SEAL. FSC certification represents a high standard in timber sustainability, but has also been awarded to companies investigated for illegal logging.

The cracks of the world's largest timber certification company impact the Amazon

The cracks of the world's largest timber certification company impact the Amazon

SEAL. FSC certification represents a high standard in timber sustainability, but has also been awarded to companies investigated for illegal logging.

Photo: OjoPúblico / Marco Garro.

The Forest Stewardship Council (FSC) labels are present on hundreds of forest products we consume daily, which claim to be legal in origin and sustainable. But their audit systems certifying their customers have shown flaws around the world, even in Latin America, where companies investigated for timber trafficking and exporting timber of illegal origin show their green label. Vices and problems of a control system traversed by millionaire interests. One of OjoPúblico journalistic teams investigates the issue in the Amazon and in Europe.

30 Enero, 2022

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Gerlin Ramirez Santana (43), President of Comandancia, speaks with the same calm found in this Amazonian community of Peru where today 37 families of the Yagua people live. Only the boats travelling along the Amazon River interrupt that tranquility. Gerlin and its neighbors watch, between January and June each year, the river transit of hundreds of old tree trunks extracted from the primary forests and which end up meeting the demand for wood in the world's major cities. 

“I don't know what Inversiones La Oroza is. It's something new for us. You just brought me that name,” Gerlin Ramirez replies to OjoPúblico. This company, with concessions near Comandancia, was involved in the Yacu Kallpa case, the largest seizure of illegal timber that occurred in 2015, when a vessel intended to take the merchandise to Mexico and the United States. As a result of this intervention, La Oroza is currently under investigation for timber traffic in Peru and has been banned since 2017 from entering its merchandise into U.S. territory.

But all this background is new to the inhabitants of Comandancia. Farther away is the existence of an organization engaged in certifying wood, the very product that allows them to subsist precariously. The Yagua people and their neighbors in the communities of Santa Ursula and San Jose de Topal have not heard about La Oroza, and least about the Forest Stewardship Council (FSC), a global organization that issues labels to certify that wood used by companies and organisms is “clean.”

Both La Oroza and FSC were the main characters in this key case for the illegal timber trade in the Amazon. In September 2021, the environmental prosecutor's office in Maynas, in the Amazon region of Loreto, filed, in the context of the Yacu Kallpa case, a complaint for illegal trafficking in Peruvian timber against 90 businessmen and officials of the Loreto regional government. Of the 35 files that were submitted and have not been scheduled for oral hearings yet, Inversiones La Oroza, owner of 80% of all timber seized in 2015, has been included in 15. 

Despite being involved in this fiscal process, in May 2021 FSC wood certifier renewed the clean wood label for La Oroza until 2026. This is a label that guarantees that the origin respects the environment, human rights, and indigenous peoples.

From an office in Bonn, Germany, FSC has in recent years become a key player in the worldwide marketing of timber, including theoretically authorized logging operations from the forests of the Amazon, Africa, and Indonesia to Siberian forests. It is a body composed of environmental activists, civil environmental organizations, and companies in the industry that issues certificates after an audit process, to ensure that the timber produced by a company is sustainable. 

The FSC logo, a nice drawing of a green tree, has inundated the labels of hundreds of products on supermarket shelves. From soft drinks to school notebooks and toilet paper to garden tables. That label has become a shield for large multinational companies to tell the world that the wood they are using does not come from illegal logging or deforestation. Green labels have also become a good business: FSC recorded revenues of US$ 44 million in 2020, according to its own financial balance sheet.

FSC Interna 1

IGNORANCE. In the Yagua community of Comandancia, in Loreto, they do not know which companies operate around their territories and they have not heard about FSC certification.
Colegio Comandancia
SERVICES. Life in the community of Comandancia (Loreto) goes on without potable water or a telephone network. Electricity requires external batteries. 
Photos: OjoPúblico / Marco Garro. 

