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.
In December 2020 FSC commissioned an independent verification exercise, to evaluate whether the company was in compliance with the requirements defined by FSC in the Conditions Framework.
To learn more about the outcomes of the independent verification process read below.
In November 2021, FSC ended the disassociation with the company, following the decision by the FSC Board of Directors, which was based on the findings of two independent verification exercises that concluded that HS Timber had fulfilled the requirements outlined in the FSC Conditions Framework, a document that defined the conditions for ending disassociation.
FSC ends its disassociation with HS Timber Group, following the decision by the FSC Board of Directors, which was based on the findings of two independent verification exercises that concluded that HS Timber had fulfilled the requirements outlined in the FSC Conditions Framework.
For more information see the FSC statement on the decision to end disassociation here.
FSC commissions Soil Association to conduct a field assessment of HS Timber’s operations in Slovakia in order to identify and evaluate any potential supply chain risks associated to the group’s operations in the country. The independent verification also included an evaluation of the adequacy and robustness of HS Timber Group’s due diligence systems and processes for Slovakia, a follow -up evaluation of the minor non-conformities raised as a result of the independent verification exercise of HS Timber Group conducted from December 2020 to February 2021, as well as a desk assessment of HS Timber Group’s due diligence systems in Belarus and Poland.
Click here for further information about this assessment.
FSC commissions Soil Association to conduct an independent verification of HS Timber Group’s operations in Slovakia to identify, assess, and evaluate any potential supply chain risks in the country.
As part of this independent verification, Soil Association has opened a six-week targeted stakeholder consultation to collect input about HS Timber Group’s operations in Slovakia and any potential associated risks.
FSC hosted a webinar on the 18 May 2021 on the topic ‘Methodology and Results of the Independent Verification of HS Timber Group by SA: evaluating compliance with the FSC Conditions Framework’.
Thank you for your engagement in this process!
Soil Association presented the final verification report to FSC International detailing the outcomes of the independent verification.
For details on the results of the independent verification please read the Public Summary of the Independent Verification report.
An executive summary of the process and findings can also be accessed here.
Please see below the section ‘Frequent Asked Questions about the results of the Independent Verification’ for further information on the case.
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 incurred by FSC during the stakeholder consultation process in 2017.
Costs incurred by FSC in connection with the independent verification process in 2021.
12,300 Euro reimbursed covering FSC staff time
Third party verifier costs have not 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.
How did Soil Association verify the methods to assure legality of log yard sup-plies?
Soil Association assessed HS Timber’s quality management, due diligence systems and procurement policies for compliance against the FSC conditions framework.
The verification showed HS Timber had partnered with tech giant Vodaphone to develop and use a digital timber legality tracing tool known as TimFlow. This system is used as a benchmark for the Romanian national wood tracing system. The key elements of the system include:
- collection of advance information from each supplier, including the wood sources, periodical verification and their updates;
- cross-check of all harvesting authorizations and delivery notes from suppliers as a proof of wood origin;
- analysis of wood quantities allowed per harvesting authorization;
- periodical inspection of suppliers and cross-check of their information;
- verification of documents related to indirect deliveries to HS Timber – through national systems such as Inspectorii Paduri – Romanian official application to verify timber shipments;
- contractual agreements between HS and suppliers related to the roundwood origin and to the audits of all suppliers.
Soil Association concluded that with the use of the digital tool TimFlow, HS Timber had addressed most of the deficiencies in their legality tracing for roundwood from suppliers. However, this tool does not address legality tracing for log yards. HS Timber has procurement policies and strict requirements of legality tracing for purchases of timber from log yards. This policy is combined with monitoring and enforcement via conformance audits against the policy and training of all staff involved in the purchasing from log yards.
Further, procurement agreements between HS Timber and suppliers provide for access of HS Timber to relevant documentation related to the round wood’s origin and audits of suppliers and sub-suppliers. This allows for the implementation of the procurement policy to be monitored and enforced against suppliers.
HS Timber purchases timber from third party log yards, 99 per cent of them are log yards of harvesting companies which are sourcing directly from the forests. In 2020, only five suppliers had a more complex supply chain, which means buying from another log yard. But even in these few cases of more complex supply chains, HS Timber has knowledge of all sub suppliers and all potential harvesting locations.
Did the audit include major entry points of illegal wood into the supply chain in Ukraine (i.e. forest logging plots and small private sawmills)?
The audit (independent verification) focused on the compliance of the HS Timber’s due diligence system with the FSC conditions framework requirements, rather than on discovering suppliers trading controversial wood.
The assessment involved an evaluation of the identified risks for illegal wood entering HS Timber’s supply chain, measures for mitigation of the identified risks, due diligence system-related procedures, staff understanding of the procedures, and implementation of the procedures.
What criteria were used to assess the risk related to the identification of wood origin and legality within the HS Timber’s forest management units?
The risk analysis for the HS Timber forest management units was classified as low or high based on the requirements of FSC conditions framework (section 2a. Legal Traceability of round wood), on HS Timber’s due diligence system and data from their suppliers:
a. Forest management units without log yards and acting as direct traders to HS Timber were considered as low risk because the HS Timber’s wood tracking system allowed for correct verification of the wood origin by combining mitigation measures and tracking tools – such as verification of harvesting documentation, physical inspection of sample logging sites, etc.
b. Sawmills and Traders with log yards were considered as high risk due to the potential mixing of wood from different sources, partial sales of the supplied wood and the limited opportunities of HS Timber to physically trace wood within the supplier’s log yard.
Did the scope of the sampling cover all countries and regions from where HS Timber was sourcing?
FSC specifically required that the verification focused on HS Timber’s operations in Romania and Ukraine, as FSC categorizes these two sourcing countries as high risk.
