23rd Illegal Logging Stakeholder Consultation and Update

Transcription

1 Energy, Environment and Resources Summary 23rd Illegal Logging Stakeholder Consultation and Update 6 7 February 2014 The views expressed in this document are the sole responsibility of the author(s) and do not necessarily reflect the view of Chatham House, its staff, associates or Council. Chatham House is independent and owes no allegiance to any government or to any political body. It does not take institutional positions on policy issues. This document is issued on the understanding that if any extract is used, the author(s)/ speaker(s) and Chatham House should be credited, preferably with the date of the publication or details of the event. Where this document refers to or reports statements made by speakers at an event every effort has been made to provide a fair representation of their views and opinions, but the ultimate responsibility for accuracy lies with this document s author(s). The published text of speeches and presentations may differ from delivery.

2 LIST OF ABBREVIATIONS CITES DG Environment DG DEVCO EC EUTR FLEGT FSC PEFC REDD+ SME SVLK VPA Convention on International Trade in Endangered Species of Wild Fauna and Flora Environment Directorate-General of the European Commission Directorate-General for Development and Cooperation European Commission European Union Timber Regulation Forest Law Enforcement, Governance and Trade Forest Stewardship Council Programme for the Endorsement of Forest Certification Reducing Emissions from Deforestation and Forest Degradation (the plus referring to the role of conservation, sustainable management of forests and enhancement of forest carbon stocks) Small and medium-sized enterprises Sistem Verifikasi Legalitas Kayu (Indonesia s Timber Legality Assurance System) Voluntary Partnership Agreement 2

3 INTRODUCTION On 6 and 7 February 2014 over 280 participants attended the 23 rd Stakeholder Update meeting at Chatham House to discuss progress on tackling illegal logging. Discussions focused on the following issues: the forthcoming review of the Forest Law Enforcement Governance and Trade (FLEGT) Action Plan, governance impacts of Voluntary Partnership Agreements (VPAs), the role of FLEGT in tackling deforestation, developments in the Mekong region and South East Asia, enforcement of the European Union Timber Regulation (EUTR) and the challenges and opportunities of complying with the EUTR and Lacey Act. This report summarizes the presentations and related discussions held during the event. 1 SESSION 1: FLEGT REVIEW Chair: Alison Hoare, Chatham House Three presentations were given in this first session. To begin, Bernard Crabbé of DG DEVCO, European Commission (EC), outlined the EC s plans for a review of the FLEGT Action Plan. Such a review is important considering the global changes that have taken place over the past ten years these including; shifts in the timber trade, new drivers of deforestation, and changing policy environment, in particular in relation to climate change and sustainable development. It was noted that there have been some important achievements of the Action Plan but there are also a number of challenges, including the absence of FLEGT licensed timber on the market and concern about the impacts of legality requirements on small-scale producers. The review will take place from the end of 2014 through to late 2015, and an external team will be commissioned for this task. It will consider the effectiveness, efficiency and impact of the various activities that have been implemented as well as the sustainability and replicability of the Action Plan as a whole. Its design is still to be decided although it will include surveys of member states, VPA partner countries, non-vpa partner countries, private sector and civil society organizations, and country case studies will also be undertaken. Participants of the meeting were encouraged to contribute evidence and analysis to the review. The next presentation, given by Indra van Gisbergen from FERN, outlined priorities for the FLEGT review from an NGO perspective. The achievements of FLEGT were underlined, these including the introduction or elaboration of public procurement policies, the introduction of the EUTR and the conclusion of six VPAs. Important features of the VPAs in particular were considered to be their emphasis on participation, the focus on legality and the flexibility to allow for nationally tailored processes. A number of limitations of the Action Plan were also identified. These include the limited attention given to the role that banks and financial institutions could play in controlling illegal logging, for example through implementing due diligence on their investments. It was suggested that member states should make further use of anti-money laundering legislation to tackle illegal logging. Another limitation of the Action Plan is its limited scope to address land-grabbing, in particular for agriculture, which is now a major driver of deforestation. This is an escalating problem in many countries, including those engaged in VPAs, for example, Cameroon, Democratic Republic of Congo (DRC) and Republic of Congo (RoC). Finally priorities for the FLEGT review were outlined, which include: a clear definition of the review objectives, preparation of the next phase of the FLEGT Action Plan, capitalizing on best practices, reaching out and coordinating with different stakeholders, and a consultation process involving civil society. 1 The PowerPoint presentations from this meeting are available at 3

