FLATPÅCKED FÖRESTS

Executive Summary

One tree every second: Feeding Ikea's fast furniture empire

A source of cheap, flat-packed products to suit every taste, Ikea revolutionised the way furniture is made, and forever changed the way we furnish our homes. But the Swedish giant’s ‘fast furniture’ model has long put enormous pressure on forests globally. Ikea is the largest buyer of wood and the largest retailer of wood furniture on the planet. It consumed 21 million cubic metres of wood in 2019, which is a line of logs that would encircle the Earth seven times. Earthsight has calculated that it consumes one tree every second, and that each year it churns through 2 million more trees than the year before.

The company owes its success largely to the exploitation of cheap labour and relatively intact forests in the countries of the former eastern bloc. With this dependence has come a steady stream of scandals. From pay-offs to Romania's brutal communist-era secret police to bribery scandals connected to its Russian operations, Ikea is no stranger to controversy. The company is even currently under investigation by the EU for billion-Euro tax evasion.

Earthsight has discovered that Ikea is the largest consumer of timber from Ukraine, a country whose lush forests are one of the last strongholds for large European mammals like bear, bison, lynx and wolf.

Over 18 months, Earthsight has gone on the trail to investigate Ikea’s Ukrainian timber purchases, tracing some of Ikea’s most iconic products from shelves to their forest source. We travelled hundreds of miles across Ukraine to interview government officials, whistle blowers, timber industry insiders and activists. We scoured thousands of documents and made dozens of freedom of information requests. The story we are able to tell as a result sits uncomfortably with the picture of a Scandinavian utopia Ikea sells to its public.

The environmental destruction behind Ikea furniture

In July 2018, Earthsight released the findings of a previous investigation on illegal logging in Ukraine. We showed that the country’s entirely state-owned forests were suffering from an epidemic of illegality. Forty per cent of the €1 billion of wood being shipped to the EU each year was suspect. At the centre of the problem lay Ukraine’s State Agency of Forest Resources (SAFR). In a troubling conflict of interest, the SAFR is responsible for both protecting Ukraine’s forests and extracting timber from them. We found it was also steeped in corruption.

The report made national headlines and prompted a crackdown on illegal timber by Ukraine’s former Prime Minister, Volodymyr Groysman. Many of Earthsight’s findings were corroborated by subsequent reports, including one conducted by experts from the EU. The momentum created by these events offered a brief, crucial window for meaningful reform. It should have translated into SAFR being restructured, for increased environmental enforcement and for transparency to be drastically scaled up. But while the new administration has made some inroads into increasing transparency, the SAFR top brass remains in deep denial, and their agency unreformed. Our new report shows the old problems have continued, and explores why. What we found has global implications.

We begin our story in Velyky Bychkiv, whose state forestry enterprise (SFE) manages an area ten times the size of Manhattan in the most heavily forested and biodiverse part of the Ukrainian Carpathians. Its beautiful, mountainous terrain is blanketed with natural forests of slow-growing beech trees. The beech tree is an umbrella species, able to support a rich variety of biodiversity in and under its canopy. Unfortunately, it is also sought after for its attractive orange-tinted hardwood.

Our research shows that illegal logging is rife in these forests. Inspections by Ukraine’s State Environmental Inspectorate (SEI) confirmed Velyky Bychkiv SFE had illegally licensed ‘sanitary’ felling on more than a hundred sites from April to June 2018. For several weeks over this period, such logging is banned by Ukrainian wildlife laws because of their importance to breeding animals. Lynx and several endangered bird species have been identified in Velyky Bychkiv’s forests and depend on the relief from logging that the silence period provides to raise their young. Earthsight found that more than half of the saleable wood harvested in the SFE during this time was illegal. Data obtained by Earthsight shows the SFE carried on illegal sanitary logging at the same rate during the silence periods in 2019 and in 2020. And it turns out this is far from the only illegality common in these forests. We uncovered evidence that the SFE had failed to conduct required environmental impact assessments before logging on several sites, and allowed the logging of healthy trees under the pretext they were diseased – a common ruse in Ukraine which has allowed harvests to massively exceed levels determined to be sustainable. Evidence of further breaches of regulations during harvesting was also detected, such as cutting outside prescribed boundaries and polluting streams.

Many of the sites in Velyky Bychkiv where we found illegalities – including ten of the sites listed by the SEI - were logged by a local Ukrainian furniture and timber company named VGSM. We even found VGSM clearing beech forests under illegal permits during the worldwide Coronavirus (Covid-19) lockdown in April 2020. Much of the beech cut by others is also bought by VGSM, which dominates the local industry, buying three-quarters of the commercial beech cut in the SFE’s forests. In a pattern of illegality, Earthsight also uncovered serious problems in 14 of 16 other Ukrainian state-owned firms we found had sold timber to VGSM in recent years.

Earthsight discovered that VGSM is one of the largest Ukrainian suppliers to Ikea. There can be little doubt the illegal wood entering VGSM’s large factory is ending up in its products. At least 96 per cent of the company’s production is ultimately destined for the Swedish giant. Part of VGSM’s production is shipped direct to Ikea, but most takes the form of parts to be completed by Plimob, a firm just across the border in Romania and equally dependent on Ikea as a customer. We were able to confirm that wood from VGSM is to be found in a wide range of popular Ikea products, including its best-selling Ingolf dining chair. Altogether, up to one million chairs containing wood from VGSM are being sold by Ikea each year. That’s enough seats to pack Wembley Stadium in London to the rafters more than 10 times over. These chairs are shipped all over the world, including to Ikea stores in the UK, Germany, US and France.

Ikea’s Ukrainian timber problem isn’t confined to its beech chairs. Most of its wood products – including furniture, shelving and kitchen units – are made from cheap woodchip boards coated with veneer or melamine. The second-largest producer of these panels in the world – and an important supplier to Ikea – is a company called Egger. During 2019 it imported almost $2 million of wood from suppliers in Ukraine which have been the repeated subjects of criminal proceedings regarding illegal logging and illegal timber trading. One, an SFE in Chernivtsi province in the Ukrainian Carpathians, was fined hundreds of thousands of dollars for such activities in 2018.

The illegalities and corruption risks in Ikea’s Ukrainian supply chains which Earthsight documented are almost certainly the tip of the iceberg. One experienced forester we spoke to in late 2019 told us that illegal logging took place as a matter of course in all SFEs in the region. He said the situation with state-sanctioned illegal logging in the country had “never been worse”.

Ikea’s Ukrainian problem also isn’t confined to corruption at a local level. The head of the forest agency in Zakarpattia - the province in which VGSM sources most of its wood – was sacked in January 2020 while under investigation for corruptly allowing illegal logging. In the recent past at least, the corruption involved has gone to the very top. Ukrainian prosecutors allege that during the era of kleptocratic President Viktor Yanukovych in 2011-14, bribes were being paid to his crony at the forest agency for sales of logs to foreign companies. Egger and another Ikea supplier of the time, Holzindustrie Schweighofer (now HS Timber Company) were among the largest log importers during that period. As Earthsight revealed in 2018, a Schweighofer subsidiary has been directly implicated in the multi-million dollar bribery scheme, the formal investigation of which remains open. The subsidiary concerned insists it always acted according to relevant laws and regulations.