But, as in the case of La Oroza, several companies are under investigation for wood trafficking despite having the FSC acronym in their products and have been sanctioned or accused of using timber from illegal logging. Other certified companies have also been reported for persecuting local inhabitants or accused of entering into agreements with governments who do not respect human rights. As in Peru, the cases are repeated in Germany, Russia, Romania, Ukraine, and China, among others.

The gaps in the FSC certification system, which in many cases has allowed companies to cover up wood of illegal origin, have raised concerns in recent months among civil organizations and activists. In November 2021, 34 European NGOs called for urgent structural changes in FSC audits, accused the organization of encouraging deforestation and confusing consumers by using different labels. 

“Green certifications are more important than we believe. In rich countries, the authorities look at these labels and are content that everything is legal. But these labels make false promises to the consumer. Today, we are talking about timber, but tomorrow many other goods coming from deforestation, such as beef or soy, could also be accompanied by these false sustainability certificates,” Tara Ganesh, Earsight researcher, told OjoPúblico.  

Earthsight, along with other organizations such as Greenpeace and the Environmental Investigation Agency (EIA) took a step further by stating that, with the current certification process, FSC functions as a washing machine for wood manufacturers and large brands that use products whose legal origin cannot be guaranteed. But the future of the world’s most important timber certifier, a case being debated at the desks of European capitals, has direct implications for the trees of the Amazon and in many protected areas of our continent.

“FSC has the best wood certification system in the world, undoubtedly. We are taking action to improve our system, which is constantly improving. We are heavily investing in technology to become more assertive. Since 2015, we have made tremendous progress, and that is because we have been devoted to improving,” argued Bruno Rath, FSC director for Latin America, in an interview with OjoPúblico.   

The cases of companies sanctioned for using wood of illegal origin, despite having the green label, have multiplied in recent years. An example? German justice last April sentenced entrepreneur Stephan Bührich, general director of WOB Timber GmbH, and several of his employees for illegal imports from Myanmar's forests. The executive was sentenced to 21-month imprisonment on parole, and the company was seized more than 3.3 million euros for 31 exports from the Asian country. WOB Timber imported teak, a wood that is mainly used to furnish luxury yachts.
WOB Timber, FSC certified until May 2022, not only imported wood from Asia. While Bührich was hearing his sentence, his company was importing a shipment of wood from the Amazon, according to Customs records consulted by OjoPúblico. Between February 2020 and September 2021, the German company shipped over 39 tons in six loads of sawn timber purchased from Mil Madeiras Preciosas Ltda., based in Brazil's state of Amazonas.

The Brazilian timber company, which is part of the Swiss group Precious Woods, registers two FSC chain-of-custody certifications, one valid until November 2022 and the other until August 2024. "Is the wood imported by WOB Timber from the Amazon, which is certified, 100% sustainably sourced?" asked OjoPúblico. Far from a certainty, FSC responded that the organization does not have "specific information on this case."  

"FSC has only certified 2% of Latin America's forests. The approach is wrong: the risk is in the remaining 98%, which is left to drug trafficking, cattle ranching, soy and illegal mining. That is the real risk. That 98% without certification has no protection. From FSC we need to bring together more public and private actors, we need to make agreements with governments. That is the concern that keeps me awake at night," said Rath.

How the green label work

FSC, the world's most important wood certification company, is a civil association incorporated in Mexico, but based in Germany. The organization consists of three areas: business, social, and environmental. Each of them elects four representatives who make up the 12 members of FSC's international board. Latin American the majority in this group of leaders who make the most important decisions of the organization.

In turn, FSC has chapters in several countries. Alfredo Biasevich Barreto appears on FSC Peru's board of directors, for example. This lawyer is also chairman of the timber committee in the National Society of Industries, a position from which he has rejected the possible inclusion of shihuahuaco in the list of endangered species, although scientists have warned that this tree is in danger of disappearing. 

How does FSC work in practice? The organization relies on a group of auditing companies made available to companies wishing to certify their wood. These companies must then hire the auditors to conduct the corresponding inspection. In some cases, the review is physical and detailed, but in others — depending on the type of certificate required — only the legal documentation is reviewed.