4 In the final presentation, Sue Unsworth, independent consultant, outlined lessons from FLEGT using a political economy lens. The nature of development is highly political and it is imperative that donors understand the political context in which they work. The importance of analysing both the underlying process as well as impacts of the FLEGT Action Plan in the EC s forthcoming review was underlined. The presentation described some of the reasons why the Action Plan has been innovative and has succeeded in bringing about change. These include the fact that it has built on common interests between governments, communities and businesses, and that it respects sovereignty, which is at the heart of the development process. Purposive muddling has been important in the design process; and the Chatham House update meetings were highlighted as an important part of the learning process. A number of key lessons were highlighted, both for the next steps of FLEGT and for development professionals more broadly. These included the importance of keeping open the space to think and work politically; valuing country and sector knowledge; hiring good people; avoiding pressures to spend; engaging long-term; and facilitating flexibility and risk-taking. The first question raised concerned the importance of including design in the FLEGT review. Unsworth responded by highlighting the importance of capturing changes in relationships and informal institutions and processes as part of the review. One participant raised concerns about the absence of FLEGT licensed timber on the market. Crabbé contended that there has been significant progress, particularly in building awareness of illegal logging, providing clarity of the legal framework and putting the issue high on the political agenda. He recognized that the process of licensing has been slow but highlighted that it is better to have credible rather than weak systems in place. Van Gisbergen underlined the ambitious and complex nature of the process especially legal reform, and suggested establishing realistic milestones to assess progress with FLEGT. The format of the FLEGT review was discussed; queries included whether the review will be forward looking and if it will acknowledge the role of conversion timber. Crabbé highlighted the importance of documenting what has been achieved, but warned that the process would lose effectiveness if it became too broad. Another participant questioned whether there would be more cooperation between FLEGT and large donors such as the World Bank. In response to this Crabbé highlighted the complexity of engaging with everyone but identified the need to work with other transnational institutions. Unsworth pointed out that it would be useful to work with those within donor agencies who are also seeking to assess qualitative change. A participant commented that trade is only one element of the VPA. The objective of the FLEGT VPA is reducing illegal logging and progress has been made in this area, through capacity-building and law enforcement in VPA countries. 4

5 SESSION 2: GOVERNANCE IMPACTS OF VPAS Chair: Germain Djontu, theidlgroup Session two focused on the governance impacts of VPAs. The first presentation, given by Lindsey Duffield, independent consultant and Michael Richards from Forest Trends, explored the impact the VPA processes have had on community resource rights. They introduced the findings of a survey conducted in the six VPA countries; Indonesia, Republic of Congo, Ghana, Cameroon, Central African Republic and Liberia. The survey established that improvements in transparency, legal clarity and accountability are the core achievements of the VPA process. The results showed progress in developing communities procedural rights, but limited progress on substantive or tenure rights. The role of civil society in the negotiation process is considered a breakthrough and civil society s role in monitoring and community mapping has been significant. The presentation concluded that there is more hope for community rights with a VPA than without it. The next presentation, given by Emily Harwell of Human Rights Watch, focused on the human rights dimension of the Indonesian VPA. Progress in improving forest governance was recognized, this including the development of the legality licensing system (SVLK), the moratorium on new palm oil concessions and introduction of the Freedom of Information Act However, there are also significant challenges, including violations of community rights and corruption, the latter resulting in the huge loss of forest revenue for the government. These issues must be addressed in order for the VPA to be successful, both in terms of reducing illegal timber supply and poverty reduction. The importance of addressing the human rights gaps in the SVLK and the need for political commitment to customary land recognition were emphasized. The presentation concluded by highlighting the benefits of including rights within VPAs; strengthened forest governance, improved forest integrity, reduced poverty and conflict, and improved access to forests. The final presentation of the session was given by Janet Pritchard, independent consultant, and centred on the role of the VPA process in supporting land tenure reform. The findings of the recent report on Securing community land and resource rights in Africa were presented. Pritchard underlined how legal pluralism affects the VPA process. Cameroon was used to illustrate this, where national state law contradicts customary laws over land and resources. The report gives guidance on land reforms, and emphasizes the importance of equality, clarity of who has rights to what, and how to integrate customary and statutory law. Pritchard concluded by underlining the significance of the multi-stakeholder process in VPAs, but emphasized that they should avoid a narrow focus on statutory law and gain a deeper understanding of legal pluralism. In relation to civil society involvement, one participant asked how important organized representation is for achieving substantive and procedural rights. They also questioned to what extent the FLEGT process has invested in the sustainability of the organizations that facilitate civil society participation. In response Duffield agreed that civil society involvement is important in the VPA process. Building platforms for community groups to inform negotiations has been successful. Richards added that civil society has a large role in monitoring and having a seat at the table facilitates this. With regards to sustainability a huge amount of effort must go into embedding participation and it was recognized that civil society participation has declined post-vpa negotiations. Pritchard also pointed out that despite the negotiation process being very different to that of implementation, both need multi-stakeholder participation. She also highlighted that there are often practical considerations, in particular that of funding, regarding the sustainability of these organizations. 5

