PEFC Chain of Custody Certification February 2012 1

History of PEFC Pan European Forest Certification Council § Created in 1999 by European forest land owners as an umbrella organisation to provide a framework for the mutual recognition of credible national forest certification standards § 11 founding European nation members Programme for the Endorsement of Forest Certification § Canada the first non-European nation to join in 2001 § Name changed in 2003 to recognize growth beyond Europe § Not a forest management certification standard but an endorsement of national standards that meet the PEFC Sustainability Benchmarks § Exception is the PEFC Chain of Custody standard 2

35 member countries - 30 with endorsed standards Argentina Gabon Malaysia Slovenia Australia Chile Germany Netherlands Spain Austria Czech Rep. Ireland Norway Sweden Belarus Denmark Italy Poland Switzerland Belgium Estonia Latvia Portugal UK Brazil Finland Lithuania Russia USA Cameroon 3 Canada France Luxembourg Slovakia Uruguay

PEFC Canada § § PEFC Canada is a not-for-profit legal entity formed in 2008 § Became the member of PEFC International for Canada in January 2009 § Represents interests of organizations certified to the CSA Sustainable Forest Management standards § Manages PEFC Chain of Custody program for Canadian companies (except for SFI participants) § 4 Canada a member of PEFC International since 2001 and represented by CSA International until 2009 Issues PEFC logo use licences to qualified organizations in Canada

PEFC Presence: Globally→Canada→Ontario § 35 member countries § 32 endorsed national standards in 30 countries - 2 each in Canada and USA § 238 million ha certified globally in 27 countries • • § 8, 690 Chain of Custody certificate holders • § 184 in Canada – 38 in Ontario 36, 000 PEFC logo use licence holders • 5 63 million ha certified to CSA SFM standards in Canada – 2. 4 million ha in Ontario 53 million ha certified to Sustainable Forestry Initiative in Canada – 12. 8 million in Ontario 79 in Canada – 24 in Ontario

PEFC Chain of Custody Documents PEFC ST 2002: 2010 Chain of Custody of Forest Based Products Requirements PEFC GD 2001: 2011 Chain of Custody of Forest Based Products Guidance for Use PEFC ST 2001: 2008 PEFC Logo Usage Rules - Requirements 6

Certified Material Accepted in PEFC COC Material from forests 3 rd party certified to following standards: § § CAN/CSA-Z 804 SFM for Woodlots and Other Small Area Forests § Sustainable Forestry Initiative § American Tree Farm System § 7 CAN/CSA-Z 809 Sustainable Forest Management any of the other 28 national forest certification standards endorsed by PEFC

What to do to get certified – PEFC COC Details § Scope § COC Requirements – Physical Separation § COC Requirements – Percentage Based Methods • • Average Percentage Method Volume Credit Method § § Controversial Sources – Non-certified raw material § Management System Requirements § Complaints § Subcontracting § Multisite Organization Chain of Custody § 8 Sale of Certified Products Social, Health and Safety Requirements

Scope § § Can be used by any organization harvesting, transporting, handling or processing forest based material at any stage from forest to final consumer § Chain of custody is used in connection with the definition of certified material in PEFC endorsed forest certification standards § 9 PEFC Chain of Custody applies to forest based products Labelling of products is an optional communication tool which may be incorporated into the chain of custody process

Scope PEFC Standard Definitions § § Certified material - Raw material whose origin is covered by the chain of custody claims § 10 Chain of custody of forest based products - Process of handling of information on the origin of forest based products which allows the organisation to make accurate and verifiable claims on the content of certified material Certified product - Product which is claimed as including certified material whose content is verified by chain of custody

Physical Separation § § 11 Organisations should use physical separation as the preferred option: • where certified material is not mixed with uncertified material, or, • where certified material can be identified during the whole process Physical separation can be achieved by: • physical separation in terms of production and storage space, or, • physical separation in terms of time, or, • clear identification of the certified material during the process

Percentage Based Methods § Percentage based method of chain of custody applies to organisations that are mixing certified material with uncertified material Calculation of certification percentage: Where: • Pc = Certification percentage • Vc = Volume of certified material • Vo = Volume of other material 12

