhaustive. A case needs to be built in relation to the product, products and supply chain and a methodology provides the means to define if more research and mitigation is required.
Evaluation of Due Diligence
Secondly, due-digilence is certainly not viewed but the competent authorities (NMO in the UK) as a single exercise conducted on one product that stands for a defined period of time. Regular evaluation of the due diligence is necessary and companies should be doing this now, one year on since the effective date of the regulation. Evaluation of due diligence involves, but is not limited to, as contained in the Guidance Document to the following:
- Evaluation at regular intervals, “good practice suggest this should be done annually”, according to the Guidance.
- An evaluation that should be performed by “someone independent from those carrying out the procedures, or by an external body”. This is not dissimilar to a performance audit to determine if persons undertaking the work are making effective use of the resources provided.
- A check to establish if deadlines have been set for addressing “weaknesses and failures” in the system. This point is not too dissimilar than corrective action as contained in the management system standards.
- A check of persons understanding of their responsibilities within the due diligence system and additionally if persons are actually implementing, or following, the system procedures prior to placing materials on the market.
Many companies may be focussing on their efforts on the risk assessment only to determine if the risk of timber being placed on the market is of negligible risk of being illegally logged, understandably so, but failing to properly implement a due diligence system in accordance with the regulation. Clearly the regulation in Article 6 states that procedures and measures are required, it shall be interesting to see what the NMO’s first case for prosecution may be and the significance of poorly defined measures and procedures in the first prosecution case. Undoubtably a case for prosecution will arise to satisfy and criticism that the NMO is being overtly business-friendly. The NMO publicly stated they are moving into a “second phase”, focussing on legal compliance opposed to providing information on the basics of the EUTR. A tougher approach is on the horizon.