Cashing in on natural capital

Two recent events further highlighted just how under the spotlight timber is on deforestation and how much it has to do to ensure it’s not implicated. One, however, had a subtle difference. Its focus was also on the business positives that could result.

At the Chatham House Illegal Logging Update conference last week the focus was very much on eco hoops that have to be jumped through. The key topic of discussion was the EU Timber Regulation (EUTR), which will make it obligatory for companies that ‘first place’ timber on the EU market to undertake due diligence risk assessment of their suppliers to ensure they’re not handling illegal material.

The EUTR comes into force on March 3 next year, and what the Chatham House event highlighted was just how much work there is still to do. All 27 EU countries still have to incorporate it into their laws and decide how they’re going to police it. They must also each decide on penalties for breaches, which may, in turn, lead to the EU stepping in to level the playing field if their sanctions vary widely.

Under the Forest Footprint Disclosure initiative (FFD), which aims to harness business behind the battle against deforestation and which just launched its third annual review, companies also have go the extra mile to prove their raw materials are sustainably sourced. But besides the eco imperatives and moral issues, its stress is the potential commercial benefit that can accrue for companies that get involved.

Each year the FFD sends questionnaires to businesses worldwide asking about their use of and sourcing policies for ‘forest risk commodities’, including timber; in effect their efforts to minimise the danger of being involved in deforestation. The results are then analysed and published in the review, with the top performers in different industries highlighted as ‘sector leaders’.

According to speakers at the latest review launch, the increasing buzzwords in the business world, particularly the financial sector, are natural capital. That’s the perceived value in an ever more eco aware global market, of a business’s environmental footprint.

Its initiative, says the FFD, provides a tool to help companies assess and promote one critical aspect of their natural capital. What is more, said FFD director James Hulse, with its experience of environmental certification and chain of custody systems, the timber industry is among the best equipped to take part in the project. In fact, it is already one of the top performers in terms of returning FFD questionnaires and this year provided two ‘sector leaders’ in Stora Enso and DLH.

He also said that participation in such initiatives would be more valuable still in the future, with investors set to make even greater use of natural capital information to benchmark companies and make investment decisions. Underlining this was the fact that the FFD now has 70 financial sector endorsers with US$7 trillion of assets under management.

Going back to the EUTR, the good news is that the industry does seem to have got to grips with the issue of due diligence risk assessment, with the UK Timber Trade Federation already making it obligatory for members in the form of its Responsible Purchasing Policy. The better news is that when the final EUTR wrinkles are ironed out, it will leave the industry even better placed to cash in on its natural capital.