Percentage Based Methods Product Group § § The product group is associated with: 1. a single product type, or, 2. a group of products which consist of the same or similar input material, i. e. species, sort, etc. § Material used in the product group must have same unit of measurement or units that can be converted to the same unit of measurement § 13 Certification percentage is calculated for a specific product group Product group must be produced at a single production site

Percentage Based Methods § § 14 Certification percentage can be calculated as either: 1. simple percentage, or, 2. rolling percentage For rolling percentage the claim period cannot exceed 3 months, i. e. the certification percentage claim is calculated from the average volume of raw material used during the previous 3 months

Average Percentage Method § § There is no minimum threshold for the certified percentage § 15 Organisations using the average percentage method (either simple or rolling percentage) apply the calculated certification percentage to all the products covered by the product group Example: If the certified percentage calculated for the 3 month claim period is 54 %, all products covered by the product group can be sold as 54 % PEFC Certified

Volume Credit Method § § 16 The volume credit method is used to distribute the certified volume of raw material over a portion of output product Example: If the raw material for 100 tonnes of output product is 54% certified, then the 100 tonnes can be sold as 54% certified using the average percentage method, or 54 of the 100 tonnes cold be sold as 100% certified using the volume credit method. No certification claim can be made on the remaining 56 tonnes of product The volume credit can also be distributed to the product at less than 100% certified Example: The organisation can decide to distribute the 54 tonnes of volume credits to sell product as 70% certified, where 54 tonnes / 70% = 77 tonnes available for sale as 70% certified

Volume Credit Method § § The credit account must be established for individual product types of the product group or for the whole product group where the same measurement unit is applied to all product types § 17 The organisation using volume credit must create and manage a credit account in a single measurement unit Certified credits can be accumulated in the credit account for a maximum of 12 months, meaning that if the total credits are not used in a 12 month period then the credits accumulated 13 months ago are lost

Sale of Certified Products § § 18 At any point of transfer or sale of certified products the organisation must provide: • a copy of a forest management or chain of custody certificate, or, • another document confirming the supplier’s certified status, or, • access to a copy of the chain of custody certificate, i. e. on a website The organisation must use a single type of document with each delivery of the certified products, i. e. invoice or delivery slip

Sale of Certified Products § The document accompanying each delivery of certified products must include the following information: • customer identification • • product identification • quantity of delivery for each product • date of delivery / delivery period / accounting period • formal claim including certified percentage for each product • 19 supplier identification the number of the supplier’s chain of custody certificate or other document confirming the supplier’s certified status

Controversial Sources § PEFC Chain if Custody requires avoiding raw material from controversial sources, defined as forest management which is: (a) not complying with local, national or international legislation, in particular related to the following areas: – forestry operations and harvesting, including conversion of forest to other use – management of areas with designated high environmental and cultural values, – protected and endangered species, including requirements of CITES, – health and labour issues relating to forest workers, – indigenous peoples’ property, tenure and use rights, – payment of taxes and royalties, (b) utilising genetically modified organisms, (c) converting forest to other vegetation type, including conversion of primary forests to forest plantations. 20

Controversial Sources § The organization must have a Due Diligence System (DDS) to avoid raw material from controversial sources § Three steps to implementing a DDS: 1. 2. risk assessment indicating either a “low” or “high” risk of material coming from a controversial source 3. 21 supplier’s self declaration that material supplied does not originate from a controversial source management and verification program for material coming from sources that have been assessed as “high risk”

Management System Requirements § § 22 The organisation must have a management system to ensure correct implementation and maintenance of the chain of custody At a minimum the management system must: • document the commitment to implement and maintain the chain of custody • appoint a manager with overall responsibility and authority for the chain of custody • establish documented procedures for all elements of chain of custody • establish personnel responsibilities, authorities and competencies • regularly review the chain of custody and its compliance • conduct internal audits at least annually

Complaints § § 23 The organisation must establish procedures for dealing with chain of custody related complaints from suppliers, customers and other Upon receipt of the complaint, the organisation must: • acknowledge the complaint to the complainant • gather and verify all necessary information to evaluate and validate the complaint and make decision on the complaint • formally communicate the decision on the complaint and of the complaint handling process to the complainant • ensure that any appropriate corrective and preventive actions are taken

