How Independent Forest Monitors can & should optimize their EUDR value

Photo by Renaldo Matamoro on Unsplash

To all of us in the Independent Forest Monitoring (IFM) community: let’s get ready to optimize our value in the context of the EUDR.

What’s the EUDR?

Most of us should know this by now, but just in case…

In May 2023, the the Council of the European Union adopted the EU deforestation regulation (EUDR). The EUDR will require large and medium-sized companies to conduct due diligence on cattle, cocoa, coffee, palm oil, soya, timber and rubber as well as derived products such as paper, tires and chocolate.

Operators placing relevant commodities and products for the first time on the EU market must perform due diligence to ensure that:

1. the commodities and products have not been produced on land deforested or degraded after 31 December 2020; and
2. they have been produced in accordance with the laws of the country of production.

Not meeting either of the two requirements will result in a prohibition to place those products on the EU market. Due diligence consists of three steps: access information, evaluate risk and mitigate risks.

Don’t EUDR actors already value IFM?

Probably, but let’s not take any chances.

To those within the IFM community, it’s obvious how IFMs — often the only source of objective information in many exporting countries — and tools like the Open Timber Portal will be vital to EUDR implementation. Due diligence is only as good as the information available.

Indeed, the EUDR acknowledges the role of civil society. Article 29, for example, states that information from civil society organisations will be taken into account when determining country risk categories.

However, there is a clear shift in focus from legality in the EU Timber Regulation (EUTR) era to deforestation in the EUDR era.

For example, Article 29 also states that “The classification shall be based primarily on the following assessment criteria: rate of deforestation and forest degradation; rate of expansion of agriculture land for relevant commodities; and production trends of relevant commodities and of relevant products.” In other words, land cover change is the priority.

There is also a growing interest in tech solutions to streamline due diligence, particularly those involving remote sensing and traceability solutions. The world loves an ‘easy’ tech solution to complex problems.

The IFM community needs to remind EUDR decision makers, especially donors, that tech solutions complement but do not replace on-the-ground governance work.

There are many ways IFM is vital to the success of EUDR. Let’s start with two: enabling operators to carry out more robust EUDR due diligence and empowering policy makers to improve EUDR policy.

IFM and robust EUDR due diligence

As stated above, due diligence is only as good as the information available. A key component to robust due diligence is taking into account information from multiple sources. That should includes objective sources with no direct financial stake in the commodity or product in question, such as journalists, watchdog groups and, of course, IFMs. IFMs are a key source (sometimes the only source) of objective information on 3 major risk categories: local rights, provenance and legality.

Local rights

The EUDR repeatedly states that the rights of indigenous people, local communities and smallholders must be taken into account during due diligence.

Only in-situ investigations can tell the whole story of complex legal and social challenges.

No satellite image or mobile app is ever going to be able to collect, analyse and communicate the site-specific challenges regarding free, prior and informed consent, for example.

Provenance

While modern tech traceability systems can certainly reduce fraud, they will never be fraud proof. That includes blockchain despite the hype. IFMs commonly document supply chain problems, particularly the laundering of ‘dirty’ goods into ‘clean’ supply chains. The reality is that it is difficult, if not impossible, to identify and measure the risk of garbage-in, garbage-out situations without in-depth in-situ investigations.

Legality

Documenting legality risks is what IFMs do best. In many source countries, law enforcement is so weak, absent or corrupted that IFMs are the only consistent source of information on legality and governance risks. This is why timber operators in the UK and EU have for years communicated directly with IFMs to provide information for EUTR due diligence.

IFM and improving the EUDR itself

Like the EUTR, the EUDR will be revaluated and improved based on lessons learned. Independent monitors will continue to be an importance source of information on what works and what doesn’t.

Let’s continue with Article 29 as an example, which describes a benchmarking system assigning risk levels related to deforestation and forest degradation to countries within and outside the EU. Due diligence will be enhanced for higher risk countries.

As stated above, deforestation rates will be the main criteria. However, risk categories will also take into account “whether the country concerned has national or subnational laws in place, including in accordance with Article 5 of the Paris Agreement, and takes effective enforcement measures to tackle deforestation and forest degradation.”

Where will up-to-date information about laws and enforcement come from? IFMs have proven themselves to be among the most consistent, objective and detailed sources of information on forest governance challenges in many exporting countries worldwide.

Aren’t audits enough?

The EUDR recommends audits to help assess and mitigate risk. Many people unfamiliar with IFM will claim that audits are enough since IFM is like an audit or is less reliable. Here is why they are wrong.