Ikea, VGSM, Plimob and Egger all also deny wrongdoing. A full summary of their responses to our draft findings is included at the end of this report.

How the world’s largest green label for wood is failing its forests

Ikea has failed to prevent illegal, unsustainable wood being used for its products. Behind this failure is the Forest Stewardship Council (FSC), the world’s largest green label for wood. Ikea has come to rely to a great extent on FSC’s audits to ensure its wood is good. It has committed to source 100 per cent of its fresh wood from sources certified by FSC by August 2020.

With the support of Ikea and other large wood product retailers, FSC has become the go-to label used by companies to signal to their customers that they are protecting forests. A quarter of the world’s timber production is now FSC certified, and its well-known green tree-tick symbol can be found on everything from toilet roll to printing paper, milk cartons, furniture and even clothing. Created by green groups and progressively minded companies in 1993, FSC certification is meant to guarantee that wood products are friendly to the environment, workers and forest peoples, as well as legal. But it is failing. 

All of Ikea’s Ukrainian wood is FSC-certified. Velyky Bychkiv, as well as almost all the other state-owned logging firms and companies we investigated for this report like VGSM, Plimob and Egger, carry FSC’s stamp of approval. Despite the plentiful evidence of wrongdoing we unearthed, successive FSC audits of all these same suppliers mysteriously failed to detect a single one of these problems - not even the large-scale illegality confirmed by government inspectors in Velyky Bychkiv in 2018.

Though FSC’s failings in Ukraine were already dramatically demonstrated in Earthsight’s 2018 report, we found little has changed as a result. That is because FSC refuses to address the fundamental flaws in its systems which are driving its failures in Ukraine and elsewhere. FSC auditing bodies are competing entities, vying for business from the logging companies which pay them. That serves to create a ‘race to the bottom’, driving down the quality of inspections. They are supposed to act as unbiased independent observers. But Ukrainian NGOs told Earthsight they behave more like advocates for the state-owned logging firms. FSC has even been lobbying the Ukrainian government to roll back the very environmental regulations we found being systematically flouted in certified forests.

In October 2019, an experienced forester from an FSC-certified Carpathian enterprise told Earthsight of just how cosy the relationship between FSC auditors and senior officials of the state logging companies they inspect can be. He said once the formalities of the “dog and pony show” inspection were completed, the auditors and SFE leadership would retire to a summerhouse in the woods to party on alcohol, meat skewers and spicy ‘bogracz’ stew. Even where auditors are intent on doing their job, the same whistleblower confirmed how easily SFE officials can hoodwink them.

FSC’s failures in Ukraine are happening because of deep-rooted problems in the organisation which have remained unaddressed for many years. As Part V of this report documents, there have been numerous scandals involving FSC-certified companies. From the Amazon and South-East Asia to the Congo Basin and Russia, FSC has been repeatedly linked to illegal logging, destruction of intact forests, violations of community rights, high-level corruption and human rights abuses. Almost all such examples have been exposed by activists, not FSC’s own checks. And while it has thrown some companies out, FSC has failed to address the underlying flaws in its systems which keep allowing these cases to happen.

In addition to failing to remove the fundamental conflict of interest described above, FSC continues to allow companies to associate themselves with FSC while selling no FSC-certified wood. It refuses to implement systems for tracking wood from forest to shelf, despite evidence of widespread laundering of uncertified wood into its supply chains. It repeatedly gives companies the benefit of the doubt, even in highly corrupt countries. It is not pro-active in searching for wrongdoing, and does not use a precautionary approach. According to its current rules, even if the ‘preponderance of evidence’ is that an FSC-certified company is guilty of heinous crimes like massive illegal logging and rights abuses, they cannot and will not throw them out.

Even FSC’s fundamental philosophy is flawed. It is wedded to a perverse neoliberal logic that to save trees, you must cut them down. As a result, while all serious environmentalists advocate a strategy of ‘reduce, re-use, recycle’, Earthsight found FSC’s leaders recommending consumers buy more virgin wood and paper.

FSC isn’t just failing to protect forests in Ukraine and elsewhere; it is actively undermining efforts to do so. By greenwashing wood from SAFR forests in Ukraine, for example, it removes pressure on it to reform. By promoting virgin FSC paper, it undermines sales of recycled paper. By greenwashing illegal wood as legal, it undermines laws in the US and EU meant to block trade in stolen timber. By providing false reassurance to conscientious consumers, it makes them less likely to take the correct action.

Many of the green groups who once backed FSC have left. Greenpeace finally walked in 2017, saying it had become a “tool for timber extraction”. But FSC continues to grow, because it has the vocal support of the world’s largest wood buyer, along with that of the world’s largest conservation organisation, WWF. The silence of these behemoths on FSC’s flaws is having real consequences.

A moment of reckoning for the era of ‘fast furniture’, and for FSC

Ikea and FSC’s failures matter, and not only for forests or for Ukraine. The timber industry remains a major driver of deforestation and forest degradation worldwide, which is in turn responsible for 10 per cent of climate-changing emissions. If we are to rescue humanity from climate breakdown, we must leave trees standing and allow forests to recover and regrow.

Incredibly – given this report’s findings – Ikea and FSC are the good guys. Ikea has among the best environmental credentials of any large furniture firm. It has funded nature protection projects, including in Ukraine. FSC is by far the best of its kind. But as global leaders, they must do better. Where they go, others follow. Where they don’t, others won’t.

While FSC’s failure to reform is increasingly undermining other efforts to protect forests, at the root of Ikea’s problem is its ‘fast furniture’ business model. It has been said that Ikea’s true genius has been to make furniture disposable. Earthsight has calculated that Americans, for example, are throwing away 40 per cent more furniture per capita than when Ikea arrived on its shores. Though Ikea has been piloting schemes like furniture rental and return to address this problem, they have had little impact. Meanwhile its new CEO has declared an intention to pursue cheapness like never before.

The relentless pressure on prices which Ikea shifts on to its competing suppliers has other consequences. The companies making Ikea’s beech chairs are almost entirely dependent on it and are in no position to negotiate. As VGSM’s boss has said, “the money [Ikea] manages is an amount far greater than the budget of Ukraine. When [they] offer a [price], you either agree or you don’t.” Companies like VGSM must accept Ikea’s prices or face bankruptcy. It is no wonder many choose to cut corners on the environment instead.

To be a truly good citizen, Ikea would need to change its business model, increase its prices, and sacrifice profits and growth in order to do so. But short of that, there is already a lot more it could and should do.

For Ikea or FSC to single out only the suppliers named in this report or its purchases in Ukraine for scrutiny would be to miss the point spectacularly. Velyky Bychkiv and VGSM are not bad apples in an otherwise good bunch. They are fairly typical of SFEs and timber companies in Ukraine. In fact, most are probably worse. Ikea buys much more wood from other countries like Russia where illegality and corruption are rife, relying on the same flawed FSC systems to ensure those purchases are legitimate. The only reason similar issues have not been exposed in other Ikea supply chains is because no one has really looked. Ikea also cannot solve its problem by moving to another green label. FSC’s competitors are far worse.

