Integrity of wood pellets supply chains at risk

The transaction verification (TV) loop on FSC-certified wood pellets, specifically focusing on supply chains in Vietnam, Thailand, Japan and South Korea, has been concluded. False claims on large volumes of wood pellets manufactured and sold by a few Vietnamese certificate holders have been detected. This indicates a high risk to the integrity of FSC’s wood pellet supply chains in the Asia Pacific region.

As an outcome of the TV investigation (second phase of a TV loop), FSC has blocked two Vietnamese certificate holders:

• An Viet Phat Energy Co Ltd (SGSHK-COC-370077) for false claims. They applied FSC 100% claims on wood pellets that were manufactured using raw material from sources that could not be confirmed as FSC certified.
• Tam Phuc Gia Lai Trading Co Ltd (NC-COC-053381) for false claims. They waived their annual audits by the certification body and declared no transactions. However, they sold products with FSC claims, which contradicts their transaction declarations.

This TV loop was launched by FSC and its assurance partner, Assurance Services International (ASI), in 2021, to examine the trading patterns and volumes of wood pellets in the Asia Pacific region. After analyzing the transaction data submitted by certificate holders within the scope of this TV loop, the preliminary results showed that Vietnam is the biggest producer of wood pellets, while Japan is the biggest consumer.

The investigation of the An Viet Phat Energy case indicated that there is potentially a large mismatch between the volume of timber sold by certified Vietnamese forest management units for wood pellet production and the volume of finished products declared by the manufacturers in their sales invoices; the latter being higher. There is also a heavy dependence on wood pellets made from material carrying FSC Controlled Wood claims. This is indicative of Vietnamese certificate holders trying to meet the large demand for wood pellets and the legal harvest requirements by Japan and South Korea.  

Vietnamese wood industry associations have expressed their concerns over ensuring the procurement of raw materials, including wooden waste from other timber-based supply chains, which deeply affects the wood pellet supply chain. The shortage started during the pandemic and continues to affect the ability of wood pellet manufacturers to ensure an adequate supply of raw materials from certified sources.

The final results of the TV loop also show that FSC-certified Japanese companies bought wood pellets with FSC Controlled Wood claims from certified Vietnamese manufacturers, which was then further sold to non-certified Japanese consumers. There are indications that certificate holders might have abused the application of the FSC Controlled Wood claim. According to the FSC Chain of Custody Standard, a certificate holder may only sell products with the FSC Controlled Wood claim on sales and delivery documents if the products are raw or semi-finished, and the customer is FSC-certified. For more information about FSC Controlled Wood claims, click here.

FSC takes any supply chain integrity violations seriously. When FSC blocks an organization for making false claims, it can no longer carry out any activities associated with FSC. This includes, but is not limited to, seeking recertification, making an FSC claim on its products or using the FSC trademark, providing outsourcing services of FSC certified materials, joining a group or multi-site certification, etc. For more information about false claims, refer to page 30 of this document. For more information about FSC’s position on false claims, click here.

FSC also has strict requirements for addressing integrity risks associated with non-conforming products. Any certificate holder trading non-conforming products needs to notify its certification body and implement the activities provided in the normative framework. For more information about these requirements, refer to clause 1.8 of the FSC Chain of Custody Standard (FSC-STD-40-004 V3-1).