Soil Association developed a method approved by FSC that involved two audit teams: one team operated on the ground in Romania and Ukraine, while the other team operated remotely in the United Kingdom. The certification body also created audit plans and a checklist using the FSC conditions framework.
How were the aspects of the Conditions Framework regarding legal land owner-ship assessed as part of the independent verification?
Following the requirement of the conditions framework, FSC appointed the legal advisory firm Schoenherr to conduct a legal land ownership review for HS Timber. FSC agreed to the appointment of this firm, after conducting a background investigation around that firm.
FSC confirms the adequacy and independence of the legal land ownership review.
Schoenherr submitted a consolidated legal report to FSC in February 2021.
After assessing this legal review, FSC confirmed the intention, objectives and requirements under Condition 3 of its framework. FSC considers the independent legal review to be satisfactorily completed and will not con duct further assessment of this matter.
The legal report can be accessed here in both Romanian and English. The legal report on the status of pending civil court files related to the HS Timber case is available both in English and Romanian through this link. It includes a Romanian version from Page 4 onwards.
How long before the visits did the certification body communicate the sampling to HS Timber?
Due to the COVID pandemic, unannounced audits were not compatible with the logistical organization of a site visit.
However, Soil Association did its best to ensure the audit was announced within the shortest time period to ensure the verification was as representative as possible of the usual working conditions of the company.
Frequently Asked Questions about the Results of the Independent Verification
Who is Soil Association Certification Ltd (SA Cert)?
Soil Association Certification Limited (SA Cert) is a long-established UK-based Certification Body offering FSC Forest Management and Chain of Custody Certification on a global basis.
SA Cert also offers certification to PEFC Chain of Custody globally, and PEFC Forest Management in those countries where they are accredited.
More information is available on our website - Forestry | FSC® and PEFC™ Certification (soilassociation.org)
What experience does SA Cert have in Romania?
SA Cert has been operating as an FSC accredited certification body in Romania for almost 20 years. SA Cert certification in the region is currently managed by a team of three Romanian nationals two based in Romania and one in the UK - all three are qualified FSC auditors.
In addition, SA Cert works with a team of seven other fully qualified, locally based contracted auditors. SA Cert currently manages 188 FSC Chain of Custody and 21 FSC Forest Management certificates in Romania.
How was SA Cert chosen to carry out the Independent Verification?
FSC launched a tendering process for the independent verification of HS Timber Group’s compliance with the FSC Conditions Framework.
SA Cert responded by preparing and submitting a proposal to FSC. SA Cert was subsequently selected by FSC to carry out the work.
What was the methodology followed by SA Cert in the independent verification?
FSC specified the scope of the verification exercise requiring the focus to be on HS operations in Romania and Ukraine. SA Cert developed a methodology – approved by FSC – using two teams, one operating within Romania and Ukraine on the ground, and one operating remotely from the United Kingdom. An audit checklist and audit plans were developed using the FSC Conditions Framework.
The UK-based team utilised video-streaming technology and file sharing platforms to carry out a document review of relevant HS Group policies, procedures, information and records. Staff and stakeholders were selected for interview and interviewed via video-link by the three UK-based auditors.
The in-country team visited all the HS Timber Group locations within Romania and carried out site-based auditing. They also created a risk-based sampling methodology – see below - for visiting suppliers within Romania and Ukraine. The audits in Romania and Ukraine included visits to suppliers, active forest harvesting areas and Ukrainian sawmill suppliers.
Assessment of supply chains
Information provided by HS Group suggests that in 2020 wood-based products are delivered by 692 suppliers located in Romania and 19 suppliers located in Ukraine. This is a significant number, which necessitates verification of compliance through sampling. Consideration was also made of the fact that some of the suppliers supply to more than one of the HS Group’s processing factories.
The suppliers were separated in four ‘sets of alike’ entities taking in consideration the length of supply / delivery chain and risks related to identification of wood origin and legality:
1. Forest Management Units (FMUs) - acting as direct suppliers selling wood standing, or from roadside storages, or from logyards. The risk related to identification of wood origin and legality is considered low.
2. Sawmills – selling mainly sawn wood and one sawmill in Romania is selling small quantities wood residues. Most of the suppliers located in Ukraine are sawmills. The risk related to identification of wood origin and legality is considered high.
3. Traders with logyards – 75% of the material comes from traders with log yards however more than 50% of the volumes comes directly from the forest, as traders with log yards also deliver from the forests. (50%) with log yards are small sawmills which cut the large diameters by themselves and further sell the small diameters. The risk related to identification of wood origin and legality is considered high;
4. Traders without logyards – in general these suppliers deliver wood from roadside storages. The risk related to identification of wood origin and legality is considered low.
Additional criteria for stratification and sampling of suppliers from each group were applied including:
• Annual wood volume delivered to HS Timber Group by a single supplier – four groups were established based on the range of delivered wood volumes: 1) up to 100 m3; 2) 101-1000 m3; 3) 1001-5000 m3 and more than 5000 m3.
• Suppliers for which HS Timber Group conducted audits vs. suppliers which were not subject to audit program in 2020; eventually suppliers at which CARs were identified during HS Audits vs. suppliers without CARs.
• FSC certification status of suppliers - FSC certified forests and FSC certified supply chains were treated as lower risk.
In line with the FSC standards the sampling numbers (y) was calculated as factor 0.8 of square root of the number of suppliers (x), rounded to the next whole number: y=0.8√x. Taking into account the considerable differences in supply chains and risks related to suppliers located in Romania and Ukraine, the samples for each country were calculated separately. Thus, the targeted samples were set as 22 suppliers in Romania and 4 suppliers in Ukraine distributed among the four ‘sets of alike’ entities based on the risks and the additional criteria described above. The selection of specific companies to be inspected within each set was random giving consideration to the implications on achieving effectiveness, in terms of reducing the time for travelling.