Aside from pursuing the use of recycled wood much more vigorously, Ikea must instead use its huge influence to change FSC into an organisation fit for the 21st Century. Ikea – and FSC’s other key supporter, WWF – must set a timetable for change, and be willing to walk away if there is no real progress. In the meantime, Ikea must act urgently to put in place better systems of its own and use them to clean up its supply chains from Ukraine and elsewhere.

Addressing the impact of consumption on forests will also require more action by governments, both in forest countries and consumer countries like the EU. The future of the world’s forests lies in their hands, and there are lessons for them here too.

Ikea’s growing dependence on corrupt ex-Soviet Europe

Though Ikea’s success is commonly attributed to its funky Swedish design or self-assembly technology, a third factor has probably been more important. This is its ability to turn trees into furniture, more cheaply and consistently, and on a more massive scale, than any company has ever done before. It does this – to an extent few appreciate – by its pioneering exploitation of cheap labour, and plentiful, accessible forests in the former eastern bloc.

Ikea is the largest manufacturer⁽¹⁸⁾, the largest buyer, and the largest retailer of wood furniture on the planet. As a result, it is also the largest consumer of wood the world has ever seen. Ikea consumed 21 million cubic metres of wood in 2019.⁽¹⁹⁾ That is a line of logs which, laid end-to-end, would stretch seven times around the Earth.⁽²⁰⁾ Sixty per cent of the company’s sales are of wood products.⁽²¹⁾ To make them, Earthsight has calculated that its supplier factories currently consume approximately one tree every second.⁽²²⁾ But soon they will demand even more.

In order to sustain its rapid growth, Ikea has had to keep finding new sources of timber. Combing through the company’s published reports, Earthsight was able to establish that its consumption of wood doubled in the last decade. Every year, it has to consume 1.8-2.5 million more trees than it did the year before.⁽²³⁾ Ikea’s impact on the world’s forests is so large that one expert, observing satellite images of massive clear-cuts in Sweden, has said that “you can see Ikea from space.”⁽²⁴⁾

At least 60 per cent of Ikea’s total wood supply in 2018 came from Eastern Europe or Russia⁽²⁵⁾: the ex-communist world. Poland is the largest supplier from the region, followed by Russia. Twenty-one of Ikea’s own twenty-eight furniture factories are also in eastern bloc countries.⁽²⁶⁾ So are most of its third-party furniture suppliers. The company is especially dependent on forests in these countries to keep up with its growing appetite for wood. In 2014-2018, for example, consumption of Belarussian wood doubled, while the volume of Russian wood used leapt by 40 per cent.⁽²⁷⁾

A history of scandal

Even before the iron curtain fell, Ikea was sourcing furniture from behind it, in what have since been revealed to be highly controversial circumstances. In East Germany in the 1980s, Ikea was buying furniture which it was later forced to admit its staff knew was being made by political prisoners.⁽²⁸⁾ Around the same time, Romania's brutal communist-era secret police received covert six-figure payments from Ikea as part of the Swedish group's deals with a local furniture manufacturer. Documents which emerged in 2014 suggest Ikea was complicit in the arrangement.⁽²⁹⁾

Ikea’s toehold in the region prior to its liberation gave the company a head-start when it was opened up in the early 1990s. Scandals regarding Ikea’s operations in Eastern Europe have spread with it.

In early 2010, for example, it admitted that two of its senior executives – including the Swedish-born head of its entire Russian operations – had approved the payment of bribes in order to secure electricity supplies for its St Petersburg stores. Internal Ikea documents obtained by Swedish investigative journalists revealed that the bribes were part of a systematic plan to smear a local businessman and politician. Later that year, the scandal broadened as a number of former Ikea managers went public claiming to have been sacked after trying to fight widespread corruption within the company’s local operation.⁽³⁰⁾ In 2011, Russian authorities reportedly charged another Ikea executive with extorting a $225,000 bribe from a local businessman, after arresting his accomplice in a sting operation in a Moscow café as he accepted the cash.⁽³¹⁾ In 2019, Ikea’s controversial former Russian lawyer and fixer was reported by local media to be on the run, accused of arranging the payment of a $600,000 bribe to officers of the FSB, Russia’s secret service.⁽³²⁾

Scandals have also plagued Ikea’s efforts to move upstream into the logging industry in Eastern Europe. In 2012, environmentalists denounced the company for cutting high conservation value old-growth forest in the Karelia region in Russia. An audit the following year confirmed some of the allegations and led to the loss of the concession’s sustainability certificate; Ikea later sold it. In 2016 another scandal emerged relating to Ikea’s forestry operations in Romania.⁽³³⁾ In 2015, it had purchased 33,000ha, making it the largest private forest owner in the country. But it soon emerged that much of this forest had been bought up illegally by fraudsters before Ikea took control of it. The company remains embroiled in legal challenges as a result.⁽³⁴⁾ Journalists investigating the case also revealed how the sale of the land to Ikea involved complex, offshore arrangements, suggestive of tax avoidance, something for which the company is already notorious (see breakout box: Ikea’s billion euro tax avoidance).

A. The rotten beech in Ikea’s folding chairs

Most of Ikea’s wooden furniture is constructed from woodchip boards coated with paint or veneer. But one of its most iconic and bestselling products is made from solid, orange-hued beech. The instantly recognisable ‘Terje’ slatted, folding chair is an Ikea mainstay, providing space-saving seating in houses and apartments around the world. The company sells more than 1.5 million Terje chairs each year – around three every second.⁽⁴⁶⁾ At a recent visit to an Ikea branch in the UK, Earthsight found them specially displayed close to the checkouts, for impulse purchase. Terje chairs are cheap – retailing for just £13 in the UK, €13 in Germany and $25 in the US – and Ikea goes to great efforts to keep them that way. Many other well-known Ikea dining chairs like the Borje, Ingolf and Henriksdal are also made from Ukrainian beech, though they are substantially more expensive.

Over the past year, Earthsight has painstakingly traced these chairs from Ikea shelves back to the forests where they originate. Our journey led us all the way back to the Carpathians in Ukraine, where we found some of Europe’s last intact forests being illegally and systematically stripped to make them.

The Romanian component

Plimob’s smart new factory in the picturesque county of Maramures in Romania’s far north, is branded in the Ikea colours of bright blue and yellow. The company, one of the ten largest furniture exporters in Romania, sells 98 per cent of its goods to the Swedish firm.⁽⁴⁷⁾ Plimob claims to be Romania’s oldest furniture manufacturer⁽⁴⁸⁾, and has been supplying Ikea for over 30 years.⁽⁴⁹⁾ Legend has it that Ikea’s billionaire founder, Ingvar Kamprad, was personally involved in establishing the long-running relationship.⁽⁵⁰⁾

This cosy relationship with the Swedish furniture firm isn’t unusual in the industry in Romania. Many of Plimob’s competitors also sell over 90 per cent of their goods to Ikea. Gilmet, which produces baby cots, is dependent on Ikea for 95 per cent of its business.⁽⁵¹⁾ Ecolor, which produces chipboard furniture, sells to no-one else.⁽⁵²⁾ Another of the top ten, Sortilemn, is even owned by an ex-head of Ikea’s purchasing operations in the region.⁽⁵³⁾

Plimob produces nearly two million chairs a year, including all of the 1.5 million Terje chairs Ikea sells annually.⁽⁵⁴⁾ Ikea have repeatedly used this supply chain as a poster child for their efforts to protect forests. In 2017, and again in 2018, Ikea invited teams of journalists from around the world to visit the factory.⁽⁵⁵⁾ The journalists were also taken on a tour of a local forest to view the sustainable harvesting of beech to supply the chairs. Though most of the resultant coverage toed the positive line intended by Ikea’s public relations people, one of the journalists did find a crack in the narrative being sold.