6 SESSION 3: DEFORESTATION AND FLEGT Chair: Hugh Speechly, DFID The third session of the meeting concentrated on deforestation and links with FLEGT. The first presentation given by Duncan Brack, representing FERN, discussed demand-led reduction of agricultural deforestation and the options for the EU. The presentation outlined a proposal for an EU action plan on Demand-Related Agricultural Deforestation (DRAD), for which the potential of a range of measures is being assessed. To reduce consumption, possible measures include improving resource efficiency, tackling food waste, the removal of agricultural subsidies, in particular those for food crop biofuels, and consideration of the role of biomass as an energy source. Measures to promote sustainable consumption include public procurement and the use of tariffs, while the private sector can be encouraged to take action through requirements on corporate reporting. The need for existing FLEGT instruments to deny market access to illegal conversion timber was highlighted, as was the potential role of legislation such as the EUTR and VPA-type agreements for forest risk commodities. Further, it was noted that the inclusion of more extensive provisions related to sustainable development in free trade agreements and bilateral investment treaties should be considered. To conclude Brack expressed his hope for an action plan on agriculture, forests and trade, to trigger a process similar to FLEGT. The second presentation of the session given by Clare Brogan, theidlgroup, considered the potential of addressing forest conversion through VPAs, presenting the findings of a report commissioned by Forest Trends. This report assessed the extent to which conversion timber was covered in the legality definitions of the six VPAs concluded to date. In all countries, the legality definition includes provisions related to forest clearance practices (for example, the payment of taxes or implementation of environmental impact assessments), and in most cases, the process of permit allocation for forest conversion is also covered. In the Central African Republic and Republic of Congo conversion timber cannot be given a FLEGT license. It was highlighted that forest conversion had not been an issue during the VPA negotiations of most countries, the reason why it was not comprehensively covered by some of the legality definitions. Further, the VPA has provided a space for further dialogue about how best to deal with the issue of timber from illegal conversion, and this includes the potential to revise the legality definitions to cover such timber. The final presentation of this session was given by Thomas Sembres from the EFI REDD Facility, focusing on possible approaches to tackle deforestation from agriculture. It was noted that if demand- and supply-side measures are combined, then there will be a better chance of triggering sector transformation and so addressing the drivers of deforestation. Ivory Coast was presented as a case-study. Economic analyses have been undertaken to determine the costs and benefits of decoupling agriculture from deforestation, focusing on a number of key agricultural commodities. Such decoupling could be achieved through investment in improved agronomic practices and land-use planning for example, and the findings indicate that the costs of this would be recouped after six years. The importance of demand-side signals was highlighted in increasing profits from such an approach (for example, through the payment of premiums for low-deforestation products), and so tipping the balance in its favour. Sembres outlined opportunities for exploring the applicability of the FLEGT approach to agricultural commodities, including the development of legality definitions and licensing schemes for these commodities, as well as the integration of monitoring systems for timber and agricultural supply chains. 6