What expertise did SA Cert team have for this verification exercise?
The UK-based SA Cert Senior Manager for Eastern Europe led the project and managed the Stakeholder consultation process. The work was project-managed by one of the Technical Managers for SA Cert who also participated as a member of the UK auditing team.
The UK-based team consisted of three highly experienced FSC Chain of Custody Auditors, who also share experience of managing and auditing quality and environmental management systems.
The in-country team consisted of two Romanian nationals who are employed by SA Cert in Romania and two SA Cert contracted auditors from Bulgaria. All 4 team members have extensive experience of conducting FSC chain of custody and forest management audits in Romania and the wider region.
What did the stakeholder engagement process involve?
Stakeholder engagement is an important means of collecting information on how HS Timber Group is performing. The assessment team followed the guidelines provided in ISO 19011:2011 and adapted the requirements for stakeholder consultation laid down in FSC Standards.
A list of stakeholders was compiled using SA Cert’s existing list of stakeholders in the region plus contacts supplied by FSC and HS Timber Group. The list included local, national and international governmental and non-governmental organisations covering environmental, economic and social considerations.
Consultation invitation emails and documents – in both English and Romanian - were sent to over 1000 stakeholders in Romania plus over 300 other stakeholders in other countries including Ukraine. The emails were sent out on 20 January 2020 with a 6-week period given for responses. The consultation process was also advertised on the FSC and SA Cert websites. Consultees were invited to give their feedback directly to SA Cert using email, and the options for a follow up call or meeting were also available.
In addition, a range of stakeholders were contacted in person and via phone and/or video conferencing during the audit.
30 responses were received and are all recorded in the public summary report.
What were the key issues raised in the stakeholder consultation?
Key positive comments:
• HS Timber Group has made significant efforts to reach out to stakeholders, respond to concerns and to publish information about its sustainability efforts.
• HS Timber Group scaled up the level of transparency regarding its supply chain
• HS Timber Group is continuously improving its supply chain security including implementing Timflow, a GPS tracking system for trucks delivering logs to its Romanian mills from Romanian suppliers.
• HS is very cooperative in working with authorities and business partners.
Key negative comments:
• HS Timber Group mills in Romania purchases over 50% of timber from outside Romania. It is unclear to stakeholders to what extent these supplies are being checked and monitored for legality?
• Concerns about risk of illegally harvested material entering HS Timber Productions supply chain through log yards
• Reference to recent settlement with the Romanian Competition Council for violation of the national /EU competition rules for an investigation period 2011 to 2016
• Romania’s anti-organized crime prosecutors, DIICOT, have an open investigation against employees and former employees of HS Timber Productions dating back to 2015
What are the main positive aspects identified by SA Cert as a result of the independent verification?
SA Cert concluded that there have been very significant improvements in HS Timber Groups’ operations, including (but not limited to) the following:
Anticorruption Policy, Employee and Supplier Code of Conduct
• The company has engaged and worked with the International Anti-Corruption Academy and international experts in developing its Anticorruption measures. Both an Employee Code of Conduct and Supplier Code of Conduct have been developed and published in English, Romanian and German on the company’s website and which comprehensively express the company's expectations and requirements of employees in Anticorruption and integrity.
• First tier suppliers are given relevant guidance through the Supplier Code of Conduct/Timber Sourcing Policy, provided as part of Supplier Contract agreements.
• Sufficient resources are allocated to implement the Anti-corruption and integrity policy (ACIP) - e.g. resources for the operation of a Compliance and CSR department, SCCC department, and provision of training.
• A system for training of HS employees and suppliers in the Employee and Suppliers Code of Conduct are in force and largely implemented.
Supplier and employee auditing: ensuring compliance with HS’ DDS and Supplier Code of Conduct
• First tier supplier breaches are investigated and enforced.
• Interviews with HR demonstrated clear understanding of control and enforcement processes in relation to employee non-compliance.
• Interviews with Legal Officers demonstrated excellent understanding for first tier supplier checks for criminality/potential criminality via media and court records and the process for investigation and if proven/suspected, suspension of the supplier.
• Enforcement actions taken in both employee and supplier breaches, recorded and appropriate to issues identified.
• Control of first tier suppliers is carried out at different levels. Prior contracting each new supplier is investigated by the legal department for previous or ongoing court cases involving the company as legal entity or the managers / administrators / shareholders as physical persons. Internal software links to the public juridical databases. Additional checks for compliance with SCC are applied by the Supply Chain Control and Certification (SCCC) department. HS purchasers working on the ground are obliged to sign a 'Conflict of Interests' declaration and if any conflict is declared then the decision on the contract to go ahead is taken by the respective mill manager.
Media monitoring is also performed by HS CSR department observing any public cases for involvement in HS potential and current partners in unacceptable activities including corruption.
• Review of the internal database maintained by the legal department showed that recently a total of 1419 companies are under the HS monitoring. HS refrains from doing business with companies registered as 'red' according to their internal monitoring and risk evaluation.
• HS database showed that in 2020 based on information obtained by media review 6 companies were suspended from contractual arrangements with HS.
Improved stakeholder engagement
• Stakeholder inputs related to the company's Codes of Conduct/Timber Sourcing Policies are addressed positively and appropriately by the company and considered.
• The company actively provides Stakeholders with opportunities to engage, tools and processes detailed on the Stakeholder Engagement Protocol.
• A public Stakeholder Platform exists through which stakeholders can submit input.
• HS has also engaged in proactively reaching out to stakeholders to present their sustainability report and systems, for transparency and feedback.