The financial modality on which the FSC system rests has been controversial since its inception. “The recent scandals showed that there is complicity in relationships and intentional blindness of auditors as has been revealed in the failure of the existing mechanisms. This creates a serious conflict of interest and weakens the integrity of FSC's core process: auditing. The organization must consider in a meaningful, fair, and open way new alternative financing arrangements,” the 34 NGOs claimed in their letter. 

In a favorable scenario, the requesting company receives the FSC label for five years with annual audits to verify compliance with the agreements. In addition, the certified company must make a periodic payment for keeping the license, which varies according to the size of the company. FSC keeps a percentage of that fee. If a company fails to meet the requirements, FSC may request new audits after the implementation of changes included in the rejected certification report.

“I insist, it is the best wood certification system in the world. The large number of our customers guarantees our independence. Auditors can deny a customer; nothing happens because we have many customers. We don't need any single customer in particular, no matter how big it is,” Rath argued.

FSC issues different types of certification worldwide. In Brazil, the first country in the region, there are more than 1,400 labels in force, and in Peru there are other 74, 28.3% of them awarded between 2020 and 2021. There are also 76 other certifications expiring between 2007 and 2021 in FSC records. The organization can deliver its label as part of the “Chain of Custody” modality, which proves that products used by manufacturers, processors, and traders are separated from non-FSC-certified materials. Most of the Peruvian certificates (56 cases) correspond to this kind of auditing.

There are 11 certifications in Peru for forest management granted to forest managers or forest owners who can prove compliance with FSC guidelines, after approving an assessment. And four other certifications belong to the category of controlled wood, granted to products whose origin are not FSC-certified forests but are verified to avoid wood from “unacceptable sources.” Products of this group may be combined with certified wood and in these cases carry a “FSC Mix” label. 

“The different types of certificates with different standards confuse the consumer even more, from "FSC 100%" to "Controlled Wood" to "FSC Mix", which can include non-certified wood,” the NGOs insisted in their letter, another of their claims to the certifier. 

For Julia Urrunaga, director of EIA in Peru, one of the flaws of this international label is that it has not focused on warning what happens in the forest or beyond what is certified to its members. “FSC should not allow companies to certify only a small part of their business and use it as a public relations strategy to cover up their normal business. This, in the medium and long term, can destroy the reputation of the label and companies that strive to do things well, will no longer want to have the same certification as illegal ones,” she told OjoPúblico. 

Once the certificates are issued, alarms go off. There are 614 cases of suspended labels in 69 countries. The listing is topped by India (91), Ukraine (66) and Vietnam (36). Brazil is the first in the region with 33 suspended certificates. In the same group, three belong to Peru and other 54 to Latin America (9.2% of the total). In the case of Peru, these companies are Wayra Impresión Digital, Amaz Home SAC and Concesión Sepahua SAC, the first two with domicile in Lima and the last one in the Ucayali region. All the companies were suspended in 2021 and their certifications were in effect until 2022 and 2024. 

Recorrido Comandancia
FOOD. Once a week, members of the neighboring communities of Comandancia and Santa Ursula cross the Amazon River to buy different types of smoked meat. 
San José de Topal
LEADER. Richard Delgado, president of the Yagua community of San José de Topal, farms his fruits and vegetables on a daily basis. 
Photos: OjoPúblico / Marco Garro. 

When consulted on the certification granted to Inversiones La Oroza and the investigation into the Yacu Kallpa case, FSC's office in Peru indicated that “the wood questioned did not come from certified areas, but that it was wood purchased from third parties and was also marketed as non-certified wood”. In insisting on the filters they handle to ensure sustainability at the origin of the wood, the local office indicated that “forest management certification” applied to a particular forest or forest area and not to the entire company.

In the case of chain of custody certification, according to the reply given by the FSC office in Peru, a “specific product” in the supply chain was certified and not “all products and supply chains of a company that are certified”. In other words, having this label does not guarantee that a company is not linked to illicit activities. 