First, IFM and auditing are not the same. Auditing relies on periodic visits and checklists while IFM is based on investigations. Investigations are adaptive and can uncover complex legal, social, and environment issues that often go undetected by auditors. Another notable differences is time frames. IFMs are long term and consistent while audits are periodic and sometimes done be people unfamiliar with the complex situational context.

Second, Regarding reliability, auditing in any field has long been fraught with problems of conflict of interest. IFMs, on the other hand, are less vulnerable to conflicts of interest because they are primarily funded by international donors with no direct financial ties to the entity in question. That is not to say that all audits are corrupt and that all IFMs are impermeable to corruption. But IFMs do have an excellent record of maintaining their independence.

The importance of IFM does not mean that auditing — internal and external — is not important. Since audits take a more more structured approach, they can provide important measurable insights that IFMs don’t.

In short, audits and IFM are fundamentally different but both important for the success of the EUDR

How exactly can IFMs maximise their value in the EUDR context?

To start, the IFM community needs to do 2 things: 1) provide more actionable information: 2) and improve communication of that information.

Provide more actionable information

There is no standard definition of actionable IFM information. But if information fulfills the following three criteria, it will be actionable.

1. Provide meaning
2. Follow best data collection practices
3. Easy to access

Provide meaning

People understand meaning, not data. Data exists to derive meaning. IFM reports have traditional focused on providing data and letting the end users figure out the meaning. This is difficult and time consuming.

Imagine, for example, you go to the doctor for some tests. The doctor sends you the results as raw data —white blood cell counts, blood iron levels, etc. What do you do? You call the doctor and say “I don’t understand what all this means, am I healthy?”. Now imagine you, the IFM, is the doctor and the commodity buyer in the EU is the patient. You need to tell your patients what the data means so they can take action.

Best data collection practices

Since meaning is derived from data, how the data is collected determines the accuracy and ultimately the value of the meaning.

Best practices are constantly evolving and vary by location, organisational missions, and other variables. But there are four generally accepted best practices in the IFM community.

1. 🔢Be specific: provide details about quantities, locations, time frames, actors involved, and other relevant variables
2. ⚖️Know the law: prior to any investigation, understand the legal responsibilities, obligations and rights of all entities involved
3. 📐Triangulate evidence: don’t rely on one source. The more diverse the sources the more difficult the observation will be to ignore or refute
4. 🛣️Follow the evidence: adapt to wherever evidence may take you to uncover the underlying causes, which are often more severe than proximate problems

Easy to access

Open Timber Portal

The data and derived meaning are only impactful if the end users can readily access them. Meaning is already provided in IFM reports in the form of analyses, recommendations, and conclusions. But it’s inconsistent and not always easy to digest, especially for the layperson.

Reading and understanding a 40 page IFM report often in a foreign language is simply not feasible for most EUDR actors

That’s why the Open Timber Portal (OTP) exists. While the OTP is focused on data provision, rather than meaning, it is an important first step.

Substantiated concerns

Defined as “a duly reasoned claim based on objective and verifiable information regarding non-compliance with this Regulation…”

The EUDR requires operators to not only take into account substantiated concerns during due diligence, but to also report them to competent authorities even after a product has been placed on the market. The EUDR also requires competent authorities to act upon substantiated concerns when carrying out checks.

Submitting official substantiated concerns may be the most effective way to ensure that IFM observations are applied to EUDR due diligence

Perhaps more importantly, Article 16 requires competent authorities to include checks in public annual reports and make them available upon request. Competent authorities must also inform those that submitted the concern of any follow up activities within 30 days. That means that IFMs can monitor competent authorities and inform policy makers and consumers accordingly: IFM at both ends of the supply chain to maximize impact.

Recommendations to IFMs

1. Remind EUDR actors that IFM is a vital source of information for robust EUDR due diligence and for improving the EUDR itself
2. Follow best data collection practices and derive meaning from the data to provide more actionable information
3. Continue to add information to the OTP and get ready to submit substantiated concerns once the EUDR is in force

About REM

Resource Extraction Monitoring (REM) is a UK non-profit organization specializing in Independent Forest Monitoring. Since 2003, we have coordinated or supported IFM programmes in Cameroon, Democratic Republic of Congo, Republic of Congo and Ivory Coast. As of 2023, our current focus is expanding IFM to more commodities covered under the EUDR and helping civil society led IFMs collect and communicate more actionnable information. This includes collaborating with the World Resources Institute on the development and adoption of the Open Timber Portal.