Timber Souring Policy
• HS Timber Sourcing Policy expressed the company’s commitment for ensuring all timber is responsibly sourced from sustainably managed forests and to excluding material sourced from virgin forests and non-intervention, also voluntarily refraining from buying timber originating from National Parks in Romania
• The policy is aligned with the FSC requirements in the FSC Conditions Framework.
• HS Timber Group has developed an effective and transparent Sustainability Report, most recent published in August 2020, and which covers the mandatory elements required by EU 2014-95 (environmental matters, social and employee-related matters, respect for human rights, anti-corruption matters, description of the policies, outcomes and risks related to those matters, information on the due diligence processes and its supply chain). The report details key performance indicators for the required reporting period of 2017 - 2019.
• A critical review of HS Timber Group's Sustainability Report was carried out by the Environmental Agency Austria (Umweltbundesamt Gmbh) the report review of the latest report draft of 28/05/20. The critical review panel found the overall quality of the sustainability report, especially regarding materiality, completeness, balance and design to be high and adequate for the purpose of the report. The data listed are comprehensible and comprehensive. The report includes positive aspects of the company ́s sustainability performance, but also addresses existing challenges and current or previous difficulties.
• The company's Sustainability report dated August 2020 was compiled in accordance with Global Reporting Initiative requirements with clear indication within the report of areas of action and GRI topics & related codes.
System for identification and mitigation of social and environmental impacts
• The company has developed a group wide sustainability system which is used to assess the negative social impacts related to its operations and supply chains. That system is clearly embedded into business processes and the company’s Corporate Social Responsibility system, including with the Employee and Supplier Codes of Conduct and the Timber Sourcing Policy.
• Impacts are identified and assessed by HS Timber Group but also through stakeholder consultation processes and measured through the company's sustainability process details of which are published in its Sustainability reports the most recent dated August 2020. Those impacts include wood material use, fuels, energy water, gas use, emissions and waste streams generated. A detailed KPI assessment exists for Significant Environmental Aspects at Mills including fuel consumption, energy use and waste.
Social Impacts the company has identified by the presence of its log purchase operations in rural areas, risk of illegal logging by its supply chains impacting local communities (pre-control risk), fraud and corruption (pre-control risks) as well as local issues such as light pollution at Reci when first installed.
The company takes positive actions to minimise, mitigate, prevent and correct negative environmental and social impacts.
Timber traceability systems and Due Diligence
• The company has a detailed documented HS Timber Group Manual on the Supply Chain Management System dated January 2020 which details arrangements for supply chains Risk Management through a due diligence system sourcing based on information gathering, risk assessment and risk mitigation (where required).
The DDS considers risk management and DDS at a country level, supplier Level, and also in high-risk countries for delivery level (e.g. Romania) and covers mitigation of risks identified (classified as high or low risk).
• First tier suppliers and their managers and officers are subject to review by HS Legal Officers prior to supplier contract approval., criminal databases (Ministry of Justice) and media checked for infringements and excluded from approval in evidence of such exists. Regular checks also carried out of existing suppliers.
• Risk mitigation methods implemented by HS include the use of Timflow (wood traceability system), legal review, exclusion of areas (national parks) and second party audits to address high risk rating for Romania. Other mitigation methods for high-risk countries of origin include sourcing only certified inputs, conducting third party audits, isotope testing (programme under development) and sourcing wood with FLEGT licenses (Indonesia).
• HS Group avails comprehensive system and tools to implement its Risk Management Programme. Moreover, prevention and mitigation of any identified risks is embedded into the company purchasing routines.
• Various risk prevention and mitigation tools are used:
o Legal verification of suppliers
o Media monitoring
o Regular audits of suppliers
o Timflow software for tracking and tracing roundwood deliveries on HS gates
o Supplier management system (DDS Hub)
Gate and log yard checks.
• HS has implemented a very advanced, effective and impressive timber traceability system: TimFlow (developed with, and is supported by a large Romanian GSM operator, since April 2017).
HS implements the TimFlow system, which works in unison with the national SUMAL system to allow the tracking of timber from the forest stump or log yard, and into the sawmill. TimFlow details confirmed during interviews/demonstration.
Tomorrow’s Forests Foundation
• Foundation was set up with support by HS
• Foundation for the implementation of social and environmental forest related projects in alignment with the FSC Conditions Framework. As of December 14th, 2020, the programme figures are as follows: 33 reforestation sites in 8 counties and 617,380 seedlings planted on 146.1 hectares.
• Tomorrow’s Forest website, www.padureademaine/en/, serves as a platform for potential beneficiaries, volunteers, donors, it presents the programme methodology, as well as details on each reforestation project.
• Additionally, HS concluded a framework contract for setting up a program for additional forest related social and environmental projects. An initial contribution of 700.000 Euro, as well as a 500.000 Euro as budget for implementation of future projects has been allocated.
What are the formal findings of the verification?
The verification audits were strongly supported by HS Group, who cooperated fully throughout the entire process.
The audit team were able to record significant investment and substantial efforts having been made by HS to address the majority of the requirements within the Conditions Framework.
No major non-compliances to requirements within the FSC Conditions Framework was raised as a result of the verification process.
4 Minor non-compliances were found, and Corrective Action Requests were raised against these.
The Minor Corrective Actions related to:
• Incomplete roll out of Training for the Code of Conduct and Mission Statement.
• Limited documentation and implementation issues with supply chain auditing
• Documentation improvements relating to Due Diligence systems as applied in the Ukrainian supply chains.
• A lack of a centralized system for registration of any identified errors in the incoming transport documentation for sawn wood and wood panels products in the HS’ processing sites in Comanesti and Siret – this finding was successfully closed before the end of the verification process.
A further 11 observations covering opportunities for improvement, or potential for future non-compliance.
What is the main conclusion by SA Cert in relation to each of the conditions of the FSC Conditions Framework?
