Environmental Auditors Approve Green Labels for Products Linked to Deforestation and Authoritarian Regimes
“A new ICIJ-led cross-border investigation exposes how a lightly regulated sustainability industry overlooks forest destruction and human rights violations when granting environmental certifications.”
Environmental Auditors Approve Green Labels for Products Linked to Deforestation and Authoritarian Regimes
A new ICIJ-led cross-border investigation exposes how a lightly regulated sustainability industry overlooks forest destruction and human rights violations when granting environmental certifications.
By Scilla Alecci, March 5, 2023
Ricardo Weibezahn / ICIJ
Major environmental auditing firms ignore or fail to recognize glaring environmental damage caused by loggers and other clients whose practices they certify as sustainable, undercutting an elaborate global system meant to fight forest destruction and climate change.
With alarming frequency, the auditors and so-called certification firms validate products linked to deforestation, logging in conflict zones and other abuses, according to an investigation by the International Consortium of Investigative Journalists and 39 media partners. Certification helps the firms’ clients produce and promote teak yacht decks, high-end furniture and other products in markets all around the world.
ICIJ investigation, Deforestation Inc., showed how companies use the results of flawed audits to advertise products and operations as compliant with environmental standards, labor laws and human rights, misinforming shareholders as well as customers. The damage can be devastating and long-lasting.
“A felled tree cannot be replaced in a man’s lifetime,” said a French prosecutor in a recent case involving a Spanish logging firm that had illegally cut down century-old oaks and other trees in privately owned forests in Southern France.
ICIJ found that many companies declared as sustainable forestry operations that fell well short of their own claims or voluntary standards. For instance, a Brazilian wood products company operating in the Amazon claimed that it was “certified with flying colours” despite having been fined 37 times since 1998 for stockpiling and transporting wood without legal documentation, among other violations. A Japanese forestry company in Chile sourced timber from suppliers that used documents containing false information on the origin of the wood.
A group of Canadian logging companies used a “sustainable forest management plan,” certified by a local auditor, to cut down trees in Indigenous forestland, drastically altering the community’s territory and way of life, according to a court ruling.
ICIJ examined inspection records, environmental violation data and court filings, concerning companies in at least 50 countries. The analysis identified 48 auditing firms that had declared sustainable the practices of companies in the forest products industry that had been charged with such violations as logging in Indigenous forestland and protected reserves, using false permits, and importing illegally harvested timber.
Since 1998, more than 340 certified companies in the forest products industry have been accused of environmental crimes or other wrongdoing by local communities, environmental groups, and government agencies, among others. About 50 of those firms held sustainability certificates at the time they were fined or convicted by a government agency.
Such cases are almost certainly undercounted, in part, because many government databases of environmental crime don’t identify the companies responsible.
A logging truck drives down a rural road on August 20, 2018 in British Columbia, Canada. Credit: Andrew Lichtenstein/Corbis via Getty Images
“It’s the whole system that we rely on, on certifications in general, that doesn’t work,” Grégoire Jacob, a consultant working in the forest-products industry, told Radio France, an ICIJ partner. “We are led to believe we will have more virtuous products. Sometimes it’s true; sometimes it’s false.” Jacob was one of six current and former forestry auditors and consultants who told ICIJ and media partners in France, Canada, the U.S. and elsewhere that certification standards were inadequate and the procedures ineffective.
The auditors themselves ー who make up a growing $10 billion industry ー are rarely held accountable for downplaying or missing red flags in clients’ operations and sustainability reports. Environmental auditing differs from its highly regulated counterpart, traditional financial auditing, and is governed by far fewer rules and guidelines. Indeed, said Jonathan White, a lawyer at ClientEarth with expertise in corporate responsibility and climate risk, environmental auditing.
Marketing ‘Sustainability’
Over the last two decades, publicly traded multinationals, small suppliers and investment firms have used their association with voluntary forest-certification schemes to show customers and shareholders that they are committed to “environmental, social and governance” (ESG) guidelines and that their practices do not harm the environment. So-called sustainability certifications provided by private bodies are not legally required, but they have become virtual must-haves for companies that trade, produce or use timber and other commodities associated with deforestation.