7 The first question related to whether illegal conversion timber could potentially undermine the EUTR or the VPAs, if these instruments were not able to stop the trade in such timber. In response it was highlighted that whether this was the case would depend on the type of illegality. Some aspects, for example tax avoidance, may be addressed under FLEGT licensing. However, for those aspects not included within the legality definitions, then timber in breach of these could be licensed and so could be imported into the EU. Brogan reiterated that the scope of the legality definition is dependent on the national stakeholder processes, and could potentially be revised. Another participant suggested that if the FLEGT approach were applied to tackling the drivers of deforestation this would be a form of colonialism by the EU. In response Brack commented that the EU had a significant role in driving consumption, and so had the responsibility to start a dialogue to consider policy solutions to address agricultural driven deforestation. SESSION 4: MEKONG REGION AND SOUTH EAST ASIA Chair: Emily Fripp, Efeca Session four took a regional perspective and focused on the Mekong region and South East Asia. The first presentation, given by Luca Perez, from DG Environment, European Commission, offered a regional overview and update. The involvement of the ASEAN countries in the FLEGT process reflects the growing timber trade within the region, as well as that to China and India. A number of countries have become engaged in VPAs, with the Indonesian VPA signed in The summary of their progress is as follows: Indonesia: FLEGT licensing will be based on the timber legality assurance system (SVLK) but some amendments to this are needed so that it is consistent with the VPA. Ensuring adequate coverage of small-scale producers and processors by the system remains a challenge. Malaysia: negotiations are on-going to finalize the legality assurance system for Sabah and Peninsular Malaysia. Sarawak is maintaining its position of joining the scheme at a later date, which presents the challenge of segregating its timber within the licensing system. Vietnam: the stakeholder consultation on the legality definition continues. The question of how to verify the legality of imported timber is a key issue to be resolved. The aim is to conclude negotiations in October Laos: workshops have been held in 2012 and 2013 and preparations are underway for the first formal negotiation session. Major challenges to be overcome include ensuring effective civil society participation, addressing human rights, and the issue of largescale forest conversion. Thailand: negotiations were launched in September 2013 and a working group has been set up to develop the draft legality definition. Major challenges include imports of rubber wood, and addressing the needs of smallholders and community forestry. Cambodia, Myanmar and the Philippines were also discussed; however progress in these countries has been limited. The challenges and opportunities in the region were discussed. The changing context in which the VPAs are situated, for instance the growing domestic market and human rights concerns, remains a challenge. However the increasing involvement of civil society in these new democracies presents an opportunity to address these challenges. The next presentation, given by Allison Lewin of The Nature Conservancy, focused on the Responsible Asia Forestry and Trade (RAFT) programme. The RAFT programme, which is funded by USAID and AusAID, aims to bridge the gap between market and policy signals for sustainable 7