When asked, Plimob’s boss admitted that not all the wood he uses comes from local forests of the kind the team toured. He said that increased prices for Romanian beech, combined with Ikea’s stubborn refusal to increase its prices, had eaten into Plimob’s margins and forced the company to look elsewhere for cheaper sources of raw materials. But the only other country he mentioned sourcing beech from was Switzerland.⁽⁵⁶⁾ It appears he chose to avoid mentioning a much more important supplier country, though it could be seen from his factory window. As Earthsight discovered, it turns out there may have been good reason for his reticence.

The Ukrainian component

A short walk across some open fields from the Plimob factory gates is the Tisza river, which marks the border with Ukraine. Beyond the river, and clearly visible from that factory window, are the lushly forested mountains of the Carpathians.

The Carpathians are home to the largest European populations of brown bears, wolves, chamois and lynx, as well as a third of all European plant species.⁽⁵⁷⁾ They stretch in an arc across four countries, with their lynchpin in South Western Ukraine. The highest and most densely forested part of the Ukrainian Carpathians are the Hutsul Alps of Rakhiv district, across the border from Maramures. This region, named for the Hutsuls, a local indigenous group, contains the highest concentrations of rare, threatened and endangered species in the entire Ukrainian Carpathians.⁽⁵⁸⁾

Located in this region is a small Ukrainian town of about 9,000 inhabitants, called Velyky Bychkiv. Controlled variously by the former Czechoslovakia, Hungary, and the Soviet Empire for short periods in the 20th century, the town and its surrounds were once also the site of a violent and unexpected resistance by the Carpathian Sich just before World War II, as the soldiers from the short-lived state of Carpatho-Ukaine were called. These days, Velyky Bychkiv is a sleepy place nestled in the foot of one of Rakhiv’s many steep valleys, frequently muddied by the floods visited upon it by the river.

We headed out of town in our dusty car, following the Tisza upstream into the mountains, and were soon driving through the territory of the lishosp, or state forestry enterprise, that is responsible for managing the forests in and around Velyky Bychkiv. Named for the closest town or village, as most Ukrainian forestry enterprises are, Velyky Bychkiv SFE is made up of more than 50,000ha of dramatic mountains and forest, and is home to several protected areas, rare animals and plants.

Timber harvesting and processing is the mainstay of the local economy in Velyky Bychkiv. By far the largest employer is a furniture company, VGSM. The company’s processing site, covering an area larger than 13 football fields, dominates the town. In the midst of the factory buildings, there is a huge yard filled with beech logs awaiting processing. Trucks loaded with more logs come rumbling down the access road in a cloud of dust every few hours.

Interviewed by local journalists, VGSM’s director explained that it was set up in 1992, specifically to supply Ikea.⁽⁵⁹⁾ Until 2008, it was owned by Ikea subsidiary Swedwood, but in 2008 Ikea closed the company, because of local corruption. The firm was then purchased by an Ikea employee of many years’ standing from Romania, who re-opened it in 2010 to produce beech chairs for the Swedish giant.⁽⁶⁰⁾ It is one of the largest timber processors in the country, processing 40,000 cubic metres a year, from which it churns out nearly half a million beech chairs.⁽⁶¹⁾ Nearly all of its production is for export to the EU⁽⁶²⁾, and 96 per cent is ultimately destined for Ikea.⁽⁶³⁾

VGSM purchases beech from State Forestry Enterprises across the Carpathians. Around 90 per cent of its supplies come from the local Velyky Bychkiv SFE.⁽⁶⁴⁾ Much of this is harvested by VGSM itself, which acts as a logging contractor for the SFE.⁽⁶⁵⁾ Data obtained by Earthsight show that nearly three-quarters (73 per cent) of all the commercial beech harvested in Velyky Bychkiv is sold to VGSM,⁽⁶⁶⁾ making it far and away the largest customer for the Enterprise, and placing it in a powerful position to influence its activities.

Shipment records obtained by Earthsight reveal that VGSM produces finished Borje beech chairs and Gerton beech tabletops for direct export to Ikea, and also sells raw beech, oak and ash to Ikea’s own furniture factory in Slovakia. However, we found that the bulk of its exports are semi-finished Ikea furniture parts or beech lumber which are shipped the short distance across the Tisza river to Romania, for completion by Plimob. This includes parts for various Ikea beech chairs, including Ingolf, Ekedalen, Henriksdal and Norrnas dining chairs, but also the iconic Terje.⁽⁶⁷⁾ Analysis by Earthsight indicates that of the two million chairs Plimob sends to Ikea each year, as many as half could be made from Ukrainian wood, including many of the iconic Terje chairs. VGSM ships enough wood parts to Plimob to make around 600,000 Ikea chairs a year, plus enough raw beech to make up to 400,000 additional Terjes.⁽⁶⁸⁾ Taken together, that’s enough seats to pack Wembley Stadium in London to the rafters more than ten times over.

Assembling the illegalities

Caught in the Act

The sun was starting to set as we walked over the final ridge and onto a small dirt track that led off the main logging road. We were surrounded by tall beech trees and could hear bird song in the canopy overhead. We launched the drone to help place our location, and pointed it north-east, towards our site of interest, following its flightpath on our screen. At first all we could see were large stretches of dense forest, burnished red and gold by autumn. Suddenly, as the drone flew closer to our location of interest, we saw it – a large angry gash on the hillside where a chunk of forest should have been. A couple of seconds later, we picked out another empty patch, mere metres from the first.

The sites we were looking at were among more than 100 patches of forest that Ukraine’s state environmental watchdogs had detected having been illegal logged during just one short period in 2018.⁽⁶⁹⁾

In order to balance the desire to protect forests with the need to provide steady supplies of timber, most countries strictly regulate logging, allowing trees to be cut only in limited numbers and in certain areas. This helps ensure that the number of trees removed is balanced by fresh growth, the overall forest is retained, and the most environmentally damaging logging (such as on steep slopes or close to rivers) is avoided.

In Ukraine, a widely abused loophole in legislation allows forestry enterprises to cut far more trees, and to cut younger trees, than would normally be allowed when following these principles. Under special circumstances, such as when forests have been affected by pests, natural disasters or are dying out from the effects of climate change, forestry officials can issue permits to conduct so-called “sanitary felling” of trees, allowing them to cut the affected trees to maintain the health of the rest of the forest.

The sanitary logging pretext has long been used to illegally fell trees in Ukraine. It has reportedly been the principal means of illegal logging since the late 1990s,⁽⁷⁰⁾ and studies have shown the use of selective sanitary cutting unrelated to natural disasters had increased six to seven times in the 15-20 years to 2011.⁽⁷¹⁾ A few years later in 2017, Earthsight-commissioned field studies showed how this loophole was being routinely abused by officials, and that as much as 40 per cent of all timber in Ukraine could be being illegally felled, using the sanitary felling pretext.⁽⁷²⁾ We also showed how by 2017, SFEs were harvesting more than double the amount of timber via sanitary felling than they were logging under their management plans. As sanitary felling is exempt from many of the controls normally placed on logging, it becomes the perfect way to circumvent environmental regulations, including cutting more trees than would otherwise be permitted.

