In November 2015, WWF Germany submitted a Policy for Association complaint against Holzindustrie Schweighofer (HS), alleging that the company is involved in the purchasing and trading of illegally harvested timber in Romania resulting in a negative impact on the country’s natural protected areas. In accordance with FSC procedure, a complaints panel was established to thoroughly investigate the allegations, resulting in the FSC Board of Directors deciding to place HS on probation.
Upon receiving additional allegations against the company, a second investigation was deemed necessary and the FSC Board of Directors ultimately disassociated from Holzindustrie Schweighofer.
Holzindustrie Schweighofer expressed their interest in ending their disassociation from FSC, and a Stakeholder Working Group was established to craft a Conditions Framework outlining strict requirements for HS to comply with in order to end disassociation from FSC. To learn more about this process and the final Conditions Framework, read below.
Soil Association Certification Limited (SA Cert) will run a stakeholder engagement process in 2021 as part of the independent verification, including a six weeks stakeholder consultation.
Stakeholder comments and feedback are welcome and encouraged!
Please feel free to submit your feedback in relation to the HS Group (former Schweighofer Group) and the FSC verification process to SA Cert, by contacting Janette McKay at ForestryConsultation@soilassociation.org
FSC initiates third party independent verification of HS Group’s (former Schweighofer Group’s) compliance with the FSC Conditions Framework.
The objective of this independent verification is to evaluate whether the measures and actions implemented by HS have led to the successful compliance with the requirements stipulated by FSC in the FSC Conditions Framework.
Soil Association Certification Limited (SA Cert) has been appointed as the independent third-party verifier for this process.
The independent verification will combine desk assessment analysis, field verification, as well as a stakeholder consultation process.
The FSC Board of Directors approves the FSC Conditions Framework. The FSC Board of Directors mandates revisions to be made to sub conditions 4c and 4d following consultation with experts in Romania.
Please see the FSC Conditions Framework submitted to the Board in December 2017 here.
The results of the second Policy for Association investigation are presented to the FSC Board of Directors. The Board decides that no further requirements need to be added to the FSC Conditions Framework.
Second Policy for Association investigation is finalized by the investigation team.
The Stakeholder Working Group presents FSC with its proposed final draft of the FSC Conditions Framework.
FSC second Stakeholder Working Group meeting for the revision of the FSC Conditions Framework (consultation draft).
FSC enters into a dialogue with the Schweighofer Group in view of developing a roadmap towards ending the disassociation. For more information please see here.
Initiation of the Policy for Association investigation of the additional information presented to FSC International. For more information see here.
FSC Board of Directors decides to disassociate from the Schweighofer Group, and establishes a set of conditions that Schweighofer shall fulfill in order to end the disassociation. For more information about the rationale on the decision see here.
FSC decides to place the Schweighofer Group on ‘probation’ for possible disassociation until the FSC BoD meeting in February 2017.
For details on the rationale for this decision see here.
For details about the conditions that needed to be fulfilled by the Schweighofer Group in order to remain associated with FSC see here.
Submission of the complaints panel evaluation report with a recommendation to the FSC Board of Directors.
Establishment of a complaints panel and investigation begins.
WWF Germany files a complaint with FSC International against Holzindustrie Schweighofer. FSC accepts the complaint.
Frequently Asked Questions (FAQs) About the Case
What conditions must the Schweighofer Group meet in order for FSC to consider ending the disassociation?
Following FSC Conditions Framework HS must now begin to implement measures to correct identified shortcomings and wrongdoings in its operations while compensating for the environmental and social damages and preventing the reoccurrence of any wrongdoings and/or violations of FSC’s Policy for Association.
These conditions described in the FSC Conditions Framework require HS to make significant improvements in its operations by:
- Strengthening its Due Diligence and Chain of Custody Systems by implementing a robust system for the traceability of the round wood back to the forest stand;
- Setting up and contributing to a fund for the development of social and environmental projects promoting responsible development of forests and forest based communities in Romania;
- Upgrading its corporate social responsibility practices and stakeholder engagement efforts;
- Conducting an independent review of all land in its possession and compensating the lawful land owners and returning the land when legally required;
- Increasing transparency and communication with relevant stakeholders regarding its operations and ongoing projects;
- Compensating FSC for the costs incurred in relation to the PfA investigation;
These conditions have been developed in a multi-stakeholder process involving public consultations and describe a series of stringent requirements that HS must fulfill for FSC to consider an end to disassociation in the future.
