FSC Chain of Custody – Version 3-0

Screen Shot 2014-12-16 at 11.49.23 AMThe Forest Stewardship Council (FSC) published a long-awaited update to the important Chain of Custody standard earlier this winter. If you are a regular reader of this blog, and you have not yet looked at version 3-0 of the FSC Chain of Custody standard, we recommend that you do. Follow this link to the publication announcement that was posted on 1 February. You can download the final document here, as well as an interesting “crosswalk” document which compares versions 2-1 and 3-0.

The revision to FSC-STD-40-004 v.3-0 had been in the works for at least 3 years, and the subject of lots and lots of agonized discussion and debate. Even after the key decisions had been made, FSC took an extraordinary amount of time to release the final document. The actual release was rather less dramatic, which we think is healthy. In spite of the extended, last minute concerns, the final document includes few surprises. Now the community can concentrate on making it work.

What Is Old?

The basic structure of the standard remains intact. Part I addresses Management System (or “Universal”) requirements. FSC introduced few new concepts here, which is good. They did introduce quite a lot of “explanatory” language, however, which gives us some concern. The pleas for simplicity – coming from MixedWood and other commentators – were largely ignored. The updated CoC standard is more complex, not less.

Most CoC-certified companies will find Version 3-0 quite recognizable. This is good news, and suggests that the transition process over the next year or so will be fairly smooth. We hope so.

What Is New?

Most of the early attention to STD-40-004 Version 3-0 has been on the changes. This is understandable, of course, and worthwhile. FSC International (FSC-IC) hosted a well-attended series of Webinars highlighting the new elements. If you did not attend, we recommend you view the video recording that you can find here.

Most Certification Bodies (CB’s) have provided their own updates to clients by now, several of which can be located and viewed online. We particularly recommend this focused and short summary by our talented colleagues at NEPCon.

The 10 New Things (or maybe 5)

Much of the discussion of the CoC updates has focused on the “10 changes”. These are the subject of the FSC-IC webinars, and have been used by many others as well.

  • Cross-site application for Credit and Percentage systems (Clause 9.4, 10.3)
  • Transaction Verification (STD-40-004 clause 1.7 & STD-20-011 clause 10.1,2)
  • Rules for Downgrading Claims (Clause 5.9)
  • Product Group details (Section 7)
  • Credit Accounting details (Clauses 10.5,6,8)
  • Multi-site Eligibility rules (Section 14)
  • Sales of Custom Products (Clause 5.8)
  • Annual Summary requirements (Clause 4.4)
  • PEFC double-counting prohibition (Clause 4.3)
  • Neutral Material definition

You will notice that 5 items on this list are highlighted, and the other 5 are not. That is because we think that half of these “new” items are not really new. The “not new” items have all existed in some form before, and their addition to the updated CoC standard will – in our view – have little impact on implementation.

The 5 Really New Things

That leaves 5 new items that are worth looking at a bit more closely.

Cross-site Credit and Percentage Systems: This change is the result of direct lobbying by several large commodity paper manufacturers. It allows multi-plant organizations to “pool” their FSC materials for purposes of calculating and making sales claims. Within limits, this allows one plant that is relatively rich in FSC content to virtually “share” with a sister plant in a different region. The argument against this approach is obvious: reduced credibility in the FSC claim. The argument in favor is expanding market impacts. It will be interesting to see how this plays out.

Transaction Verification: This new element is a watered-down vestige of the much-maligned OCP initiative. In its present form, certified companies are required to “support” FSC’s continued efforts to reduce fraud and misapplication in the CoC world. FSC – as usual – is still figuring out what that will actually look like in practice. We expect to have much more to say about this in the future.

Product Group details: FSC has a long history of attempting to “clarify” points of detail within its program, but succeeding only to over-complicate the matter. Section 7 of the new CoC standard is a classic case of this. It is a mess!

Credit Accounting details: Several substantive changes have been added to Section 10, which change the ground rules for managing FSC Credit Accounts. Some add flexibility (e.g. extending credit expiration to 24 months – 10.6), while others reduce it (e.g. adding a % threshold – 10.5). It is unclear what – if any – meaningful effect this will have on the marketplace.

Annual Summary requirements: FSC took an existing simple and clear requirement (Version 2-1, clause 5.2.2) and re-formatted it in a way that could prove to be a problem. A new requirement to “demonstrate that the quantities…are compatible…” sounds innocent enough. But experience suggests it will challenging in practice for many companies. Something to be watched, for certain.

An Expedited Transition

Among the many changes FSC implemented last year, was a new standard for update of normative documents: a standard for standards! It received very little attention, and primarily addresses administrative and governance issues. It included a new timeline for implementation of new standards, which applies to Chain of Custody Version 3-0.

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FSC-STD-40-004 v.3-0 has an “effective date” of 1 April 2017. This means that it is optional prior to that date, but mandatory as of 1 April 2018. Importantly (see the NOTE), this means that companies whose annual audits fall between 1 April 2017 and 31 March 2018, will need their next audit to be against the updated standard, whether they are ready or not.  This will begin early next month!

We know that relatively few companies have made any changes to their system to adapt to the Version 3-0 updates. The CB’s we talk to are determined to move quickly to the new standard, and simply raise non-conformances for anything that is out of synch. The assumption is that this process will prove manageable and not too disruptive. The fact is that we don’t really know how it will work out.

We should start finding out soon. MixedWood is very interested in stories about how the transition is going. Please drop us a line to share your experiences – good or bad.

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