In response to widespread abuse of this logging category, including in several national parks, the Ukrainian government enacted a new law to regulate where it could be carried out more strictly. This should have led to an overall decline in the amount of timber being produced from Ukrainian forests, but most forestry enterprises either ignored these laws completely or started inventing other pretexts to keep timber production levels high.

Velyky Bychkiv is a case in point. In 2014, Ukraine enacted a Wildlife Law banning sanitary felling in Ukrainian forests from April to 15 June each year⁽⁷³⁾, months identified as being especially important breeding periods for the unique animals and birds in the region (see breakout box: Why the ban on logging during the silence period matters). But during a routine visit to Velyky Bychkiv SFE in 2018, Ukraine’s State Environmental Inspectorate (SEI) found that the SFE had been unabashedly issuing felling tickets for sanitary felling during this ‘silence period’, allowing great swathes of forest to be illegally cut. The inspectors identified 109 different sites where illegal sanitary felling had been scheduled during the silence period.

More than half the 109 sites were earmarked for destructive clear cuts – which refers to the practice of stripping large areas of forests at once. This included clear cuts in beech forests, where the practice is forbidden during standard logging because of its damaging impact. Sixty per cent of the timber cut on these 109 sites was from beech trees – the same stuff the Terje chair is made from.

Documents obtained by Earthsight show that there is little doubt that much of this illegally harvested beech made its way to VGSM and into Ikea products. Ninety per cent of VGSM’s beech comes from Velyky Bychkiv, and almost all its production goes to Ikea. We found that almost a quarter of the commercial beech harvested on the 109 sites was even directly logged by VGSM as the logging contractor for its own use.⁽⁷⁴⁾ Earthsight analysis of auction data from the SFE indicates that more than half the beech being sold during the silence period was coming from these 109 illegal sites.⁽⁷⁵⁾ Given that VGSM purchased nearly three-quarters of all the commercial beech cut within Velyky Bychkiv in 2018⁽⁷⁶⁾, it is likely that much of the beech cut by other logging contractors on the illegal sites was also sold to them.

Earthsight’s research has found that over the course of that 2018 silence period, VGSM shipped enough beech chair parts for Ikea’s Henriksdal, Norrnas and Ingolf ranges to make approximately a quarter of a million chairs.⁽⁷⁷⁾ Barely a week after the silence period ended, on 20 and 22 June 2018, two shipments totalling 38 tonnes of Ikea Terje beech chair parts – enough for over 12,000 chairs – left the VGSM factory bound for Plimob, to be finished there and distributed to Ikea stores across the globe.

Tip of the iceberg

Earthsight’s own research and that of other NGOs suggests that what the SEI found in Velyky Bychkiv is just the tip of the iceberg. Petro Testov told Earthsight: “The Ecological Inspection in Ukraine rarely identifies serious violations in lishosps. The fact that it identified these violations means that the scale is big and there could be many more of them.” The more we dug, the more we found Testov was right.

We began by analysing the 10 sites found to have been illegally logged by VGSM in the 2018 silence period. Comparing satellite imagery with official maps and felling tickets, Earthsight found discrepancies indicative of other offences. The analysis suggests that the company cleared more forest than their felling tickets allowed, and logged areas outside permissible harvesting boundaries. In addition, satellite images revealed that one of the selective sanitary felling sites was an area of empty land that had already been cleared of forest long before, so it remains a mystery as to how VGSM recorded harvesting substantial volumes of beech there. One possibility is that the loggers cut beech illegally nearby and laundered it as having come from the site.

Then in the summer of 2019, a team of experts from local forest NGOs travelled to Velyky Bychkiv to investigate the legality of felling and shared a copy their findings with Earthsight.

The team studied a random sample of planned, active or recent logging sites within the Luzhanske forestry compartment of Velyky Bychkiv forestry enterprise, an area of beech forest close to VGSM. They found evidence of illegalities in six of the ten sites they visited. This included unjustified sanitary clearcutting and clearcutting outside boundaries of licensed areas. The team also detected skidding over riverbeds and obstructing them with logging residuals – highly environmentally damaging practices that have grave knock on effects for local watercourses and ecosystems.

One site studied was a beech clear-cut where a visit just prior to harvest by the experts had confirmed that 75 per cent of the trees were healthy and in no need of harvesting. Ukrainian rules on sanitary felling demand that 90 per cent of trees on a site must be unhealthy to justify sanitary clear cuts. The team also discovered clear-cut sites that did not have Environmental Impact Assessments (EIA), something which is required for all felling sites over one hectare by a law passed in 2017. One of the clear-cut sites lacking an EIA detected by the team was logged by VGSM.

Subsequent analysis by Ukrainian NGO UNCG for Earthsight shows that during 2018 Velyky Bychkiv SFE had logged on at least seven different sites of larger than one hectare without conducting an EIA.⁽⁸⁸⁾ When found out, the SFE claimed they had had to conduct emergency sanitary felling on these sites because of a big windthrow that had struck Velyky Bychkiv in 2017, even though windthrow is not prescribed as one of the exceptions for the EIA requirement in Ukrainian law. In total, 3,464 cubic metres of timber had been illegally produced from these sites without proper EIAs.

Hrynyk explained why it was so important for forestry enterprises to complete an EIA: “It is a vital opportunity for scientists, for conservationists to share their data and to point to instances where logging in some particular areas would be extremely dangerous for ecosystems, or for particular species. Without this rare species or rare habitats would be damaged or completely destroyed.”

A pattern of illegality

Though what we found happening in Velyky Bychkiv is shocking, an examination of some of VGSM’s other state-owned suppliers from elsewhere in the Ukrainian Carpathians suggests the situation is similar and may even be worse. Our research reveals that VGSM has purchased timber from at least sixteen other SFEs in Ivano-Frankivsk and Zakarpattia during the last four years. Earthsight is aware of evidence of illegalities in fourteen of them.

