Integrity risks found in charcoal supply chains

An integrity investigation has been initiated into specific supply chains of FSC-certified charcoal after FSC and Assurance Services International (ASI) found an unacceptably high number of potential false claims, high levels of volume mismatch and several instances of fraud during the fourth transaction verification loop initiated in 2020.

Non-conforming certificate holders, who are identified through this investigation, will face suspension or termination, and they will also be blocked from the FSC system. For more details about the definition of a blocked organization and associated clauses, please see ADVICE-40-004-18 V2-0, within this document.

ASI and FSC initiated the fourth transaction verification loop on FSC-certified charcoal in 2020 due to the large number of incidents reported to ASI, indicating a high reputational risk for FSC. In addition to identifying trade patterns and volumes of FSC-certified charcoal, this transaction verification loop examined the effectiveness of efforts to curb fraud in the supply chains of this product, which were initiated as a result of past investigations.    

When this transaction verification loop was launched in 2020, there were 360 FSC certificate holders that had W2 wood charcoal products, including lumps, briquettes, and disposable grills, in their certification scope. These certificate holders were asked to submit their transaction data from 2019 to their respective certification bodies, which was collected by ASI and analyzed.

Some of the key findings from this transaction verification loop are:

• Namibian certificate holders showed the largest volume of FSC-certified charcoal sales
• Europe continues to be the main charcoal processing and consumption market
• The possibility of a new integrity risk has been identified pertaining to cases of trading without physical possession
• It is probable that the fraudulent activities detected by ASI occur predominantly amongst chain of custody certificate holders.    

Previous investigations of FSC-certified charcoal included transaction data analysis and wood sample testing, which revealed several non-conforming certificate holders and high levels of risk in certain regions. These investigations also led to  an increase in FSC forest management certifications and charcoal production in Namibia. Namibian certificate holders of FSC-certified charcoal were a part of this transaction verification loop as well, and no integrity risks were identified in their transactions at this stage. More information about investigations into FSC-certified charcoal is available here.

FSC believes that wood identification techniques and technology like blockchain can play a critical role in improving and strengthening its system integrity. In 2021, FSC launched two blockchain pilots, in China and Ukraine. A new pilot on tracing the provenance of timber using stable isotope testing will be launched in 2022. FSC has also planned new investigations with ASI into supply chains of specific FSC-certified wood species and regions that indicate high risk of fraud for 2022.