1a Corporate Social Governance
• The company worked with the International Anti-Corruption Academy to develop its Anticorruption measures. An Employee Code of Conduct and Supplier Code of Conduct have been developed and published in English, Romanian and German on the company’s website and which comprehensively express the company's expectations and requirements of employees in Anticorruption and integrity.
• First tier suppliers are given relevant guidance through the Supplier Code of Conduct/Timber Sourcing Policy, provided as part of Supplier Contract agreements. Any first-tier supplier breaches are investigated and enforced. HS Timber Sourcing Policy commits to ensuring all timber is responsibly sourced from sustainably managed forests and to exclude material sourced from virgin forests and non-intervention areas, also refraining from buying timber originating from National Parks in Romania
• A system for training of HS employees and suppliers in the Code of Conduct are in force and largely implemented.
1b Corporate Social Responsibility
• The company has developed a group wide Sustainability system to assess the negative and social impacts related to its operations and supply chains. The company takes positive action to minimize, mitigate, prevent and correct environmental and social impacts.
• Stakeholder inputs related to the company's Codes of Conduct/Timber Sourcing Policies are addressed positively and appropriately by the company and considered. The company actively provides Stakeholders with opportunities to engage with tools and processes detailed on the Stakeholder Engagement Protocol.
• HS Timber Group has developed an effective and transparent Sustainability Report, most recent published in August 2020, and which covers the mandatory elements required by EU 2014-95.
2 Strengthening of its Due Diligence and Chain of Custody Systems
• HS has implemented a very advanced, effective and impressive timber traceability system: TimFlow (developed with, and is supported by a large Romanian GSM provider, since April 2017).
• HS implements the TimFlow system, which works in unison with the national SUMAL system to allow the tracking of timber from the forest stump, and into the sawmill. TimFlow details confirmed during interviews/demonstration.
• The company has a detailed documented HS Timber Group Manual on the Supply Chain Management System dated January 2020 which details arrangements for supply chains Risk Management through a due diligence system (DDS) sourcing based on information gathering, risk assessment and risk mitigation (where required). The DDS considers risk management and DDS at a Supplier Level, Country Level and also high-risk countries for delivery level (e.g. Romania) and covers mitigation of risks identified (classified as high or low risk).
• First tier suppliers and their officers are subject to review by Legal Officers prior to supplier contract approval., criminal databases (Ministry of Justice) and media checked for infringements and excluded from approval in evidence of such exists. Regular checks also carried out of existing suppliers.
• Risk mitigation methods implemented by HS include the use of Timflow (wood traceability system), legal review, exclusion of areas (national park) and second party audits to address high risk rating for Romania. Other mitigation methods for high-risk countries of origin include sourcing only certified inputs, conducting third Party audits, isotope testing (programme under development) and sourcing wood with FLEGT licenses (Indonesia).
3 Independent legal land ownership review and compensation to the lawful landowners of illegal land restitution processes
• The evidence seen verifies compliance of the condition. The legal analysis was agreed between FSC and HS to be conducted by the law firm Schoenherr. The legal report gives the detail whereby all the legal issues/cases have either been concluded, or are being held in abeyance. There was no response to the stakeholder consultation process conducted by HS on this issue.
4 Contribution to Social and Environmental projects promoting responsible development of forests and forest-based communities in Romania
• The Foundation and the Fund is in the early stages of establishment, apart from the reforestation programme, which is progressing well. There is enough to verify compliance. HS have explained that there is more work being done by the Foundation, and to do, in order to establish the supervisory board structure for the Foundation.
• Foundation for the implementation of social and environmental forest related projects in alignment with the FSC Conditions Framework. As of December 14th, 2020, the programme figures are as follows: 33 reforestation sites in 8 counties and 617,380 seedlings planted on 146.1 hectares. Tomorrow’s Forest website, www.padureademaine/en/, serves as a platform for potential beneficiaries, volunteers, donors, it presents the programme methodology, as well as details on each reforestation project.
• Additionally, HS concluded a framework contract for setting up a program for additional forest related social and environmental projects. An initial contribution of 700.000 Euro, as well as a 500.000 Euro as budget for implementation of future projects has been allocated.
6 Additional Trust Building Measures
• The evidence verifies compliance
7 Compensation of PfA Investigation Costs to FSC
• Transparency Statement contained by HS confirms 2016 and 2017 costs. 2020 costs have not been charged yet.
How is HS Timber monitoring and enforcing legality of supply from log yards?
The most relevant risk mitigation measures implemented by HS Timber are the following:
- on-site audits where HS Timber checks and confirms:
- the sources of wood material stated in the supplier declaration document;
- the wood balance from the Romanian national wood tracing system (SUMAL) – comparing SUMAL data and the physical volumes in the log yard;
- SUMAL’s sample checks and collection of delivery notes for input;the plot visits.
- Cross-check through the Romanian Ministry of Environment app, Inspectorul Padurii – comparing suppliers’ transport pictures with stated volume);
- depletion of harvesting authorizations – if transported volume exceeds the volume recorded in the harvesting authorizations, HS Timber requests the documentation for the new origin of the wood;
- sample measurement data of individual logs – to check that delivered diameters are in line with presented harvesting authorizations.
Since February 2021, SUMAL 2.0 reveals the origin of all wood material regardless of property status and the location of every single plot, even the harvesting status of the plot, all transports in the last 96 hours with full details, including name of the company, volume, and GPS route. The SUMAL system also provides a live tracking of volumes input by species and an assortment of output delivery notes. With this approach, SUMAL effectively prevents any operator from legalizing illegally harvested wood.
Does HS Timber continue to source timber from national parks?
In Romania, HS Timber has implemented a policy to prevent sourcing of timber from national parks. All suppliers are contractually obliged not to deliver such material.