Who covers the costs of the investigation and roadmap process?
FSC ensures the impartiality of complaint panel investigations and for this reason FSC contracts directly third parties acting as complaint panel members for Policy for Association investigations and absorbs the costs and fees of their consultancy services. This approach was strictly followed in the Schweighofer case as well.
When disassociated companies initiate a dialogue process with FSC in the form of a roadmap process, FSC aims for these disassociated companies to improve their operations and remedy and correct any issues of their past actions.
FSC set a Conditions Framework detailing all the corrective actions, system improvements and remedy and compensation actions that the Schweighofer Group need to put in place satisfactorily, for the FSC Board to reconsider the company’s disassociated status.
The Conditions Framework were developed through a chamber balanced stakeholder engagement process involving the relevant stakeholders in Romania. FSC requires Schweighofer group to upgrade its timber sourcing policies, improve its traceability and due diligence systems, to conduct legal analysis and review, and to provide social and environmental remedy.
In addition, in condition 7 of this same framework, FSC requires the company to reimburse FSC for the costs incurred by FSC in the investigation of the complaint and the associated work. This is a standard requirement applicable in all roadmap processes.
In the spirit of transparency, which is the foundation of FSC as an organization, FSC provides all stakeholders with open information with regards to these reimbursement of costs for this process, as provided in the below table.
Table 1. Schweighofer Group’s reimbursement of costs to FSC
External costs incurred by FSC in connection with the work conducted in 2016 in the context of the complaints panel evaluation of the Policy for Association complaint.
External costs incurred by FSC in connection with the work conducted in 2017 as part of the new Policy for Association investigation.
No costs have been charged
External costs that incurred by FSC during the stakeholder consultation process in 2017.
Costs incurred by FSC in connection with the independent verification process in 2021
No costs have been charged yet
Frequently Asked Questions about the Independent Verification
What is an independent verification exercise?
Independent verification exercises are auditing processes (usually combining desk and field verification methods) conducted by a third party on behalf of FSC, with the objective of evaluating and assessing whether the requirements set by FSC for a disassociated company have been satisfactorily fulfilled by the disassociated organization.
For the FSC Board of Directors to consider an end to a disassociation, the independent verification must present evidence a compliance with the terms and conditions established by FSC.
Why is FSC conducting an independent verification of HS Timber Group?
HS Timber Group (HS Timber) (formally known as the Schweighofer Group) remains disassociated from FSC.
After a lengthy stakeholder engagement process, HS Timber’s affected and interested stakeholders contributed to an FSC-managed stakeholder engagement process and developed a list of requirements that HS Timber should fulfill before it could be considered for re-entry into the FSC certification scheme. This list of requirements is recorded in the FSC Conditions Framework. The FSC Conditions Framework for HS is the first step of FSC’s roadmap process for HS Timber.
The roadmap process could lead to FSC’s Board of Directors considering whether HS Timber could be allowed back into the FSC system; however, the Board will only consider this once all requirements (as defined in the FSC Conditions Framework) have been met.
The objective of independent verification is to evaluate whether the requirements set out in the FSC Conditions Framework have been successfully implemented by HS Timber Group.
The FSC Conditions Framework was developed through a transparent and inclusive stakeholder engagement process - following the advice and guidance of an expert stakeholder working group.
The FSC Conditions Framework for HS Timber was developed in 2017. Why is the independent verification being conducted now?
The FSC Conditions Framework must first be approved by the FSC Board of Directors before being finalised. The framework was therefore finalised in April 2018.
Since April 2018, HS Timber has had over two years to implement the necessary requirements stipulated in the FSC Conditions Framework. With the objective of upgrading its performance, systems and operations, HS Timber had to correct its identified shortcomings and wrongdoings, remedy for the resulting environmental and social damages, and prevent the reoccurrence of any previously identified or ongoing wrongdoings and/or violations of FSC’s Policy for Association.
After this two-year time period (which gave the company the opportunity to implement improvement measures and actions as requested in the FSC Conditions Framework), HS Timber approached FSC in September 2020, expressing its interest in an independent verification exercise. At that point HS Timber expressed its confidence that the actions implemented by the company in the previous two years were in line with FSC’s requirements. The next step therefore, was for FSC to commission an independent verifier to evaluate whether indeed such actions were compliant with the FSC Conditions Framework.
