Manage and mitigate supply chain risks Michael K Jakobsen, NEPCon

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1 Manage and mitigate supply chain risks Michael K Jakobsen, NEPCon

2 Pathway to Responsible Sourcing Develop Code of Conduct Due Diligence system Monitor & Communicate 1 2 3

3 Code of Conduct / Sourcing Policy Define the scope of the policy - Which part of the value chain - Social and/or environmental values Define acceptable and unacceptable activities in the supply chain Develop criteria to enable Risk Assessment of supply chains Develop timeplan for implementation Communicate it publically

4 Origin Risks & Controversial Activities at Forest Level Illegal activities Conversion of natural forests direct and indirect Logging in Natural Tropical forests Logging in Intact forest landscapes and other High Conservation Value Forests Human rights & working conditions Impact on indigenous peoples Impact on biodiversity Genetically modified timber

5 NEPCON - NATURE, ECOLOGY AND PEOPLE CONSULT MORE INFO - GO TO

6 Due Diligence system Risk assessment and management Collect information Evaluate risk Mitigate risk

7 Due Diligence: Collect & Evaluate Information Inform suppliers of due diligence requirements and request supply chain information Record supply chain information Analyse information and identify gaps Assess risks Analyse information and identify gaps Request any missing information from suppliers Where necessary, map supply chains Analyse information and identify gaps

8 Due diligence: Risk assessment & Identification Market Supply chain Specific information

9 Due diligence: Risk assessment & Identification Market Supply chain Specific information

10 Due diligence: Risk Mitigation at Origin Level Illegal activities Logging in Intact Forest Landscapes and other High Conservation Value Forests Human rights and workers conditions Indigenous peoples rights Impact on Biodiversity Genetically modified timber Conversion of natural forests direct and indirect (1994 rule) Logging in natural tropical forests FSC certification Market

11 Due diligence: Risk Mitigation at Origin Level Illegal activities Logging in Intact Forest Landscapes and other High Conservation Value Forests Human rights and workers conditions Indigenous peoples rights Impact on Biodiversity Genetically modified timber Conversion of natural forests direct and indirect Logging in natural tropical forests FSC certification Additional Requirements Market

12 Due diligence: Risk Mitigation at Industry Level Mixing in material from unknown or controversial sources Illegal activities Social values: Human rights and workers conditions Environmental impact FSC certification Market

13 Due diligence: Risk Mitigation at Industry Level Mixing in material from unknown or controversial sources Illegal activities Social values: Human rights and workers conditions Environmental impact FSC certification Additional Requirements Market

14 Due Diligence tools: Risk Assessments for 60+ countries

15 Due Diligence tools: Country profiles

16 Due Diligence tools: Timber Testing Identify species to genus level (e.g. Quercus spp.) Identify species to species level (e.g. Quercus robur) Identify geographic origin Identify geographic origin

17 Risk Identification: Example Retailer Tier Tier 0 Tier 1 Tier 2 Location UK Shanghai, China North-East China Certification None Unknown Unknown Species (Oak) Quercus mongolica (Oak) Quercus mongolica (Oak) Quercus mongolica

18 Risk Identification: Example Risk Topic Access to information FLEGT license UN/ EU Sanctions Risk key N/A CITES-listed species Certification Species Risk Origin Risk Trade & Transport risk Illegal transfer pricing Contamination and substitution risk Certification Non-certified supply chains Risk of contamination and substitution

19 Risk Identification: Example Risk Topic Access to information FLEGT license UN/ EU Sanctions CITES-listed species Certification Species Risk Origin Risk Trade & Transport risk Illegal transfer pricing Contamination and substitution risk Risk key N/A Species Clear documented evidence of illegal logging of Quercus mongolica Risk at harvest level, supply chain and mixing/substitution Risk is enhanced by origin

20 Risk Mitigation: Timber Testing

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23 Find out more at nepcon.org Michael K Jakobsen Customer Relations Manager mkj@nepcon.org NEPCon works to ensure responsible use of natural resources and secure sustainable livelihoods by transforming land-use, business practises and consumer behaviour.