2019-01-16 13:01:06

SHANDONG, East China — The pungent odor of formaldehyde fills the factory of Shandong Xingang Group in the city of Linyi. Few employees wear masks, despite signs saying they are required. Throughout the hall lie boxes adorned with tree-shaped logos, which should mean that the wood inside is certified by the international nonprofit Forest Stewardship Council (FSC) to have been produced under good labor conditions and come from sustainable forests.

But like so much timber that passes through China, their sourcing is unclear and likely anything but sustainable. “These are poplar and eucalyptus cores, but they’re not FSC-accredited,” a company manager explained, standing in front of a box sporting the FSC logo. “Everyone does it. We’re just following suit because of the market.”

Germany-headquartered FSC is one of the world’s most influential certifiers of sustainable forestry, having approved over 36,000 enterprises and over 195 million hectares of forests — an area roughly the size of Mexico. The organization began in 1994 and set up a series of standards to help global forests and the timber industry become truly green.

FSC has indeed discovered abuse of the logo.

In 2016, 22.6 percent of global industrial roundwood — a term for all wood aside from that used for fuel — was harvested in FSC-certified forests, according to the organization. In those areas, management should abide by local laws, respect local communities, promote its workers’ wellbeing, and not harm the environment, among other principles.

However, an investigation by Sixth Tone shows that, in China, the logo has become less a symbol of sustainability and more a tool for “greenwashing” — allowing illegally harvested timber to avoid scrutiny and enter global markets.

In 2018, Sixth Tone posed as an importer to Europe, visiting nine different Chinese enterprises of varying sizes, seven of which talked openly about supplying FSC logos and certification even though their goods don’t meet its standards. For the companies, the risk of being caught by European Union authorities is negligible, as neither regulators nor buyers bother to adequately check the authenticity of the certification they provide. According to company employees, European importers are aware of and even encourage such fraud.

A Fraudulent Veneer

As the world’s manufacturing hub, China is the biggest importer and consumer of wood products. Over 60 percent of tropical logs on the global market are imported to China. Much tropical wood comes from species which environmentalists consider at high risk for being logged illegally: Assessments by the United Nations Environment Program and Interpol suggest that 15 to 30 percent of timber traded globally has been illegally harvested — in tropical countries, this proportion could be as high as 50 to 90 percent.

Illicit timber trade is one of the most profitable forms of environmental crime. Tropical wood is often shipped to China from places such as Papua New Guinea or countries in the Congo basin, locations with dismal records of illegal logging greased by corruption and lack of oversight. As a result, endangered species, as well as the larger environment, suffer.

A large proportion of the wood China imports is processed and sold abroad. According to the most recent figures environmental nonprofit Forest Trends sent to Sixth Tone, China exported $36 billion of wood products in 2017. Of that, $5.1 billion was plywood — boards with a wide range of uses, consisting of thin layers of ordinary wood glued together and sandwiched between two sheets of veneer, much of it made from prettier tropical wood. China is the world’s largest exporter of manufactured boards, which include plywood, and 16.1 percent of all plywood exported by China goes to the EU, according to Forest Trends.

The Xingang Group is one of more than 6,000 companies in Linyi involved in plywood. It is an FSC-accredited processing enterprise, meaning it can sell FSC-certified products as long as it uses similarly FSC-certified timber for products. But the manager explained that there is too little FSC-certified timber on the market to meet supply, and more often than not, European buyers are not willing to pay for a logo. Sixth Tone tried repeatedly to contact Xingang for further comment, but was unsuccessful.

A representative at Jiangsu Hanbao’s processing factory in Xuzhou, a city south of Linyi in Jiangsu province, also pointed to a box of non-sustainably sourced plywood that was nevertheless printed with the FSC logo, due to be exported to Belgium. She said that European companies aren’t willing to pay more for legitimately sustainable timber: “[FSC-certified wood] is at least $20 to $30 more expensive per cubic meter.” The representative added: “We don’t recommend it, but we can print [logos] if buyers require them, although we explain that the responsibility will lie with the buyer.” The company claims to send more than 3,000 shipping containers of plywood all over the world, with customers across the EU. When contacted by Sixth Tone, Chen Ran, a trade manager from Jiangsu Hanbao, said all timber that was sent to Europe had been grown in China.

“FSC has indeed discovered abuse of the logo,” Ma Lichao, China’s FSC representative, told Sixth Tone. He said that the organization’s approach is to train buyers on how to make sure documentation is reliable and that companies who are found in violation of its requirements will have their credentials cancelled. FSC is also looking at blockchain technology to make it harder to falsify credentials. A recent, large-scale inspection in the Asia Pacific region focusing on charcoal and bamboo supply chains resulted in 39 companies having their certification terminated or suspended.

The FSC has strict rules on the use of their trademarks, at least according to their official documents. Timber products that use its logo should come from FSC-certified sustainable forests and have been made in certified factories that have satisfied strict requirements in areas such as labor and benefits. In theory, purchasing FSC-approved goods not only supports the legal harvesting of timber, but also helps to protect the sustainable development of forests.