At the heart of this self-regulating system are international organizations such as the Forest Stewardship Council (FSC), the Programme for the Endorsement of Forest Certification (PEFC) and the Roundtable on Sustainable Palm Oil (RSPO). They rely on third-party auditing firms to vet clients and certify that wood-product companies, palm oil producers and others harvest responsibly and don’t use materials linked to illegal logging and other environmental crimes. (Back in 2007, J.K. Rowling’s U.S. publisher agreed to her wish that FSC-certified paper be used for the final Harry Potter novel, “Harry Potter and the Deathly Hallows.”)
The environmental auditing sector is part of the $200 billion testing, inspection and certification industry. It includes specialized units of auditing giants such as KPMG and PwC, large, publicly traded companies such as the Swiss multinational SGS Société Générale de Surveillance SA and smaller firms such as PT Inti Multima Sertifikasi in Indonesia. The auditors typically perform risk assessments for their clients, inspect mills, interview company foresters and ensure that operations and products are in line with voluntary environmental standards designed by private certification organizations.
Some of the auditing firms’ marketing materials trumpet such goals as “protecting the planet’s forests,” facilitating the “economically feasible exploitation of forests” and “mitigating deforestation.”
The conversion of forest to other uses ー such as agriculture or road construction ー and industrial logging in primary forests are some of the leading causes of climate change. Scientists estimate that these practices are responsible for more than 10% of the world’s greenhouse gas emissions, which contribute to global warming. Forest destruction also aggravates flooding and loss of wildlife habitat, and it contributes to a surge in infectious disease in humans, according to some scientists. With fewer trees available, some pathogen-carrying bugs migrate to plants consumed by farm animals that end up in the food chain.
In 2021, U.S. President Joe Biden and more than 100 other world leaders gathering at the United Nations COP26 climate summit in Glasgow vowed “to halt and reverse forest loss and land degradation by 2030.” Since then, governments have promised ー and others approved ー stricter regulations. Private environmental auditing firms see the renewed forest protection movement as a business opportunity to promote their services helping clients combat forest loss worldwide.
Experts consider that in countries where deforestation is widespread and forestry governance weak, such as Brazil, voluntary certification is a better alternative to poorly enforced laws on forest management and supply chains. But in Brazil, where an estimated 90% of logging is illegal, only a small percentage of companies are willing to open the books and apply for costly certifications, according to Marcos Planello, a forestry auditor based in Sao Paulo.
“It’s not a playground. There are people with guns” in the forest, he told ICIJ. “We [auditors] just search for areas when a company wants to be certified voluntarily.”
Certifications remain a valid way to “reduce risks,” Planello said. “But if a company wants to do something wrong, they will be able to do it.”
Damage that Can’t be Calculated
During the nine-month Deforestation Inc. investigation, 140 reporters working with ICIJ have followed loggers’ footprints from logged protected woodlands in Finland to clear-cut areas of South Korea to over-harvested Indigenous forests in British Columbia. They talked to members of Indigenous communities, forest-preservation advocates, forestry auditors and industry insiders. They examined hundreds of court filings, violation data and leaked documents in more than a dozen languages. The project spanned the world.
Finnish forest on Oct. 31, 2022 in Askola, Finland. Credit: Alessandro Rampazzo/AFP via Getty Images
In April 2022, a leading environmental auditing firm certified an Austrian conglomerate’s wood products from Romania, a country known for its vast old-growth forests, as compliant with environmental standards. Within months of the certification, Romanian authorities launched an illegal logging investigation into some of the Austrian giant’s timber suppliers.
In the U.S., Italy and New Zealand, yacht deck manufacturers and timber traders continue to sport green labels on marketing materials even while importing teak from Myanmar, where trade in natural resources finances a military regime that toppled a democratically elected government in 2021.
In Finland, auditors monitoring the forest-management practices of two forestry companies did not mention in the audit reports that courts had fined their clients for felling trees in biodiversity-rich protected areas; the companies kept their sustainability certificates. And in Indonesia, one of the world’s largest exporters of tropical wood and other forest products, environmentalists at the Bogor City-based Independent Forest Monitoring Network (JPIK) reported that in the last decade, auditing firms missed environmental violations by at least 160 companies.
The violations included the use of false permits, illegal logging and destruction of elephant and tiger habitats. ICIJ’s reporting partners at Tempo, an Indonesian magazine, found in addition that, on some occasions, the auditors did not demand the client take corrective actions to address the violations.
The auditors’ laissez-faire approach made it possible for the Indonesian companies to use certification to obtain export licenses for Europe and other markets where buyers were less likely to be aware of the violations, JPIK, the forest-monitoring network, found
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