FSC proceeded to appoint an independent verifier to evaluate HS Timber’s alleged compliance with the FSC Conditions Framework.
What were the main issues which led to the disassociation of HS Timber?
Some of the findings of the original independent investigation panel in 2016 were:
“In relation to the trade in illegal timber the complaints panel has found [a] variety of clear and convincing evidence that the company has:
- purchased timber from sources that cannot be defined as legal under the Romanian legislation.
- a DDS [due diligence system] that is inadequate to verify if the timber it receives is from legal sources and as a result is compliant with national law. As a result, the company is exposing itself to a substantial risk related to engaging in trade in illegal timber. The DDS developed by the company in order to avoid timber and/or timber products from illegal sources entering HS operations is not sufficiently able to ensure compliance in the highly complex regulatory and business environment in Romania –especially with widespread criminal action / prosecution / conviction/ records as well as prevalent incidents of corruption in the sector. Romania suffers from a very high risk of illegality based on the use of fraudulently issued documents of all types as well as a lack of adequate law enforcement in previous years and also long delays in legal action where such action has been taken.
- itself violated several laws and regulations in relation to the way it has transported, received and accounted for its timber.
- sourced timber from lands that it has acquired from cases where fraudulent land restitution has occurred.
- associated with individuals and companies with criminal and corrupt backgrounds, and has not removed such companies from their supply chain or implemented extra measures to mitigate the additional risks even where these are made public; as would be required from a precautionary approach to avoiding risks of becoming involved in trading in illegal timber.
- developed a culture in which the demand to satisfy the need of the mill for timber has effectively overridden the competing demands for ensuring that timber is legally sourced.
- developed a system of paying bonuses for full delivery of volume authorized for harvesting that encourages suppliers indirectly to source timber above and beyond the volumes available from authorised stands.
- developed a system for timber accounting and reporting that at best can be described as mistake ridden, sloppy and misleading.
- misclassified timber likely in order to benefit from reduced log prices and tax breaks related to bioenergy production.
- the complaints panel is also aware that similar allegations against HS are now emerging from the Ukraine from which HS sources significant volumes of timber to feed the mills it owns in Romania. The complaints panel has not investigated these allegations in detail.
- Following the above described, the CP concludes based on clear and convincing evidence that HS has violated FSC PfA by being involved systematically and over an extended period of time, directly and indirectly, in the trade of timber which has been harvested and/or handled in violation of existing laws and regulations”.
Why is FSC continuing to engage with HS Timber in a roadmap process when HS Timber has been found guilty of multiple infractions of the FSC system?
The main objective of Roadmap processes is to provide companies with a second opportunity to improve the social and environmental aspects of their operations, and this way addressing the issues identified in their operations through FSC’s investigations.
By giving this second opportunity to disassociated companies, FSC ensures that the social and environmental harm caused by companies is remedied, driving this way positive impacts in the world’s forests and the people that depend on them. This approach was followed in the HS case.
In addition, as a voluntary certification scheme, FSC has the responsibility and obligation to treat all companies in a consistent manner. As a voluntary certification scheme FSC is open to all companies which demonstrate compliance with its Standards and Policies, and this potentially includes HS (provided the results of the independent verification would demonstrate fulfillments of the requirements under the FSC Conditions Framework).
Does the roadmap process mean that HS Timber will be allowed back into the FSC System?
No. The Roadmap process is no guarantee that a disassociation status will be lifted and that a company is going to be reassociated with FSC.
First, the result of the independent verification shall demonstrate that the disassociated company, in this case HS, has implemented the necessary actions as to improve its operations (as required by FSC in the FSC Conditions Framework).
In the event the result of an independent verification shows compliance by the disassociated company, the case is brought to the attention to the FSC Board of Directors (BoD), for them to decide whether FSC shall end the disassociation with the company.
In the scenario where the FSC BoD decides that the disassociated status of the company is to be lifted, the company is not automatically reassociated to FSC. For a reassociation to occur the company shall in addition follow the ordinary auditing process through a certification body as to determine whether the company’s operations applicant to certification indeed operate at a sustainability and social responsibility level in line with FSC’s Standards for forest management and timber trade.
What are the countries included in the scope of the third-party verification exercise led by FSC?