8 forestry and trade. Key trends in the region were highlighted, these include the Indonesian VPA, the policy and market signals favouring legal and sustainable timber, and the REDD+ process. China s increased awareness of illegal logging and the development of its timber legality verification system was also noted. RAFT s next steps include work to improve development planning and forest licensing processes and to increase transparency and accountability in the trade in commodities. The final presentation was given by Jago Wadley from the Environmental Investigation Agency (EIA). Undercover investigations have found evidence of the illicit trade of timber from Laos to Vietnam. It was highlighted that opaque exemptions to export restrictions have become widespread, and consequently Laos receives little official revenue from the timber it produces. This timber is being processed in Vietnam into furniture and exported into the EU. This raises serious concerns regarding Vietnam s Timber Legality Assurance System (TLAS) under development for the country s VPA. This does not adequately cover imports and there are loopholes regarding hammer marking for proof of legality. The continued involvement of the military in the timber industry, which has been outlawed, was also highlighted. Another issue discussed was rosewood smuggling from Thailand, Cambodia and Laos through Vietnam into China. In conclusion, Wadley highlighted how these concerns present a challenge for credible VPAs in the Mekong region. The issue of the risks to the integrity of a VPA with Vietnam was raised by a participant. Perez responded by recognizing these risks but noted that the development of other VPAs in the region would be important in reducing the trade in illegal timber. Wadley also highlighted the importance of a Vietnamese VPA to put pressure on Laos and other producer countries to take action. Another question related to the informal sector and the extent to which the European Commission has a role to play here. Perez highlighted the need to strengthen law enforcement in countries where the informal sector makes up a high proportion of the industry, also noting that it was vital to ensure that the VPA does not negatively affect the informal sector. A further question related to the gap between the EUTR and Lacey Act and what is happening in producer countries. Lewin responded by emphasizing the increasing response by the private sector to this legislation. Wadley contended that these policies do have an effect on the ground as they set up the infrastructure for change. Perez also maintained that the EUTR provides the momentum for change and that there are indications of shifts in the EU market in response to the regulation. SESSION 5: ENFORCEMENT OF THE EUTR AND THE LACEY ACT Chair: Alison Hoare, Chatham House Session 5 focused on enforcement of the EUTR and the Lacey Act. The first presentation, given by Davyth Stewart of INTERPOL, outlined the lessons from project LEAF (Law Enforcement Assistance for Forests). Project LEAF, which is funded by NORAD, has numerous functions: providing criminal intelligence for police, capacity-building and supporting law enforcement operations. Recent capacity-building has included training in jungle survival and the use of geoprocessing tools in Brazil, and training on the collection, management and sharing of intelligence on forest crimes in Indonesia. The challenge of effective enforcement of the EUTR was highlighted, as much of the illegal timber entering the EU has the correct documentation. The role of NGOs was highlighted in identifying illegal timber and high-risk shipments. However, the need to tackle the issue at source was noted, through providing capacity-building for law enforcement in producer countries. 8

9 The next presentation was given by Kate Horner of the Environmental Investigation Agency (EIA). This focused on the findings of recent investigations into the timber trade between the Russian Far East, China and the United States. EIA s report Liquidating the Forests highlighted a vibrant timber industry in the Russian Far East, but one overrun by timber mafias. Undercover investigations have highlighted the extent of illegality in the region, including harvesting outside of concessions and collusion between companies and corrupt government officials. The role of Chinese companies in the region was outlined, who are key players in the production of hardwood flooring, much of which is exported to the United States and Europe. The case of the US firm, Lumber Liquidators, was described. This company has imported timber to the United States originating from the Russian Far East, and it is being investigated for suspected violations of the Lacey Act. In conclusion, it was highlighted that the Russian Far East should be considered as a source of high-risk timber and that further reform of key timber markets was needed. Further, effective enforcement of the Lacey Act and EUTR was essential to encourage importers to proactively source legal products. The final presentation of the session, given by Danielle van Oijen of Greenpeace, focused on recent investigations conducted into timber imports to Europe from the Democratic Republic of Congo. The implications of their findings for enforcement of the EUTR and CITES were outlined. The scale of illegal logging and corruption in DRC s forest sector has been widely reported and concern was raised that wood from this country is not being considered as high-risk, either by the private sector or enforcement officials. Two recent cases of suspect imports of timber were described, outlining the irregularities in documentation that had been found. The difficulties of implementing effective due diligence were noted, in light of the fact that official documents cannot necessarily be taken as evidence of legality. The private sector, with the help of timber federations, needs to fully understand their obligations under the EUTR. Further, a call was made for enforcement authorities to make further use of substantiated concerns and the expertise of NGOs. A comment was made noting how even the best efforts on enforcement can be jeopardised by a lack of information on high-risk country sources. In response, Horner stressed the importance of extensive collaboration between those involved in enforcement. Stewart underlined the need to ensure a common understanding of due diligence, also noting that in countries such as the DRC and Cameroon, where local law enforcement is often limited, more sophisticated investigations to determine legality should be employed. Another participant enquired about the role INTERPOL can play in supporting the competent authorities for the EUTR. Stewart stated that INTERPOL works with governments to notify them of high-risk shipments. He was also asked how INTERPOL can monitor money laundering in the forest sector. Stewart gave the example of Indonesia, where Interpol has been working with the anti-corruption agency to support their investigations and it was noted that this country has made significant progress in tackling corruption and bribery. SESSION 6: COMPLYING WITH THE EUTR CHALLENGES AND OPPORTUNITIES (1) Chair: Duncan Brack The sixth session of the update meeting focused on the opportunities and challenges of complying with the EUTR. The first presentation by Jade Saunders of Chatham House considered the role of certification for EUTR compliance, focusing on the furniture sector. This sector is at particular risk of illegality because of the complexity of the supply chains. The level of certification in the furniture 9