The UNCG research revealed violations of EIA laws at four of VGSM’s other suppliers; in 2018-19, the Khust, Perechyn, Bolekhiv and Kolomiya enterprises violated EIA laws on a total of 143 sites, from which 78,000 cubic metres of timber were harvested.⁽⁸⁹⁾ Earthsight investigators found that those same SFEs sold at least 2,990 cubic metres of timber to VGSM during that time.⁽⁹⁰⁾ At Bolekhiv, an SEI inspector was found guilty in 2018 for seeking a $7,000 bribe from forestry officials to overlook illegal logging.⁽⁹¹⁾ Until 2018, VGSM was also sourcing from Brosturyanske SFE in Zakarpattia, where there is an ongoing investigation alleging corruption and illegal logging by the SFE director.⁽⁹²⁾ A local sawmill owner Earthsight interviewed in 2019 claims to have personal experience of corruption at the SFE.⁽⁹³⁾ At Uzhgorod SFE in Zakarpattia, another VGSM supplier, an ongoing case alleges illegal logging and corruption by the SFE head and his boss at the regional RFMB. A suspect was detained by police in 2019 in relation to the case.^(94a)(94b) Ukraine Forest Watch field investigations have uncovered complicity by SFE officials in illegal logging in a number of other VGSM suppliers in recent years.⁽⁹⁵⁾

Earthsight also found that VGSM has bought beech from a supplier which has been called out for illegal logging in national parks, although Earthsight hasn’t been able to trace these particular practices to Ikea’s door.⁽⁹⁶⁾ In Spring 2019, the former Deputy Minister of Environment Vasyl Polujko issued a strongly worded statement appealing to the SAFR and local police to take action against employees of Kutsky forestry enterprise, which he said had been illegally cutting trees in Hutsulschyna National Park (the SFE denies this).⁽⁹⁷⁾ Earthsight spoke to Serhiy Komarchuk, at the State Environmental Inspectorate, who said it was a black-and-white case of ‘theft’ by forestry officials.⁽⁹⁸⁾ He also described how guards trying to protect the park had faced violence and intimidation (see section: An atmosphere of fear). Timber auction data obtained by Earthsight show VGSM purchased 605 cubic metres of logs from Kutsky during 2016-2018, and a further 168 cubic metres during the first half of 2019, while the scandal was at its height.

Earthsight shared its findings with Ikea, VGSM and Plimob in advance of publication. VGSM did not deny that wood from sanitary felling during the silence period had been used in Ikea products. It claimed that its activities and that of Velyky Bychkiv SFE did not constitute ‘illegal logging’ but were the result of ambiguities and inconsistencies in forestry laws and regulations. Regarding other SFEs, it said that these purchases either did not take place, or if they did the wood was not used for Ikea products. Plimob said all its own and its suppliers’ actions were legal. Ikea stated that they do not accept illegally logged wood in their products, and claimed that the silence period regulations only apply to confirmed animal breeding sites. For more information and Earthsight's commentary on the replies, see Company Responses.

B. Rotten to the core: Ikea’s cheap chipboard furniture and high-level corruption in Ukraine

State level complicity

The illegalities witnessed in Velyky Bychkiv and the other VGSM suppliers don’t take place in a vacuum. As Earthsight’s 2018 report Complicit in Corruption documented, corruption and illegality in the timber sector in Ukraine is pervasive and occurs at all levels. More recent evidence indicates little has changed.

Information uncovered by Earthsight shows that in Ivano-Frankivsk province for example, where VGSM purchased timber from three different SFEs in 2019, top officials from the RFMB currently stand accused of colluding with SFEs and private companies to issue fake logging permits and carry out illegal logging.⁽¹⁰¹⁾

In neighbouring Zakarpattia, where nine different VGSM suppliers including Velyky Bychkiv are based, the head of one of those suppliers, Uzhgorod forestry enterprise, is accused by prosecutors of conducting illegal sanitary felling in a protected area, using fake documents issued with the help of the head of the regional forestry board, Valery Murga.^(102a)(102b) In May 2019, police investigators on the case detained the head of Uzhgorod forestry and the deputy head of the RFMB.⁽¹⁰³⁾ In January 2020, former prime minister Honcharuk announced he had fired Valery Murga from office.⁽¹⁰⁴⁾ The investigation is ongoing; those involved deny wrongdoing.

Officials in these regional boards are responsible for signing off on key documentation like logging permits, annual harvesting plans, and export documents for all SFEs in the region – including Velyky Bychkiv. To what extent top RFMB officials knew of or sanctioned illegal activity in Velyky Bychkiv is not known but corruption at this level calls the legality of all the primary documents issued by these offices into serious question.

The case of VGSM and beech chairs is just one of several supply chains leading from Ikea back to Ukrainian forests. Most of Ikea’s Ukrainian raw material comes from other sources. Exploring some of these reveals how the beech chairs are no special case; indeed, other Ikea supply chains may have been dodgier still, and are linked to corruption at the very top.

Ikea and high-level corruption in the Yanukovych era

Between 2010 and 2014 Ukraine was under the control of notorious kleptocrat Viktor Yanukovych. On his overthrow in the Maidan revolution of February 2014, he left behind a vast luxury mansion whose grounds included a mock Spanish galleon and a private zoo. Evidence soon emerged that he had paid at least $2 billion in bribes during his four years in office.⁽¹⁰⁵⁾ Even before he was deposed, he used to boast to other ex-Soviet heads of state about how corrupt he was.⁽¹⁰⁶⁾ Much of the cash Yanukovych and his cronies stole from the state was laundered through shell companies in the UK, whose true beneficial owners were hidden behind further shells in offshore secrecy jurisdictions.⁽¹⁰⁷⁾

Earthsight’s 2018 report Complicit in Corruption documented how this exact model operated with regard to the corrupt exploitation of Ukraine’s valuable forests. One of Yanukovych’s closest associates – and regular tennis partner – was Viktor Sivets. Sivets was given the plum job of running Ukraine’s forest service, a job he exploited to the full. According to a report prepared for the World Bank by a top Ukrainian forestry expert which draws on the findings of an official investigation into Sivets, during his time in charge foreign companies wanting to gain access to Ukrainian timber produced by the State Forestry Enterprises under his control were required to pay ‘marketing fees’ for every cubic metre of timber purchased into offshore bank accounts controlled by SAFR top brass.⁽¹⁰⁸⁾

Earthsight spoke to Ostap Yednak, formerly from the timber industry, then an independent MP for several years, and currently on the Board of a Ukrainian advocacy network. He explained how the bribes worked to Earthsight. “It was evident for everyone in the market, and also to law enforcement authorities in Ukraine that not a single foreign company could access the market without paying an ‘agency fee’ or ‘marketing fee’ – which basically was a bribe – to some offshore company, or maybe bring cash to the authorities.

“It was a very cynical method used by EU companies or any buyer, whose main priority is to get the resource. How this resource is received is like a secondary question for them.”

Documents obtained by Earthsight revealed that one overseas timber firm which stood directly accused of complicity in these schemes was Austrian-owned Holzindustrie Schweighofer, whose Romanian mill was by far the largest consumer of Ukrainian logs at the time. Its Slovakian subsidiary, Uniles s.r.o., is specifically named by prosecutors as having been found during their pre-trial investigation to be one of four companies from which Sivets received illegal payments totalling €13.6 million during the period February 2011 to February 2014. The payments were sent to the Latvian bank accounts of three shell companies – two of them registered in the UK – before being routed on to the Swiss bank accounts of two Panamanian firms established by Sivets’ wife. Customs records obtained and analysed by Earthsight confirm that Schweighofer imported over 1.1 million tonnes of logs from Ukraine during the Sivets era, worth over $100 million. Around half of these were handled by Uniles.⁽¹⁰⁹⁾ Uniles told Earthsight that it only acts within relevant laws and regulations and strongly rejects any allegation that states the contrary.

During this time, Ikea was using wood from Schweighofer’s mill in Romania. It only ceased purchasing from Schweighofer in 2016⁽¹¹⁰⁾, most likely because of separate revelations regarding illegalities relating to its Romanian timber supplies. If Schweighofer was paying bribes for its Ukrainian logs, then Ikea was in all likelihood unwittingly selling products made from that very same wood.