The geographical range of the verification exercise follows the FSC Conditions Framework, as follows:
- Scope of conditions 1, 6 and 7: entirety of HS’ operations;
- Scope of condition 2: applicable when sourcing from high risk countries/ areas (categorized as specified and unspecified risk according to FSC CW risk categories);
- Scope of conditions 3, 4 and 5: limited to HS’ operations in Romania.
Following to the above, the scope of the independent verification covers the entirety of HS forestry operations, with particular focus on those sourcing countries categorized as high risk (Romania and Ukraine). In-field audits focus on potentially high risk countries/areas, while the desk audits evaluate HS Timber’s operations as a whole.
What was the process followed by FSC to select the independent verifier?
FSC selected the independent verifier following the FSC procurement principles and procedures. This is a transparent, inclusive and structured procurement process.
FSC published a call for proposals open to any consultancy that presented the skills and expertise necessary for the independent evaluation. FSC then reviewed the received proposals and conducted interviews with the candidate organizations to evaluate expertise, skills and experience needed for the evaluation.
Who was selected as the independent verifier?
Soil Association was identified as the most adequate, competent and impartial consultancy for the service and was therefore formally appointed for this role by FSC.
Did FSC conduct any conflict of interest check prior to formally appointing Soil Association as the independent verifier?
Prior to appointing any third party consultancy to conduct any work on behalf of FSC related to dispute resolution, FSC conducts a conflict of interest check.
This is done to assess the ability of the consultancy to operate with impartiality and objectivity. This conflict of interest check was therefore conducted in relation to Soil Association, prior to its appointment as a third-party verifier.
Conducting a conflict of interest check prior to the recruitment of any consultancy is key for FSC, to ensure that no existing conflicts of interest could jeopardize the process and the impartiality of the findings. This is particularly relevant in the dispute resolution process, considering the confidentiality and sensitivity of the topics managed.
Soil Association signed a legally binding declaration, stipulating that no conflict of interest existed in relation to HS Timber. FSC assessed the conflict of interest declaration to determine whether any other open matters required further clarification or evaluation. Following the information provided by Soil Association, FSC concluded that no conflict of interest existed in the case, and that Soil Association could be appointed as the independent verifier of HS Timber.
HS Timber sold its forestry concessions in Romania: does this have an implication for the FSC verification process? Does this make the company exempt from responsibility in any way?
HS Timber’s sale of forest area in Romania does not exempt HS Timber from the need to comply with the FSC Conditions Framework.
HS Timber is still held accountable to implement the necessary system and operational improvements to meet the requirements stipulated by the FSC Conditions Framework.
Specifically, FSC demands the following areas to be improved in relation to the company:
- Strengthening its due diligence and chain of custody systems by implementing a robust system for the traceability of round wood back to the forest;
- Setting up and contributing to a fund for the development of social and environmental projects promoting responsible development of forests and communities whose livelihood are dependent or related to forest resources. in Romania;
- Upgrading its corporate social responsibility practices and stakeholder engagement efforts (reflected in improved CSR systems and protocols, sustainability reporting and impact assessment and mitigation systems, among many other measures);
- Conducting an independent review of all land in its possession and compensating the lawful land owners and returning the land when legally required;
- Increasing transparency and communication with relevant stakeholders regarding its operations and ongoing projects (including a platform available online accessible to all stakeholders to provide input and comments, a grievance mechanism and improved CSR policies reflecting the company’s commitment and actions in relation to stakeholder engagement);
- Compensating FSC for the costs incurred in relation to the Policy for Association investigation;
What steps does the independent verification follow? What does the process for independent verification look like?
The independent verification combines on site verification and desk assessment, covering the scope mentioned (with special focus in operations located in high risk countries/areas).
The independent verifier shall follow the following general steps in the independent verification exercise:
1) Research, gather, review and analyze case documentation, corporate documentation and other sources of information provided by FSC, external parties and stakeholders, and conduct a desk assessment of the potential compliance with the FSC Conditions Framework by HS Timber.
2) Conduct stakeholder consultations, to gather information on the stakeholder perceptions about HS Timber, in the context of the FSC roadmap implementation (and beyond). This stakeholder consultation shall include the consultation with the key interested and affected stakeholders at international, national and local level.
3) Conduct an onsite verification to triangulate the findings of the desk assessment and ensure robustness of the evaluation of compliance.
4) Develop a final independent verification report providing a comprehensive, account of the results and conclusions of the verification exercise.