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.
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 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.
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.