Preview of the GTF survey of SMEs responses to risk management in market & producer countries.

Size: px

Start display at page:

Download "Preview of the GTF survey of SMEs responses to risk management in market & producer countries."

Paula Douglas
6 years ago
Views:

The International Timber Industry Discussion &

of SMEs responses to risk management in market

How do SMEs manage the risk of purchasing

Using two similar questionnaires and rating

Europe SME producers in Africa & Vietnam In

1 The International Timber Industry Discussion & Networking Platform Preview of the GTF survey of SMEs responses to risk management in market & producer countries. How do SMEs manage the risk of purchasing illegal timber products? Using two similar questionnaires and rating systems, we interviewed: SME importers in Europe SME producers in Africa & Vietnam In September 2015 we will produce simple guidance for traders and producers based on the best examples we have seen.

2 Based on our own knowledge and experience we broke down Due Diligence in to its simplest components: Staff and systems having the right people in place following some simple policies Knowledge of the regulator talking is better than ignorance! Keeping good records know what you have bought Assessing the risk what should I know? Mitigating the risk what can I do about it? Monitoring does the system work consistently? We set up a simple scoring system to see how they were doing We also wanted to find out how they set up their systems and where did they get the information and support to help them

3 European SMEs The survey so far has covered 27 companies in Germany, Netherlands, Italy, UK and France. The survey was focused on their ability to comply with the EU Timber Regulation as Operators We wanted to see how they were performing and see what advice they had for others. Product types include: hardwood, softwood, joinery & sheet materials Source countries includes: Congo Basin, Latin America, China, SE Asia, Russia and 10+ others Turnover ranged from 1 to 80 m Euro average was 23.7 m Euro Employees ranged from 1 to 240 average of 22 people

4 EU SME overall performance 100 These ones probably have a fairly robust DD system Monitoring 70 Risk mitigation Risk assessment 40 Record keeping Relationship with Competent Authority 10 Staff & systems 0

5 EU SME variances between countries? 6 companies contracted to MO 74.3 Italy 71.3 Germany 71.3 Netherlands 71.3 UK 76.8 France Note: 6 companies contracted to an MO are also included each national score

FR1 FR2 FR3 FR4 FR5 FR6 FR7 UK1 UK2 UK3 UK4 UK5 UK6 UK7 UK8 NL1 NL2 NL3 NL4 DE1 DE2 DE3 DE4 DE5 IT1 IT2 IT3 EU SME does size affect performance of the DD system?

6 FR1 FR2 FR3 FR4 FR5 FR6 FR7 UK1 UK2 UK3 UK4 UK5 UK6 UK7 UK8 NL1 NL2 NL3 NL4 DE1 DE2 DE3 DE4 DE5 IT1 IT2 IT3 EU SME does size affect performance of the DD system? Turnover (Million Euro) 0 Score Some relationship between T/O and performance but: Large companies do not always perform better Small companies can practice high levels of DD

7 The cost of a due diligence system - EU Management time spent on legal compliance (hours / week) Management time spent on enviornmental compliance (hours / week) Estimated cost of Due Diligence system (Euro x 1000 / yr) The average cost of managing the Due Diligence system was 23.7k Euro per year This represented 0.12% of turnover Please note only half of respondents could answer these questions.

Producer SMEs The survey so far has covered 15 companies in Cameroon, DR Congo, Gabon, Ghana, Liberia and Vietnam.

cases producer countries. We wanted to see how they were performing and see what advice they had for others.

Vietnamese companies - primarily manufacturers using imported and domestic timber.

8 Producer SMEs The survey so far has covered 15 companies in Cameroon, DR Congo, Gabon, Ghana, Liberia and Vietnam. The survey was focused on the companies ability to comply with their own legislation and that of export markets and in some cases producer countries. We wanted to see how they were performing and see what advice they had for others. African companies -primarily forest managers with their own sawmills. Most did not have what they considered a DD system. Vietnamese companies - primarily manufacturers using imported and domestic timber. Product types include logs, sawn wood, plywood, moulding, joinery & furniture Turnover ranged from 0.4 to 20 m Euro average was 5.9 m Euro. Employees ranged from 9 to 2350 average of 320 people

Cam1 Cam2 DRC1 Gab1 Gab2 Gh1 Gh2 Gh3 Gh4 Lib1 VN1 VN2 VN3 VN4 VN5 These are

9 Producer SME overall performance 100 Awareness of legislation 75 Risk mitigation 50 Risk assessment 25 Record keeping Staff & systems 0 Max. Cam1 Cam2 DRC1 Gab1 Gab2 Gh1 Gh2 Gh3 Gh4 Lib1 VN1 VN2 VN3 VN4 VN5 These are all forest managers - a due diligence system for them = legal title and legal harvesting

Millions Score Gab1 Gab2 Gh1 Some relationship between T/O and performance but:

10 Producer SME does size affect performance of the DD system? Cam1 Cam2 DRC1 Turnover (annual sales) - Euros Millions Score Gab1 Gab2 Gh1 Some relationship between T/O and performance but: Large companies do not always perform better Small companies can practice DD Gh2 Gh3 Gh4 Lib1 VN1 VN2 VN3 VN4 VN5

11 The cost of a due diligence system Producer countries Management time spent on legal compliance (hours / week) Management time spent on environmental compliance (hours / week) Estimated cost of Due Diligence system (Euro x 1000 / yr) The average cost of managing the Due Diligence system (or complying with forest laws) was 33k Euro per year This represented 0.57% of turnover

12 Findings Companies with 1 or 50 million Euro turnover can effectively practice Due Diligence 2. Companies with 1 or 50 million Euro turnover can ineffectively practice Due Diligence! 3. Many organisations are trying to help some better than others 4. Any timber company operating anywhere can implement a basic system that will reduce their risk and demonstrate due diligence to customers and regulators 5. In the producer countries it s very clear that those who have sought outside help are better equipped certification, capacity building, support programmes etc. 6. The producer country companies spend far more time on legal (17 hours) & environmental compliance (4 hours) per week. The European SMEs spend 3-4 hours on each. 7. DD system running costs are proportionately much higher for producers than EU companies the proportion of turnover is 0.6% to 0.12

13 Findings Demand for legal (and sustainable) timber is strong from EU, less strong from US and absent from China. 9. Most producers have not switched export markets they tend to stay with where they know and learn how to keep the customer happy. 9. European SMEs want more information where are the problems, what are the problems, how are laws broken, who has been convicted, what are others doing out of 27 European companies welcomed the EUTR in principle their main concern is that it is not implemented evenly. Level playing field Some of the respondents advice: Document everything Talk to your customers they know the laws in their countries Talk to your suppliers they know the laws in their countries Exporters will face more regulations you have to have a good system in place to cope with this Use experts and outside help

14 Report prepared for GTF by George White George White Associates 16 Britannia House Telephone Bentwaters Business Park Suffolk Skype egroegetihw IP12 2TW United Kingdom

GTF Supplier and Consumer Due Diligence Analysis

GTF Supplier and Consumer Due Diligence Analysis Acknowledgements GTF has kept their identities confidential, but would like to thank the 27 EU and 15 supplier country companies who participated in this