The global chipboard giant

Schweighofer’s vast facility at Radauti close to the Ukrainian border is shared with another Austrian timber giant. Egger, which has a turnover in excess of €2 billion a year, is the second largest producer of wood-based panels in the world.⁽¹¹¹⁾ These kinds of cheap chipboard panels, covered in melamine or veneer, are what is used to make most of Ikea’s furniture.

During the Sivets’ era, Egger was Schweighofer’s largest customer.⁽¹¹²⁾ In what amounted to an efficient joint operation, waste from logs turned into sawn-timber at Schweighofer’s mill was used to make chipboard panels by its neighbour. Egger also imported 17,000 tonnes of logs of its own from Ukraine while Sivets was in charge at the SAFR.⁽¹¹³⁾ This Egger facility was also supplying Ikea at the time. In 2014, for example, Romanian records show purchases by Ecolor⁽¹¹⁴⁾, a Swedish-owned furniture factory in Romania which produces chipboard panel flat-packed furniture exclusively for Ikea. Ecolor supplies numerous cheap and popular Ikea staples, including the white melamine-coated Algot shelf and Stuva Grundlig kitchen drawer.⁽¹¹⁵⁾

While Ikea halted purchases from Schweighofer in 2016, it has continued to use wood from Egger’s mill next door.⁽¹¹⁶⁾ And Egger has continued buying from Ukraine. Indeed, after Yanukovych’s fall, Egger’s Radauti mill overtook Schweighofer to become the largest consumer of Ukrainian wood in the world. And while Sivets’ alleged bribery scheme was ended when the regime fell, there was much still to be concerned about regarding Egger’s purchases.

Our 2018 report revealed how kilometre-long trains loaded with logs illegally exported from Ukraine in contravention of its log export ban were arriving at Egger’s Romanian mill on an almost daily basis. One third of the logs it imported from Ukraine in 2017 also originated from state forestry enterprises whose senior officials were the subject of major ongoing criminal investigations for timber-related corruption. In one of these cases, Egger’s name was even mentioned in documents filed by prosecutors in Ukrainian courts (though it was not itself accused of wrongdoing). In an echo of Sivets’ earlier scheme, prosecutors alleged in 2016 that officials at three SFEs in Zhytomyr oblast were colluding to sell timber at below-market rates to two UK letterbox companies, who were then selling it on to Egger. The case remained open in 2018.⁽¹¹⁷⁾

Continued complicity

Following our report, Egger commissioned a third-party audit of its supply chains from Ukraine. In January 2019 it declared that this had concluded that the legality of its wood was ‘absolutely guaranteed’ and that its due diligence systems were fully compliant with the EU Timber Regulation (which demands risk of illegality is reduced to a negligible level).⁽¹¹⁸⁾ Ikea also investigated the Egger supply chain, using third party auditors as well as its own specialists, with full access to Egger’s internal supply chain records. They claim to have found no illegally sourced wood, though one Ukrainian supplier was blacklisted as its sub-suppliers were unable to provide documents of origin in due time.⁽¹¹⁹⁾

Other evidence suggests these auditors either may not have been looking very hard or had an odd way of assessing risk. There are also reasons to question the full independence of the selected auditors. For its audit, Egger hired the Swiss-based firm SGS, which was the very same company which had previously issued legality and sustainability certificates to many of the Ukrainian state-owned forestry enterprise suppliers highlighted by Earthsight as linked to evidence of illegality and corruption. It also has a track record of failing to spot serious abuses by Ukrainian companies it audits, including in Velyky Bychkiv and elsewhere.⁽¹²⁰⁾ Any criticism SGS had made of Egger’s purchases would have effectively been a criticism of its own auditing. In this light, it is perhaps unsurprising that it found nothing. Given’s SGS’s broader timber auditing record (see Part V), even less surprising.

Meanwhile, Egger’s claims to never have been importing logs covered by Ukraine’s log export ban were rather dramatically contradicted when an enforcement crackdown ordered by the Ukrainian Prime Minister in response to our report brought the flow of illegally exported logs to an almost complete halt, depriving Egger of 30,000 tonnes a month of raw material – enough to fill 600 railway wagons. The buried Audit Service report also confirmed that Egger’s largest supplier had been exporting logs illegally.

Though the stemming of these illegally exported logs dramatically reduced Egger’s supplies of Ukrainian timber, the company has continued to source from Ukraine. Its latest timber origin declaration – provided to Ikea – confirms that 14 per cent of the melamine-coated furniture chipboard it produced at its Radauti mill in 2019 was made with Ukrainian raw materials.⁽¹²¹⁾ Fresh investigation by Earthsight reveals that these continued imports are just as suspect as before.

Fifty miles east of Velyky Bychkiv, on the other side of the Ukrainian Carpathians, is Chernivtsi, a province in the Ukrainian Carpathians we previously visited to write our 2018 report. East of Zakarpattia and sharing a notoriously porous section of border with Romania, Chernivtsi is home to the south-easternmost section of the Ukrainian Carpathians. Most of its forests are spruce and fir. When we first spoke to activists and conservationists in Chernivtsi, they told us of a ‘mafia-like’ network of corrupt forestry and customs officials, set up to launder illegal timber and ship it over the border into Romania.⁽¹²²⁾

Chernivtsi has faced these problems for a while, as government and NGO sources show. In 2015, a Parliamentary committee was sent to Chernivtsi to investigate ‘peculiarities’ in the forestry sector at the time, particularly in Beregomet SFE, one of the SFEs in the area. It was suspected that timber suppliers had been colluding with foreign importers of timber to intentionally underestimate the quality of raw timber. An inspection by the State Ecological Inspectorate the same year exposed illegal logging, illegal sanitary felling, and violations of rules on export of timber by the enterprise.⁽¹²³⁾

This SFE and senior officials in the provincial RFMB have been repeatedly accused by local prosecutors of colluding to organise an illegal logging scheme involving timber exports. In July 2017, Earthsight’s own field sampling in Beregomet also showed officials had been conducting unjustified sanitary felling there. The experts we hired to conduct this study were physically threatened and chased out at gunpoint by SFE guards.⁽¹²⁴⁾

A few months later, Roman Cherevatyi, head of the Chernivtsi regional forestry board, was caught red-handed bribing the police tens of thousands of dollars a month to turn a blind eye to illegal logging in the SFEs under his watch, including in Beregomet.⁽¹²⁵⁾

Serious charges against Cherevatyi as well as Beregomet SFE are still being investigated, with fresh evidence continuing to be presented in court.⁽¹²⁶⁾ Despite this, shipment records obtained by Earthsight show Egger has continued to source from them. With logs now off the menu, Egger is instead buying wood chips and sawn wood. During 2019 Egger imported 68,766 tonnes of wood from Ukraine. More than half of this wood came from Chernivtsi, and the number one supplier was Beregomet SFE. The second largest supplier was a Chernivtsi-based company called Krastok, which we found is also connected to the Cherevatyi case.⁽¹²⁷⁾ Altogether, our evidence reveals that Egger is importing an average of 2,700 tonnes a month from companies directly implicated in that ongoing investigation.⁽¹²⁸⁾

Cherevatyi and other defendants in the case deny the charges against them. Earthsight spoke to Antac, a renowned anti-corruption NGO based in Kyiv which has looked into these investigations and attended Cherevatyi’s court hearings in 2019, to learn their significance.