Consorcio Maderero SAC and Grupo Vargas Negocios Amazónicos SAC, two firms related to Edgar Vargas Pulido, a businessman prosecuted by the Loreto's environmental prosecutor's office and Ucayali's organized crime prosecutor's office, also have FSC certifications in force.  

Rolando Navarro Gomez, specialist at the Center for International Environmental Law (CIEL), believes that all companies with certified forests have met FSC standards and principles. However, the problem is in the wood with unknown origin which companies purchase. “Let’s say that my company has a commitment to [commercialize] 100 thousand cubic meters of timber, but of that total only 20 thousand meters come from my certified forests and the rest from anywhere else. That origin is the controversy. There is where the FSC is not auditing,” he explained to this media outlet.

When the system fails

The last case that brought FSC back under the spotlight involves tons of illegally sourced timber from protected forests in Siberia, Russia, which were used as raw material for the production of Ikea furniture, the Swedish multinational present in most middle-class households in Europe. The irregularities that Russian tycoon Vengeny Bakurov's companies had allegedly committed were not discovered by FSC auditors, but by the British NGO Earthsight, who published the investigation last June.

The same happened with the Austrian company HS Timber Group. EIA revealed in 2015 that this FSC-labeled company bought timber from illegal logging in Romania, a case that reached the Congress of that country. 

“A fundamental flaw in the FSC system is that it does not appear to be designed to detect and punish infringements, but depends on external actors, in most cases independent NGOs. They depend on these organizations to discover illegality and other violations of their own rules,” pointed out Julia Urrunaga of EIA. 

“It is unusual to obtain a rapid and meaningful reaction from FSC to legitimate complaints. Cases in which FSC has become detached from certain companies have required enormous external and public pressure. What happens is that they usually suspend companies temporarily for infractions and lift the suspension once an accredited organization has determined that sufficient corrective action has been taken,” she added.

Rath chose to compare FSC's decisions with the justice process. "Let's see what happens in court: you are innocent until proven guilty. That is a fundamental principle. We are open to complaints and we take them very seriously, because they are not decisions that can be taken lightly. This seriousness may cause delays that may lengthen the process a little. But we have to be assertive and precise with the decision," he said.

The same was true of the emblematic case of illegal timber in Romania. After the issue became public, the German certifier suspended the HS Timber Group license, but a few years later, last November, FSC announced that they would work together again because the company had been able to demonstrate changes that guaranteed the legality of their supply chain. The decision was condemned by different environmental NGOs.  

"We focus on the integrity of our value chain and we expect more companies, volume and forest area to be protected. Something like this [Inversiones La Oroza in Peru] is the case of HS [Timber Group] in Romania. It's a story of positive change: a company that disassociated and has reincorporated having implemented a good practice improvement path," Rath compared. 


Comandancia aérea FSC

LEGAL GAP. FSC certification has not been able to guarantee that all companies with this seal have no links to deforestation. 
Photo: OjoPúblico / Marco Garro. 

Despite this interpretation, cases such as HS Timber not only caused criticism, but organizations like Greenpeace left the certification company. “Companies use FSC as an excuse to import illegal timber. The problem here is that internal dispute resolution procedures are very slow,” said the Spaniard Miguel Angel Soto, Greenpeace timber specialist, to OjoPúblico. 

What is FSC's reaction when a company with their label sells wood of illegal origin? The response of the organization is slow and, in many cases, controversial, the specialists agree. Far away from the forests, the decision is played at the Bonn offices in Germany. The discussion cuts, in some cases, the three blocks that make up the board of the certifying company, but mainly focuses on the economic area, composed of companies with millionaire interests in timber commercialization.  

Latin American companies are the majority in the economic area, the most important when assessing business behavior. The representatives are Brazilian Ivone Satsuki Namikawa, related to Klabin. This is a Brazilian giant, the world leader in packaging paper exports with 24 factories in Brazil and 25,000 employees. Brazil is a key player for FSC in the region: It is the Latin American country with the most green labels with a total of 1,482 current certifications (another group of 33 are suspended due to possible irregularities).  