The company also implemented a control procedure to avoid inflow of timber from national parks into its supply chain. Suppliers with harvesting plots in national parks and with log yards are requested to physically separate the material at their log yard. If they are not able to physically separate the material, the suppliers cannot deliver from their log yard. Suppliers that cannot separate and cannot deliver directly are suspended from delivering until the National Parks plots are closed.
With the new national wood tracking system, all harvesting authorizations are publicly visible, including the name of the buyer and harvesting company. HS Timber actively monitors all harvesting authorizations issued in buffer zones with national parks.
The risk of supply from controversial sources is assessed for each country HS sources wood from and documented as part of the HS due diligence system. Timber from Slovakian national parks has been earmarkers as potentially controversial. HS Timber assessed the risk of supply from controversial sources in Slovakia as low. However, as of 2021 that risk has increased in Slovakia and HS Timber is reviewing its due diligence system. HS Timber is aware of concerns raised by UNESCO in relation with one beech forest heritage site.
How well is the HS Timber due diligence system working and what were the results of the verification?
HS Timber maintains and implements a due diligence system which covers all its input and is based on three pillars:
- information gathering
- risk assessment
- risk mitigation
The risk assessment covers country risk, supplier risk and a risk applying to the delivery level. The risk related to the suppliers is addressed through different risk mitigation measures, especially when there is a risk of mixing (such as at the log yards). HS Timber addresses corruption risks by excluding suppliers when issues are detected.
HS Timber also implements a supplier code of conduct and directly raises awareness among the suppliers and training opportunities for suppliers to learn about anti-trust regulations and anti-corruption.
In addition, Soil Association has found for high-risk countries that HS Timber has comprehensive evidence of all harvesting plots, direct controls for the log yard deliveries, and applies rigorous controls for larger log yards to mitigate any additional risk.
HS Timber’s Romanian mills are currently sourcing from Romania, Slovakia, Austria, Germany and the Czech Republic. The European Union Timber Regulation (EUTR) considers HS Timber as a trader for all trade exchanges between these EU countries. The EUTR requires due diligence systems to govern all trade of timber within and entering the European Union. Compliance with these due diligence requirements is regulated by national competent authorities. The Soil Association verification found no citations against HS Timber for violations of the EUTR.
Did the sale of HS Timber’s land holdings in Romania impact the requirement for con-ducting the independent review of land claims?
No, despite HS Timber selling its land holdings in Romania, an independent legal review of all claims against these holdings was conducted and a public summary of the review was published.
Frequently Asked Questions about the ending disassociation decision
Why did FSC end its disassociation with HS Timber?
The FSC International Board of Directors decided to end disassociation with HS Timber Group on 23 September 2021 after reviewing and assessing the results of an independent verification of HS Timber conducted by the certification body Soil Association between December 2020 and February 2021.
As basis for its decision, the Board also reviewed and considered the outcomes resulting from Soil Association’s most recent independent verification from August 2021 regarding HS Timber Group’s operations in Slovakia, Belarus and Poland.
The findings of the different independent verification exercises conclude that HS Timber Group made significant investment and substantial efforts to comply with the conditions FSC had set for its reassociation in the last years.
HS Timber successfully implemented improved systems and procedures enabling the company to operate at a higher performance level from an environmental and social perspective. Positive measures taken by HS Timber include developing timber sourcing and anticorruption policies, improving stakeholder engagement and developing employee and suppliers’ codes of conduct, among others.
Does ending disassociation mean that HS Timber is now back in the FSC system?
Ending disassociation means that HS Timber Group is no longer blocked from the FSC system and can pursue FSC certification again by following an ordinary certification process.
How long did the process of ending disassociation take?
FSC first entered into dialogue with HS Timber Group to develop a roadmap towards ending the disassociation in March 2017. It often takes years for companies to end their disassociation status with FSC, mainly due to the following reasons:
- FSC needs to engage all concerned stakeholders to ensure they have an opportunity to provide feedback. This engagement step implies that processes might take time, but it also ensures processes are inclusive, fair and aligned with FSC’s mission.
- Disassociated companies often need months or even years to successfully implement all the conditions and requirements stipulated by FSC. Ultimately FSC is seeking lasting change, and that means the measures and actions companies will need to carry out will not necessarily be easy nor fast to implement.
- The decision to end disassociation follows a robust and diligent independent verification process. The FSC International Board of Directors must also assess the results of this verification. The FSC Board does not take lightly decisions to end disassociation, which explains why they need time to analyze the results of the verification and to ensure the decision made is fair and aligned with FSC’s strategic direction.
Why did FSC disassociate from HS Timber?
In November 2015, WWF Germany submitted a policy for association complaint against HS Timber Group alleging that the company was purchasing and trading illegally harvested timber in Romania, which resulted in a negative impact on the country’s natural protected areas. Following two FSC official investigations in accordance with FSC procedures, FSC dis-associated from HS Timber.
HS Timber then expressed its interest in ending its disassociation from FSC, and a stakeholder working group was established to craft a conditions framework outlining strict requirements HS Timber should comply with to end disassociation.
In December 2020, FSC commissioned an independent verification exercise, to evaluate whether the company complied with the requirements defined in the FSC conditions framework.
What are the activities that led to HS Timber’s disassociation?
Some of the key findings of the original independent investigation panel in 2016 included evidence that the company had:
- purchased timber from sources that were not defined as legal under the Romanian legislation.
- implemented a due diligence system that was inadequate to verify if the timber it received was from legal sources and complied with national law. As a result, the company exposed itself to a substantial risk related to engaging in trade in illegal timber.
- sourced timber from lands where fraudulent land restitution had occurred.
What does it mean when FSC disassociates from a company?
