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How to Ensure ESG Compliance: A Look at High-Risk Timber Imports

08/30/23 5 minute read
As a response to deforestation, companies in the United States and Europe now face growing pressure from governments to conduct rigorous supply chain due diligence and disclose sourcing practices. This requires companies to have a better understanding of whether the extraction of their raw materials are linked to conflict, environmental degradation, human rights abuses, or other problems.

This is especially true for imports of timber and other raw materials from Brazil, which has the largest reserves of tropical forest on the planet. Drug trafficking organizations have taken advantage of a weakened law enforcement presence in the region to consolidate their operations and branch out into other criminal enterprises, such as illegal logging, mining, and fishing. Public officials warn that the convergence of these crimes poses a grave threat to public security and sustainable development in the Amazon. Since 2023, the number of fines issued for such violations has increased considerably. The renewed focus on regulatory enforcement appears to be paying off, with deforestation in April 2023 down 68% from the same period in 2022.

Read on to learn more about the regulations aimed at alleviating deforestation and how you can screen for illicit imports of timber in your supply chain.

International Regulations Step Up to the Cause

Stopping deforestation is a top priority for both the United States and European Union. In the U.S., the Biden administration pledged $500 million in April 2023 to help Brazil fight deforestation. While many countries have laws regulating the import and export of forest products, recent legislation in the U.S. and EU has expanded the scale and scope of responsibility that falls on importers to ensure that illegal timber from anywhere in the world does not enter their supply chains. As a result, companies in these jurisdictions must be able to trace their supply chains back to the point of origin.

Since 2008, the U.S. Lacey Act has prohibited the import of illegally harvested timber into the United States, requiring companies to file Lacey Act declarations for imports of timber and timber products. Starting in 2024, companies will be required to file Lacey Act declarations for a wider range of products, including furniture. To prepare for the expanded regulations, the U.S. Department of Agriculture recommends that companies map out their supply chains down to “each piece of plant material” used in their products.

Similar regulations will soon take effect in Europe. The EU Deforestation Regulation, which entered into force in June 2023, requires importers of timber and other deforestation-linked commodities to prove that their imports are free of deforestation starting in December 2024. To comply with the law, European companies must assess whether their suppliers are exposed to deforestation risk, take steps to mitigate such risk, and report on their efforts.

Public Data: A Supply Chain Solution

For manufacturers and downstream buyers of these products that wish to avoid sourcing conflict-affected or high-risk materials, timber and other deforestation-linked commodities from the Brazilian Amazon should be treated with extra scrutiny – a task that is easier said than done. The complexity of supply chains for commodities such as timber can make it difficult to trace a product’s chain of custody back to the point of origin. Sayari addresses this problem by integrating and analyzing publicly available information from a variety of global sources to shed light on the ownership, operations, and risk exposure of companies across supply chains.

Public records are an especially rich source of company information in Brazil thanks to strong access-to-information laws and data transparency initiatives. Many other countries, however, provide some degree of public access to data on corporate ownership and control, land concessions, imports and exports, and other relevant information. Depending on data availability, the same analytical workflow can be used to assess supply chain risk in any country or sector. 

Sayari’s data and tools let users harness public records from around the world to investigate all forms of supply chain risk. Sayari collects information on more than 467 million companies in more than 250 jurisdictions, including company-level trade records from more than 60 countries across the Americas, Europe, Africa, and Asia. With environmental risk becoming a key concern for companies and investors, Sayari’s data and tools offer the level of visibility needed to perform effective supply chain due diligence. 

In our latest report, Tracing High-Risk Brazilian Timber Through Global Supply Chains Using Public Records, you can learn how to use data to flag high-risk exporters of timber and other deforestation-linked commodities through a series of detailed example cases. 

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