But currently, when shipments of illegally sourced wood arrive in Europe, their forged FSC certifications help them pass customs. In 2013, the EU Timber Regulation, or EUTR, came into force, prohibiting companies from placing illegally harvested timber and products on the EU market and requiring the ability to trace such products back to their origins. Timber that does not meet this regulation is deemed to have been illegally harvested, and operators putting it on the market can be held financially and even criminally responsible.

There’s a lot of red tape for products going to the EU.

Experts see stricter regulation of timber supply chains as a potentially effective tool for eradicating illegal logging, as their influence would extend beyond borders. Better oversight in a country central to the timber trade would mean that any business wanting to enter the market must ensure that their products meet the requirements, Sun Sheng, a fellow with the Vermont Law School’s U.S.-Asia Partnerships for Environmental Law, explained to Sixth Tone.

China currently has no such regulations. It has only non-mandatory guidelines calling for enterprises to implement green supply chain management. This leaves a lot of Chinese companies who are in the middle of the supply chain at a loss when dealing with stricter foreign regulations: Neither their suppliers nor their customers comply, so how could they? They say forgery is often their only option to stay in business. Some small businesses whose FSC certification may have expired will provide a copy of the certification of larger companies in their contracts to ensure they don’t lose potential business.

Small Companies, Big Crimes

According to the manager of another Linyi company, Heyi Wood Co. Ltd., dealing with buyers from the EU is often a headache for plywood companies. It is much simpler exporting to developing countries where nobody cares where the timber comes from. “There’s a lot of red tape for products going to the EU,” the manager said in his office. The plywood his company manufactures also uses tropical wood veneers, but he’s unable to provide proof of the timber’s place of origin.

In order to try and win Sixth Tone’s “business,” the manager explained one trick. One Swedish customer requested the plywood be placed deep inside the shipping containers and exported alongside other non-tropical timber products. “There has never been any risk,” he said. “There hasn’t been a problem at their end, otherwise we’d have heard about it a long time ago.”

China’s plywood industry is divided into thousands of companies, each focusing on one step in the process. Heyi Wood purchases raw materials from a variety of small factories — many of which don’t have a business registration or even a name. “We’ll buy from whoever is selling veneer; it’s not fixed,” the company’s manager said. None of his suppliers know or care about how the timber was sourced. “They have no idea if it’s legal or not,” he said. When Heyi buys veneer, there’s only ever a sales contract. Apart from the timber’s country of origin, he’s unable to find out more information. Sixth Tone’s repeated attempts to contact Heyi for further comment were unsuccessful.

Workers make plywood in Xingang Group, Linyi, Shandong province, Jan. 16, 2018. Shi Yi/Sixth Tone

Workers make plywood in Xingang Group, Linyi, Shandong province, Jan. 16, 2018. Shi Yi/Sixth Tone

At one supplier, a mom and pop rotary-cutting plant, four or five machines are noisily slicing timber into veneer just a few millimeters thick. The wife of the couple who owns the shop thinks it strange to ask so many questions about where the wood comes from. “As long as it’s legal in China,” she chuckled, “why worry about anyone else?”

Some of the timber in Heyi Wood’s processing plant is marked with “TIL,” which stands for Taman Industries Limited, a company that operates in three large forest-cutting zones in the Republic of Congo. According to an investigation in 2016 by Resource Extraction Monitoring, an EU-funded independent watchdog, this company has been involved in unlicensed and excessive tree felling, tax fraud, and the cutting down of unauthorized tree species. There is a long list of similar logging companies operating in the Congo basin.

As long as it’s legal in China, why worry about anyone else?

Shortcuts to Europe

Although many plywood companies do a poor job of managing their supply chain, they still manage to sell their goods to Europe. Companies come up with different ways of dealing with the “due diligence” required for EU enterprises.

Headquartered in Nanjing, state-owned SUMEC International Technology Co. Ltd. professes to have customers in countries including the U.K., the Netherlands, Belgium, and France, and to ship over 4,000 shipping containers of plywood annually. In contrast with smaller factories, SUMEC has its own team in Africa to manage the timber it imports to China, but most of this wood is not processed in its own veneer factories. A department manager explained that plywood is a low-end product, and so completing all the links in the production chain doesn’t make financial sense.

SUMEC often sells the logs it imports to one plant, then buys cheaper veneer from another, even though the origin of that wood might be unknown. They then use the legal documentation from the logs the company imported for the veneer. “The certificates we have might not match the materials we use in the end, but we don’t mind, and we can’t control it,” the department manager said. These documents fool EU inspectors and allow SUMEC to smoothly export their goods.