Disassociation is the process of cutting all legal ties with an organization (including all legal entities, holding companies, subsidiaries and sister companies under the same ownership and belonging to the same group), through the termination of all FSC certificates.
Once FSC disassociates from a company, the company’s FSC certificates get terminated and the ex-certificate holder can no longer use the FSC trademarks.
Frequently Asked Questions about the Second Verification
Why was the second verification need-ed?
Following the first independent verification and its consideration by the FSC Board of Directors, Soil Association Certification Limited (SA Cert) was instructed to carry out a second independent third-party verification of HS Timber Group against section 2 of the FSC “Conditions Framework”.
The scope of this second verification was targeted at supply chains in Slovakia, Poland and Belarus. The second verification was considered necessary due to concerns raised by stakeholders during the first verification about HS’ purchasing activity within Poland, Belarus and Slovakia, and risks known to be present in these countries. FSC carried out its own internal assessment of risk from these countries before instructing a remote assessment for Poland and Belarus, and an onsite assessment for Slovakia.
What was the methodology followed by SA Cert in the second independent veri-fication?
SA Cert developed an auditing methodology within the scope provided by FSC, and the Conditions Framework, which was approved by FSC prior to implementation. The methodology used a combination of a UK-based auditor carrying out remote documentation review for Polish and Belarus supply chains including video interviewing, and another audit team in Slovakia carrying out on-site auditing by sampling of HS’ Slovak suppliers, and related forest harvesting sites.
The on-site audit in Slovakia involved sampling and interviewing the first tier supplier, and a range of second and third tier suppliers. The audit included visits to suppliers, logyards, and forests from where material had been procured in 2021.
The onsite audit in Slovakia was based upon an analysis of the HS supply chain first and second/third tier suppliers and geographical origin of the supplies. A risk-based approach was used to determine which suppliers to audit.
HS Group sources in Slovakia from 1 first tier supplier, which in turn has 11 second tier suppliers - 6 of which have 41 third tier suppliers. Many of the second and third tier suppliers hold FSC Forest Management (FM) and/or FSC Chain of Custody (COC) and/or PEFC COC certification. Nearly 80% of all 2021 delivered volume came from one second tier supplier who holds both FSC and PEFC COC certificates, the remaining 13% from uncertified suppliers. The first tier supplier in Slovakia and 9 second/third tier suppliers were audited over 4 days in August 2021. The audit included visits to forests, logyards and interviews with a range of Managers and Forest Managers involved in the supply chains.
The remote auditor was given access to the full procurement data sets for Poland and Belarus for 2021.
For both on-site and remote, samples of purchases, including contractual and delivery documentation was audited to check origin, certification status, due diligence application and compliance with HS internal policies and procedures.
Full details of the methodology are described in the public summary of the independent verification report which can be accessed here.
What expertise did SA Cert have in the second verification?
SA Cert used one of the same experienced Forest Management and Chain of Custody Auditors from the initial verification, for the Slovakian on-site audit, together with an independent translator.
The remote auditing was done by a UK-based experienced Forest Management and Chain of Custody Auditor who also had taken part in the initial verification.
What is the degree of complexity of HS’ supply chain in Slovakia?
HS Group sources in Slovakia from 1 first-tier supplier, which in turn has 11 second tier suppliers. Many of the second and third tier suppliers hold FSC Forest Management and/or FSC Chain of Custody and/or PEFC Chain of Custody certification. Nearly 80% of all 2021 delivered volume came from one second tier supplier which holds both FSC (including FSC Controlled Wood) and PEFC COC certification.
Forest management plan maps are publicly available at sub-compartment level where status of the sub-compartment (e.g., ownership, age, location) is available (See here).
Due to a change in the National legal framework, all sanitary harvesting activities have to be approved by Slovakian national Nature Protection Agency. HS was seen in the on-site audit to be following the required legislation.
What is the situation with National Parks in Slovakia?
Management plans of the National Parks in Slovakia are publicly available. All HS documentation concerning harvested timber transport originating from National Parks in Slovakia is publicly available at the Tanapu State Forests website here.
HS Timber Sourcing Policy in Slovakia is not to exclude timber from National Parks, with the exception of the Vihorlat area, were seen to be following relevant legislation and regulations.
During the on-site verification, the most relevant National Park in Slovakia was visited (office and field visits were covered). The main concern related to the management of this National Park relates to issues concerning bark beetle.
What were the key positive outcomes from the second verification?
The on-site Slovak audit, and the remote audit of the Polish and Belarus supply chains demonstrated that HS have comprehensive risk management and due diligence systems which minimise the risk of sourcing illegal or controversial timber.
SA Cert found good compliance with the FSC Conditions Framework. No additional non-compliances were identified with the assessed requirements of section 2 of the FSC Conditions Framework during this assessment. HS Timber Group were able to demonstrate good control of purchasing and supply chain management in Poland, Belarus and Slovakia. This is achieved by HS through a combination of:
- implementing its corporate procurement policy, supplier code of conduct, supplier contracts, and audits where applicable;
- sourcing only certified material where possible;
- avoiding areas of concern which have a geographical basis, e.g. Białowieża region in Poland;
- assessing and managing risk using external sources of information, e.g. FSC Controlled Wood Risk Assessments, supplier intelligence, credible third party information, and legal checks;
- monitoring biodiversity issues in each country, including Forest Management Certification reports.
What are the formal findings of the second verification?
There were no formal findings, but two ‘observations’ were raised in the second verification. Observations are items raised by the auditor which identify opportunities for improvement, or issues to watch, but do not constitute non-conformances with regard to the Conditions Framework.
- The first Observation related to a small number of keystroke data-entry errors within the full purchase data set for Poland and Belarus. This involved material which had been recorded as uncertified when in fact it was certified, but the material was managed appropriately through the HS Due Diligence System and Chain of Custody systems. SA Cert identified an opportunity for improvement by analysing the full data sets for exception reports.