The other representative of the South American business world is Ralph Schmidt-Liermann, who works at the Uruguayan company Montes del Plata (Eufores SA), a forestry company engaged in the production of eucalyptus pulp. The company exports 1.4 million tons of cellulose per year. Schmidt-Lierman and his colleague Satsuki Namikawa are two key votes when FSC board need to define sanctions to companies around the world. 

“The problem is that for FSC the certified company has more credibility than the complaining party. It is evident that the organization is highly influenced by the business sector. Companies play with an advantage because the complaining party spends one or two years collecting evidence, and companies use that time to defend themselves. FSC should invest much more energy in solving the many conflicts there are. Thus, their reputation is deeply damaged as they do not solve them quickly,” added Soto, from Greenpeace.

Labels SA

FSC is a non-profit civil association, but that legal cover does not prevent it from increasing its income year after year. The certifying company is organized in Oaxaca, Mexico, but added five subsidiaries located in Germany (three of them), China and Malaysia. Of these companies, only FSC International Center (engaged in the world preservation of forest resources) is registered as a “non-profit” organization. The remaining ones were organized as businesses.

They are: FSC Global Development (dedicated to the licensing and trademark business of the certifying company) and Accreditation Services International GmbH (auditing of certifications), both registered in Germany. FSC Beijing Global Forestry Management Consulting (dedicated to forest management consulting) was registered in China, and Asia Pacific Sdn Bhd (evaluation of certifying organizations) in Malaysia.

The balance for the 2020 fiscal year, the last one available on-line, indicates that the income of the certifying company and its subsidiaries exceeded USD 44 million. More than 80% of what was collected corresponds to annual fees paid by the companies to keep their green labels. The increase in FSC income was gradual: the previous year it was USD 40 million and in 2018 it amounted to USD 37 million.

How much should each company pay for its certificate? OjoPúblico asked the question in an interview and then in writing, but FSC would not give a specific number. "The annual amount paid is a calculation made directly by the Certifying Body [the auditors], not FSC. This amount depends on multiple variables, including the type of certificate and size of the organization, for example. There is no average price," they explained. The certifier does not charge, but receives directly a percentage of each label issued.


Recorrido río

COMMERCE. Some communities in the Peruvian Amazon are dedicated to the sale of timber from their forests, but there are cases where they have been deceived by businessmen. 
Photo: OjoPúblico / Marco Garro. 

The balance sheet does not provide information on FSC's clients in China or in other countries in terms of consultancy. In this country, according to FSC data, there are more than 2,900 in force and more than 6,500 expired. "FSC Beijing Global Forestry Consulting is not a commercial office, therefore, it does not have clients as such. This FSC office groups the different stakeholders in China and the income it receives comes mainly from the parent company in Germany to support the local team and operation," the certifier said.

The central offices in Bonn, Germany, and the Chinese consulting company are now far away from the headquarters of the company, in Oaxaca, where the organization was born, some 30 years ago. This cabinet negotiations are even farther of the daily reality of the Amazon communities. Despite the importance of the raw material, wood, the deceits of the businessmen of the sector are repeated in Comandancia.

Encouraged by businessmen in the area, the residents of Comandancia carried out forestry activities based on personal permits obtained from the regional authorities in the sector. However, the ignorance and deceit of some of the area's businessmen -as Ramírez Santana narrates- had this community fined in 2012 for logging unauthorized wood in an area of their forests.

“We have depredated our forest ourselves,” expresses Gerlin Ramirez with resignation, recalling how different timber businessmen advised Comandancia for the population to obtain forest permits and extract wood from their forests. “We told the residents that they could sell 30 pieces, but in the end, as there was plenty, they multiplied that amount. That made the wood scarce." 

From the area surrounded by forests and a few meters from the Amazon River, where there is neither telephone network nor potable water, a group of workers load pieces of wood on board a boat whose final destination is unknown to the members of the Comandancia community. They only know that they will arrive at the port of Iquitos, capital of the Loreto region, but they are new to them and they also ignore if the company owning the wood is FSC-certified, a label that they say guarantees the sustainability of 2% of all the forests in the Amazon. 

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