BVRio launch the Responsible Timber Exchange
Rio de Janeiro, 23 November 2016 – BVRio Environmental Exchange has launched the Responsible Timber Exchange, a trading platform to assist traders and buyers of timber in sourcing legal or certified products from all over the world.
The platform is integrated with a Due Diligence and Risk Assessment System, to facilitate the screening of timber products and their supply chains. See video (www.youtube.com/canalbvrio).
The objective of this initiative is to facilitate the procurement of responsible timber products in an efficient, cost effective and secure way, increasing liquidity, supply and demand for this market segment and helping to promote transparency, legality and sustainability in the timber sector.
Through a series of partnerships, the platform will also enable users to contract for a variety of additional services to aggregate value to each transaction. These include grading and quality control, field audits and due diligence, receivables finance, insurance, logistics and export.
The platform will be particularly useful to buyers and traders operating in Europe and the US, where they have to ensure compliance with the EU Timber Regulation and the US Lacey Act, reducing their exposure to illegal timber trade.
The platform is ready to allow the screening of responsible timber products from the Brazilian Amazon, Indonesia (based on the newly issued FLEG licenses), as well as certified products (FSC and PEFC) from all over the world. While the system was originally designed for Brazilian timber, with the support of the UK government it is already been adapted to enable the screening of responsible timber from West Africa (starting with Ghana) and Peru. Products from other sources can also be found in the Exchange, and users will be able to contract for due diligence services through the platform.
In the case of products from Brazil, users can conduct their own screening using BVRio’s Due Diligence and Risk Assessment tools (see below).
About BVRio Due Diligence and Risk Assessment tools
BVRio’s Due Diligence and Risk Assessment tools (www.bvrio.org/timber) were designed to assist traders and buyers of tropical timber in verifying the legality status of the products purchased. Users can simply scan the bar codes of Timber Transportation Permits and receive a report on the legality status of the product checked. The system is initially focused on compliance with Brazilian laws. See video here.
The system is based on big data analysis and conducts more than 2 billion crosschecks of data daily. Since their release in 2015, the tools were used by traders and environmental agencies worldwide, to screen thousands of timber shipments.
These apps will be particularly useful to buyers operating in Europe and the US, where they have to ensure compliance with the EU Timber Regulation and the US Lacey Act. Given the high risk of timber illegality in Brazil (it is estimated that more than 50% of Brazilian timber comes from illegal sources – see BVRio’s report on Big Data and Timber Legality, the use of these apps assist buyers in estimating their risks and avoiding exposure to illegal timber trade. Each consignment of wood products can be assessed individually according to its chain of custody, estimating the probability of risks related to social and environmental infractions.
This verification and due diligence process starts with the analysis of documentation provided for the Brazilian government’s DOF and Sisflora Systems (document of origin of timber products). Information gathered is crosschecked to detect any inconsistencies with internal and external databases, including satellite imagery analysis (including analysis from WRI’s Global Forest Watch, and Brazilian NGOs Imazon and ICV) and official databases of infractions of environmental legislation, slave labour, illegal deforestation, environmental infractions, and tax compliance.
About the illegal trade of tropical timber products
This initiative was developed with a view of promoting the responsible trade of tropical timber. A significant barrier for the expansion of the production of sustainable and/or certified timber, however, is the unfair competition posed by illegal operations. Interpol estimates that between 50 and 90% of all tropical timber are from illegal sources, with lower production costs and no tax. This lower cost structure enables them to displace the legal sources in the market, resulting in financial difficulties for the companies involved in legal and/or certified sustainable production. Brazil is considered a high risk country in terms of illegal timber extraction, and this is affecting the markets of timber from this country. Indeed, there has been repeated cases of timber illegality reported by NGOs or the press in the last months (see footnote for examples).
About the Responsible Timber Exchange
BVRio Responsible Timber Exchange is a negotiations platform for legal or certified (i.e., FSC) timber products integrated with a due diligence system and supply chain tracker, allowing traceability of timber products from source of production to final buyer, providing transparency, efficiency and liquidity to this market. The system was designed to facilitate compliance with the requirements of the EU Timber Regulations and the US Lacey Act.
A trading platform with in-built due diligence and traceability systems
BVRio’s Timber Exchange is a simple and efficient trading platform with internal due diligence functionalities. It includes a supply chain traceability system to verify the legality of products negotiated, while ensuring its main purpose to approximate producers and buyers of legal timber products in a transparent and safe environment.
A due diligence system, from the forest to the trading platform
BVRio due diligence system consists of a framework of procedures and measures designed to assess the compliance with the applicable legislation and to identify evidences of fraud and illegality. The due diligence system covers the whole supply chain, assuring the traceability of the timber. All information and documentation are stored and made available for independent auditing.
Adding credibility to the DOF System of the Brazilian government
The due diligence starts with documentation provided for the Brazilian government’s DOF System (Document of Origin of Timber Products). Information gathered is cross-checked to detect any inconsistencies, including spatial satellite imagery analysis and verification of databases of infraction of labour legislation, illegal deforestation, environmental infractions, and tax compliance, possibly complemented by spot checks and field audits, verifying the legality of timber products.
Building on Brazilian experience
The Timber Exchange was developed by Rio de Janeiro’s Environmental Exchange BVRio in consultation with a range of buyers, producers, auditing companies, supply chain experts, NGOs, and government agencies in Brazil. BVRio has vast experience in building and operating environmental markets in Brazil.
The Exchange benefits from input from an Advisory Board with the participation of the following organisations: Imaflora (Brazilian FSC certification NGO), Imazon (Pará-based NGO), Instituto Centro Vida (ICV, Mato Grosso based NGO), WWF Brasil, WRI – World Resources Institute Brasil, and Amata (Brazilian FSC certified timber products company).
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