Subcontracting § Where subcontractors are used in the manufacture of certified products the subcontracted activities must be covered by the organisation’s chain of custody with the following considerations: • • material received by the subcontractor must be physically separated from other material and returned after the subcontracted work is completed, or, • the organisation with the chain of custody remains responsible for the sale or transfer of the product to the customer • organisation shall take full responsibility for the all the subcontracted activities • 24 applies to work within or outside the organisation’s site subcontractor activities must be covered by the internal audit

Multisite Organization Chain of Custody § § Multisite organizations must have an identified “central office” which: • represents the group in the certification process • provides a contractual relationship within the group and with the certification body • provides a commitment and procedures to implement and maintain the chain of custody system • operates an internal audit program § 25 Chain of Custody can be implemented within a network of sites: • either multi-sites within a single organization/company, or, • a group of small independent companies Individual sites are responsible for implementing the chain of custody requirements applicable to their specific site

Social, Health and Safety Requirements 2. 1 The organisation shall demonstrate its commitment to comply with the social, health and safety requirements defined in this standard. 2. 2 The organisation shall demonstrate that: • workers are not prevented from associating freely, choosing their representatives, and bargaining collectively with their employer, • forced labour is not used, • workers, who are under the minimum legal age, the age of 15, or the compulsory school attendance age, which ever is higher, are not used, • workers are not denied equal employment opportunities and treatment, • working conditions do not endanger safety or health. 26

Certifying to the PEFC COC Standard § § All certification bodies are accredited to ISO Guide 65 General Requirements for Bodies Operating Product Certification Systems by an International Accreditation Forum member such as Standards Council of Canada (SCC) or the American National Standards Institute (ANSI) § Audit cycle includes an initial certification audit, an annual surveillance audit and a recertification audit every 5 years § 27 All PEFC Chain of Custody certifications must be carried out by a qualified independent 3 rd party certification body Certificates are valid for 5 years

Who can certify - Qualified Certification Bodies 1. ALKO-Cert, Germany 2. BMG Trada Certifiering, Sweden 3. BM Trada Certification, United Kingdom 4. Bureau de normalisation du Québec, Québec City 5. Bureau Veritas, Houston 6. Control Union Canada, North Vancouver 7. KPMG PRI, Vancouver 8. Pricewaterhouse. Coopers, Vancouver www. pwc. com/sustainability 9. QMI-SAI Global, Toronto 10. Scientific 11. SGS 28 www. alko-cert. de www. bmgtradacert. se www. bmtrada. com www. bnq. qc. ca www. certification. us. bureauveritas. com www. controlunion. com www. kpmg. ca/performanceregistrar www. qmi. com Certification Systems, Emeryville www. SCScertified. com Systems and Services Certification, Toronto www. ca. sgs. com

PEFC Canada Chain of Custody Fees § PEFC Canada pays membership fees to PEFC International in part based on the number of PEFC COC certificates in Canada § PEFC Canada charges an annual notification fee based on the number sites included in the scope of the COC certificate § Fee collected by Certification Bodies on behalf of PEFC Canada Number of Sites on COC Certificate Annual Fee 1 $500 2 $1, 000 3 – 10 $1, 500 11 – 20 $2, 000 21 – 30 $2, 500 31 – 40 $3, 000 41 + $3, 500

PEFC Logo Use On-product label 30 Off-product label

PEFC Logo Use § § Logo use licences available for 4 groups of users: • Group A: National governing bodies i. e. PEFC Canada • Group B: Forest owners and managers with PEFC endorsed forest certification, including individual and group certificates • Group C: Forest related industries with PEFC Chain of Custody • Group D: Organizations using the PEFC off-product label for promotional and educational purposes § 31 PEFC logo use requires a logo use licence issued by PEFC Canada on behalf of PEFC International On-product of the label use requires minimum of 70% of PEFC certified product or recycled material

PEFC Logo Use § PEFC Canada charges an annual logo use fee based on the number of sites included in the scope of the chain of custody certificate Number of Sites on COC Certificate 1 $250 2 $500 3 – 10 $750 11 – 20 $1, 000 21 – 30 $1, 250 31 – 40 $1, 500 41 + 32 Annual Fee $1, 750

For More Information § § 33 PEFC International at http: //www. pefc. org/ PEFC Canada at http: //www. pefccanada. org/