10 sector was outlined, although it was noted that there is a lack of data on the total volume of products being certified under the different schemes, an issue which needs to be addressed. There are relatively low levels of PEFC certification in manufacturing countries, and limited coverage of FSC Chain of Custody (CoC) certification in South and South East Asia, with the exception of China, Vietnam and Japan. Certification schemes can facilitate compliance with the EUTR as they entail the collection of relevant information about the timber and supply chain that is needed for risk assessment. However there are limits to this, for instance, the certification schemes cannot take responsibility for risk assessments; rather this must stay as an obligation on the operator. It was also highlighted that the EUTR increases the risk of fraud in certification schemes, particularly if it is considered as offering a green lane for imports rather than just as part of a broader risk assessment process. The need for further investment by certification schemes to ensure the credibility of their systems was highlighted. Furthermore, it was emphasized that the EUTR competent authorities must clarify to operators the role that certification can play as part of their due diligence obligations. The next presentations were given by John Hontelez from the Forest Stewardship Council (FSC) and Alun Watkins from the Programme for the Endorsement of Forest Certification (PEFC), responding to Saunders presentation. Firstly, Hontelez stated that Saunders had given a fair representation of the challenges and opportunities of certification. The complementarity of FSC and the EUTR was highlighted, as legality is an essential step towards sustainable forest management, and the FSC has developed a number of advice notes on EUTR requirements for FSC certificate holders. To address fraud within the FSC, certified bodies are accredited and controlled by one global, specialized body, Accreditation Services International (ASI). It was noted that special attention should be given to high-risk countries and that operators need to address the threat of external fraud through vigilantly assessing certificates and claims. Secondly, Watkins stated that the report was fair but wanted to address some messages he considered confusing. He noted that the numerous steps involved in the PEFC certification process must be independently audited, and legitimate and valid certificates must be ensured by all actors involved in the supply chain. The PEFC standards have been revised to align with the EUTR. Fraud risk is not a concern for PEFC at present as this scheme mostly operates in low-risk countries, however this may change in the future. Watkins highlighted the issue of mixing certified and uncertified into one product, noting that any uncertified material has to meet the definition of non-controversial sources. These assessments are audited by a third-party independent certification body. He therefore stated that no timber from illegal sources should be placed on the market through a PEFC chain of custody system. The final presentation was given by Nick Sammons, Carnstone Partners, who presented the findings of a survey conducted to determine the private sector response to the EUTR in its first eight months of implementation. There were 80 respondents to the survey, the majority of whom were manufacturers and retailers from Europe. It was found that most respondents are applying blanket due diligence across all their product lines, not just for those that fall under the EUTR. In some cases, product lines have been discontinued and manufacturers have shifted to suppliers that can provide due diligence information. Obtaining information was flagged up as an on-going challenge particularly for composite materials. A quarter of respondents had taken on new staff to support their due diligence efforts, highlighting the resource implications of the EUTR. Looking forward, there is the need for further improvements in transparency from suppliers and better communication across the supply chain. A participant raised concerns over the extent to which certification could be relied upon for EUTR compliance. Saunders responded by stressing that buyers need to fully understand their supply chain and the process involved in buying credibly certified wood. Watkins highlighted that PEFC provides the tools for operators to mitigate risks. In response to a question related to assessing 10