- The second Observation related to a single incidence in Slovakia where documentation from the forest of origin did not include information to identify it at the compartment/stand level.
How were the findings from the previous verification addressed?
The 4 Minor Corrective Actions raised in the first verification related to:
- Incomplete roll out of Training for the Code of Conduct and Mission Statement.
- Limited documentation and implementation issues with supply chain auditing
- Documentation improvements relating to Due Diligence systems as applied in the Ukrainian supply chains.
- A lack of a centralized system for registration of any identified errors in the incoming transport documentation for sawn wood and wood panels products in the HS’ processing sites in Comanesti and Siret – this finding was successfully closed before the end of the verification process.
All three of the remaining open findings were successfully closed out by HS and verified by SA Cert during the remote auditing –
- Training records were available to demonstrate that the Code of Conduct training was completed.
- Evidence on the supply-chain auditing demonstrated that internal procedures had been reviewed and improved; the software systems used for auditing had been further improved and integrated, and the auditors had received training on the use of the new systems.
- Evidence on the Ukranian due diligence and auditing systems demonstrated that extra detail had been added to audit checklists and processes to incorporate the risks previously identified.
It should be noted that the recent FSC Risk Assessment for Romania specifies and considers the risks of wood not covered by legal harvesting and transport documents entering the HS’ supply chains through suppliers delivering saw logs via log yards.
What stakeholder consultation process took place and what feedback was received?
A targeted stakeholder consultation process was undertaken directly by FSC concurrently and ran for 6 weeks. The objective of the consultation was to gather information on the stakeholder perceptions about HS Timber Group’s operations in Slovakia, in the context of the FSC Roadmap implementation (and beyond).
Stakeholders were chosen to include those who had expressed concerns or submitted comments for the first verification, and other key stakeholders within Slovakia (and beyond) following inputs from HS Group.
There were no Stakeholder comments received as a result of the consultation.
Frequently Asked Questions about the FSC Conditions Framework
What is the roadmap process and what did it imply in HS Timber’s case?
After an organization has been excluded from the FSC scheme and if they demonstrate real commitment to change, FSC brings them together with those who have been affected by destructive activities. Through extensive collaboration and consultation, the different stakeholders work out how to remedy the harm caused and make sure it does not happen again.
A roadmap is developed for each ending disassociation process. It is shaped by the verified unacceptable activities and the related impacts on affected stakeholders and environmental values of the specific case while the overall requirements for achieving remedy and reform remain the same.
After FSC disassociated from HS Timber, affected and interested stakeholders contributed to an FSC-managed stakeholder engagement process. They developed – represented by a chamber balanced Stakeholder Working Group - 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 defined in the FSC conditions framework that the FSC International Board of Directors has approved.
The FSC conditions framework for HS Timber was the first step of FSC’s roadmap process that could lead to the FSC International Board of Directors considering whether HS Timber could be allowed back into the FSC system. However, the Board only considered this once all the defined requirements had been met.
The objective of independent verification has been to evaluate whether the requirements set out in the FSC conditions framework have been successfully implemented by HS Timber.
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 working group members included stakeholders of the social, environmental and economic sectors, representing all relevant regions and countries to the case: internationally, within the European region, and more specifically involving stakeholders involved in the forest sector in Romania.
What were the requirements and conditions listed in the FSC Conditions Framework?
The FSC Conditions Framework included the necessary actions and measures to be implemented by HS Timber in order to improve its systems and operations, provide social and environmental remedy and to prevent and mitigate the risk of involvement in any unacceptable activities. For specific information, please visit this page.
How did FSC assess and review HS Timber’s performance against the FSC Conditions Framework?
FSC has contracted the certification body Soil Association to conduct the independent verification in combination with the independent legal review. The verification covered the assessment of all requirements and conditions under the FSC conditions framework.
Soil Association’s independent verification was based on the FSC conditions framework, and on FSC normative standards. As part of the conditions framework verification, the audit team reviewed the HS Timber Group systems for due diligence and legality.
A webinar was conducted in May 2021 on the findings of the independent verification of HS Timber’s compliance with FSC’s conditions. Click here to view a recording of the webinar.
What are the legal land ownership requirements mentioned in the FSC conditions framework?
To address this issue, FSC specifically required HS Timber to improve the following areas and validated their successful completion in the independent verification:
- 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 to develop social and environmental projects promoting responsible development of forests and communities whose livelihoods depend on or relate to forest resources in Romania;
- Upgrading its corporate social responsibility (CSR) practices and stakeholder engagement efforts – through improved CSR systems and protocols, sustainability reporting, impact assessment and other activities.
- Conducting an independent review of all land in its possession, compensating the lawful landowners and returning the land when legally required;
- Increasing transparency and communication with relevant stakeholders regarding its operations and ongoing projects - through an online platform enabling all stake holders to provide input, a grievance mechanism and improved CSR policies in relation to stakeholder engagement;
- Compensating FSC for the costs related to the policy for association investigation.
Will this FSC conditions framework for HS Timber be used for other disassoci-ated companies?
A stakeholder working group focused on Romanian forestry developed this FSC conditions framework specifically for the HS Timber group. It aimed to address issues specifically identified in HS Timber’s operations through expert investigation. Therefore, this framework is not applicable to other disassociated companies.
Still, all frameworks developed under FSC roadmap processes share similar structure and content, as they all cover the same key principles and overall objectives. These key principles are focused on robust due diligence and risk mitigation systems, strong and inclusive stakeholder relations, social and environmental remedy and transparency.
Moving forward, FSC aims to make roadmap processes as consistent as possible and is currently developing a remediation framework to be used for all disassociated companies involved in FSC roadmap processes.