Finished goods are piled up in SUMEC’s processing plant in Pizhou, another city in Jiangsu province, ready to be exported to several large plywood distributors in Europe. Their buyers in Europe are aware of the fraud, but don’t care, the manager said. “They know how to play the game; they’re professionals. They’ll teach you. EUTR is just about documents, nothing more.” When contacted by Sixth Tone for further comment, SUMEC said that it does not accept interviews.

Wood stored in the port of Brazzaville, Republic of Congo, Oct. 19, 2011. Yann Arthus-Bertrand/Hope Productions/VCG

Wood stored in the port of Brazzaville, Republic of Congo, Oct. 19, 2011. Yann Arthus-Bertrand/Hope Productions/VCG

Jiangsu Hanbao purchased Sapele mahogany from the Republic of Congo to make plywood, but their supplier was either unwilling or unable to offer legal documents. Hanbao’s representative explained that the company pays for the documents it needs to meet EU requirements. “Not many companies are willing to spend the money, so some small companies got their hands on a document years ago and keep changing it, reusing it for several years with small changes,” she said. “But they still keep exporting to Europe.”

They [buyers in Europe] know how to play the game; they’re professionals. They’ll teach you. EUTR is just about documents, nothing more.

Too Little, Too Lax

The effectiveness of the EUTR has been questioned ever since its implementation. Critics suggest that the enforcement is lax and uneven between EU countries, and that this has made the regulation less effective. The U.K. is considered one of the stricter countries. In 2015, its National Measurement and Regulation Office conducted tests into plywood coming from China. Results show that of the 13 samples tested, nine did not match the species of wood declared; and 14 out of the 16 companies investigated did not meet the due diligence requirements.

European importers often visit their suppliers in China as part of their due diligence obligations. However, many Chinese companies explained that few buyers will really go out of their way to visit every link in the supply chain: The majority just take a look at the final step, the processing plant.

A report on the results of the EUTR’s implementation published in November 2017 shows that countries which import the most tropical wood — including Belgium and the Netherlands — actually rank near the bottom for the number of regulatory checks they employ. Despite this, the relevant authorities from these countries told Sixth Tone by email that they carry out special supervision checks on timber from high-risk regions.

Wiet Raets, policy officer at the Belgian Federal Public Service for Health, Food Chain Safety and Environment (FPS Health) said that not all companies treat due diligence seriously, and that the implementation of the EUTR requires a lot of time and effort, putting high demand on the professionalism of regulators. Dutch regulators also expressed the same viewpoint.

A wood market in Dongyang, Zhejiang province, March 17, 2018. Bao Kangxuan/VCG

A wood market in Dongyang, Zhejiang province, March 17, 2018. Bao Kangxuan/VCG

In light of China’s key role in the global timber trade, some international environmental organizations have recommended that the country implement timber management laws as soon as possible. However, despite the relevant research having been carried out for years, rules are still slow in coming.

China’s adviser at environmental group Global Witness, Liu Lican, told Sixth Tone that such legislation would be beneficial to China in the long run. “A lack of traceability increases the risk of importer countries cracking down on illegally harvested timber and some import companies avoiding Chinese products because of concerns over legal risks,” he said.

In response to such concerns, the National Forestry and Grassland Administration sent a statement to Sixth Tone that “laws are not made overnight.” China has established bilateral dialogue with several countries to promote solutions to timber-related issues, the statement said, adding that department-level regulations for how to manage timber should be implemented first, and only after its effects are clear should legislation follow. The biggest challenge is getting exporting countries to safeguard the legitimacy of their wood, it said.

In recent years, the Chinese government has put greater emphasis on environmental protection, sending waves of inspectors across the country — including to timber factories. Many small processing plants have had to change their ways or even close up shop because they were found to be polluting too much. “We want blue skies, but manufacturing has to continue,” the department manager at SUMEC said. Such concerns don’t expand to other countries, however.

Wood is displayed at a warehouse in Zhangjiagang, Jiangsu province, October 2016. Wu Yue/Sixth Tone

Wood is displayed at a warehouse in Zhangjiagang, Jiangsu province, October 2016. Wu Yue/Sixth Tone

Zhangjiagang, a port city on the Yangtze River in Jiangsu province, is one of the country’s largest gateways for tropical wood, with several hundred timber import businesses and distributors of varying sizes located near the port area. Many of the dozen distributors Sixth Tone talked to said that they know the countries their timber comes from, but they aren’t clear about the exact origin or circumstances, and that their customers are similarly unconcerned.

A state-owned company and one of China’s top 10 tropical timber importers said they run a forest-cutting area in Equatorial Guinea, but that very few customers ask them for legal documentation. The person in charge was nonplussed about the interest in how its overseas forests are being managed. “If it’s cut down, it’s cut down,” he said. “It’s not like China’s forests are being cut down.”

Additional reporting: Liang Chenyu; translator: David Ball; editor: Kevin Schoenmakers.

(Header image: Workers produce plywood in Xingang Group, Linyi, Shandong province, Jan. 16, 2018. Shi Yi/Sixth Tone)