11 risk, Hontelez emphasized that FSC certified products are low-risk provided they have gone through the rights steps and audits. It was noted by another participant that the distinction between high and low-risk countries is not made in the EUTR. Sammons was asked whether the survey had found retailers substituting timber products with nontimber products, but Sammons stated that this was not the case, instead retailers sought different suppliers. Finally, one participant reflected that the presentation painted a very positive picture; Sammons responded by highlighting that the survey was self-selective and may not be representative of the whole industry. SESSION 7: COMPLYING WITH THE EUTR CHALLENGES AND OPPORTUNITIES (2) Chair: Bernard Crabbé, European Commission The final session of the update meeting focused on the opportunities and challenges of complying with the EUTR for small-scale producers. The first presentation, given by Rachel Butler, an independent consultant, discussed this issue from a European trade perspective. Butler highlighted that the private sector is dominated by small and medium sized enterprises (SMEs). They typically have a lack of understanding of major markets and limited access to resources and finance which makes legality verification and sustainability certification difficult. These challenges have meant that in some cases EU buyers are avoiding community forestry producers because they are considered higher risk. A range of projects and activities are being put in place to assist SMEs, including initiatives to support SME federations and the development of systems to facilitate the sharing of information. A call was made for more targeted capacity-building for SMEs, and the need to explore alternatives to certification or verification to reduce the risk of illegality amongst small producers was highlighted. The next presentation, given by Duncan Macqueen from IIED, discussed the challenges of legality verification for small-scale and community forestry, for which the term locally controlled forestry was used. Locally controlled forestry is characterised by insecure forest rights, a lack of business capacity, little bargaining power and resource grabs. The potential of the EUTR to benefit locally controlled forestry was explored through a rights-holder perspective. Using this perspective four issues were highlighted that FLEGT would need to address: tenure; business support; technical extension; and how to organize to strengthen these first three. It was suggested that the current FLEGT approach is best suited to address tenure issues and enforcement, but less so the other elements. A FLEGT+ approach was proposed that could also address these others, for example, strengthening producer associations, developing business models and brokering partnerships between producers and financial institutions. The case study of locally controlled forestry in Myanmar was used to illustrate how associations can help forest businesses to flourish and so can be important for poverty eradication. However, it was noted that such schemes are time consuming and capital intensive. The final presentation was given by Andrea Johnson from CATIE. This focused on identifying and overcoming barriers to legality for community-based SMEs using a value chains approach. This approach seeks to identify and fix bottlenecks that are preventing small producers and community businesses from benefiting from the sale of their forest products. Johnson stressed the importance of creating strategic partnerships for technical assistance along the supply chain and between producers and service providers. The barriers faced by SMEs were outlined, noting that the largest of these often have little to do with legality but relate to competitiveness and finding the capital to scale up production. These barriers existed before the EUTR and Lacey Act, so it is important to diagnose and understand them. 11

12 Some examples were presented to illustrate the impact of legality requirements on SMEs. In Nicaragua, charcoal producers without formal registration of their land rights were subject to penalties and so could not operate on the formal market. In Guatemala, complex export processes resulting from requirements for legality verification resulted in delays, with negative impacts on small businesses. It was highlighted that SMEs are well positioned to supply legal timber, and so meet the requirements of the Lacey Act and EUTR, because of high levels of traceability in their supply chains and the potential to establish long-term alliances between producers and buyers. Johnson also noted that many small businesses operate in areas of high biodiversity and high poverty. It was recommended that further work be done to understanding the impacts of informality on small producers, to identify bottlenecks in supply chains and to create platforms and alliances connecting small producers with buyers. One participant highlighted that many of the SMEs in Indonesia are certified despite the costs outlined in the presentations. In response Macqueen emphasized the enormous potential for smallholders in Indonesia to fill the timber supply gap, but stressed the importance of financing these organizations so that they could maintain this growth. Another participant questioned how knowledge and experience could be translated into practical solutions for the industry. In response, Butler stressed the importance of having clear information, for example, the need for a common understanding of the EUTR. Another participant queried whether the EUTR had taken attention away from the VPAs. In response Butler stated that there is more focus on the EUTR in part because the VPA is voluntary but the two are interrelated. There was discussion of the risk-based approach. Macqueen noted that different approaches should be adopted for large-scale corporations compared to cooperative, locally controlled organizations in risk-assessments, as the latter typically are lower-risk. 12