“It is common for cases against high-ranking officials such as Cherevatyi to drag on for years,” Antonina Volkotrub, a senior investigator at Antac, told Earthsight. “The purpose of such delays could be that the defendants hope the statute of limitations will be reached, and the case will expire. In the Cherevatyi bribery case, proceedings have been ongoing since 2017 despite him being caught red-handed in the act of bribery by authorities. In our experience, such delays could also mean that the defendants could be trying to break the case as evidence tends to disappear over time and key witnesses may refuse to give testimonies after being pressured, or these witnesses may forget important facts with time.

“So just because the cases against Cherevatyi, Beregomet or Krastok have not reached final conclusions doesn’t mean there is not a high risk associated with these suppliers. Besides, apart from the court proceedings, we have come across numerous other red flags about suppliers in this region in the course of our research.”

One of these red flags is the buried report by the Ukrainian Audit Agency. The report, which as outlined in Part I was ordered by Ukraine’s former prime minister as part of a crackdown on illegal logging issued in response to Earthsight’s 2018 timber corruption exposé, showed that Beregomet SFE had likely forged documents to export round timber despite a ban on exporting round timber from Ukraine at the time. The report also stated that forest products from Beregomet SFE had been exported from Ukraine as fuel wood but had entered Romania as round timber in contravention of the log export ban. Earthsight’s research shows that Egger was the biggest buyer of timber from Beregomet during the period covered by the Audit agency’s checks (2016-2018).

The same audit report says the State Customs Service slapped Beregomet SFE with 8.5 million Ukrainian hryvnia ($265,470) in punitive penalties for these violations in 2018. According to the report, illegal logging that had caused damages of 25 million Ukrainian hryvnia ($780,796) had occurred in Beregomet SFE in just the first few months of 2018 alone. The Audit Agency’s report provides fresh evidence from a government body that during the time Egger was its biggest buyer, Beregomet SFE was involved in illegal logging and had breached the log export ban.

Volkotrub told Earthsight: “Ukrainian customs levied a large fine on Beregomet Forestry for selling timber with the help of forged documents to Egger in Romania. This is a very strong indication that the timber exported by that SFE was considered illegal by customs and thus can be called ‘of high risk’.”

Ikea admitted to Earthsight in November 2019 that Egger’s mill in Romania continues to be an important supplier of panels for its furniture, though it is unclear if Ecolor is among those still purchasing from it.⁽¹²⁹⁾ Earthsight was therefore unable to confirm which Ikea products still use Egger’s melamine-coated chipboard, but many still do, and there is a fair chance you will have heard of them.

Supplied with our findings in advance of publication, Egger stated it has “made every effort to ensure, independently of the State Forestry Resources Agency of Ukraine, that the origin of the timber supplied to it is clearly legal”. It noted that a number of third-party audits of its Romanian plant since our 2018 report, including one by Ikea, had found no major issues.

Once you start looking for it, you begin seeing it everywhere. On the back of that book you are reading. On your toilet roll or milk carton packaging. Prominently displayed on the online website of that company you bought your dining room set from. Somewhat bizarrely, you might even find it on the tags attached to the clothing you buy.⁽¹⁶¹⁾ The cuddly tree-tick symbol of the FSC has become rather ubiquitous. Countless companies selling many thousands of different products have come to rely on it when asked about their green credentials. They brag about it to customers and investors. The wording varies, but the message is always the same. ‘We are the good guys’, they say, ‘and here’s the proof.’

Some of these companies are aware of FSC’s problems, but don’t want to be burdened with the cost of fixing them. Some are simply liars, who don’t much care whether its label can be trusted or not. Some are innocently ignorant. But all of them reach the same conclusion: job done. And that is a problem. Because FSC’s failings don’t end in Ukraine. Nor did they start there. Its failures are far broader, span the globe, have been well documented for years, and many of them are arguably much worse.

The warning signs were there very early on. In 2000, with the FSC at the tender age of seven, a group of frustrated activists from forest countries got together to share their experiences. The resulting 158-page report, published by the Rainforest Foundation in 2002, was utterly damning. ‘Trading in Credibility’ catalogued a raft of fundamental flaws in the system, illustrating them with case studies from around the globe.⁽¹⁶²⁾ Sadly, little changed as a result. Simon Counsell, who had been involved in the founding of FSC and as executive director of Rainforest Foundation oversaw the production of the report, was interviewed six years later. “The analysis in Trading in Credibility is, I think, as true now as it was then”, he said. “If anything, things have probably got worse.”⁽¹⁶³⁾

In 2006, Counsell helped set up FSC-Watch, a website which has continued to track FSC’s failings ever since. As FSC has grown, scandals have proliferated, many of them even more damning than those documented in 2002. Rampant illegal logging. Clearance of vast tracts of precious rainforest. Beatings and murder of local communities. You name it, FSC has stood accused of complicity in it.

What has changed since that 2002 report is that the steady stream of scandal and the failure of FSC to meaningfully reform have led more stakeholders to leave. In 2018 Greenpeace, another founding member of FSC, finally walked, saying FSC had become “a tool for timber extraction”.⁽¹⁶⁵⁾ Progressive industry people who had been working on the inside for years have also abandoned it. Scott Poynton, a timber sustainability expert who spent decades handholding firms to achieve FSC certification, left in 2011, calling certification “a money-making racket” which had proved “an abject failure.”⁽¹⁶⁶⁾

Fraud and misleading claims

The final straw for Poynton happened during a visit to a wood processing factory in India, which like many other firms he had visited, had FSC certification but wasn’t actually using any FSC wood at all. This wasn’t fraud, but a fundamental flaw in FSC’s systems, its ‘chain of custody’ certificate. The internet is festooned with wood product manufacturers and retailers advertising these certificates and claiming them as proof of their sustainable credentials. This is deeply misleading, since all these documents prove is that a company is capable of keeping FSC wood separate from other wood. In fact, the vast majority of FSC certificate holders use no FSC-certified wood at all.⁽¹⁶⁷⁾ Exploiting understandable public ignorance and deeply confusing FSC rules, it is much cheaper not to bother.

FSC is feeding this misuse. It has repeatedly failed to make the simple changes to its rules which would prevent it.⁽¹⁶⁸⁾ Quite the contrary, its marketing for FSC Chain-of-Custody certification actually brags about how it can improve companies’ public image, allowing them to use the iconic FSC trademark in their marketing⁽¹⁶⁹⁾ – even though on its own, having FSC CoC is utterly meaningless. As Poynton explains, “a CoC system does not confer legality to logs. It does not confer sustainability to logs. It merely identifies logs.”⁽¹⁷⁰⁾

FSC has a powerful incentive not to fix this problem: most of its money comes from these certificates. FSC earned over $29 million from the annual fees paid by certified firms in 2018, 78 per cent of its total income.⁽¹⁷¹⁾ Four-fifths of this reportedly comes from chain-of-custody certificates⁽¹⁷²⁾, which now number over 41,000.⁽¹⁷³⁾ Almost a quarter of all these certificate-holders are now in China, which has seen by far the fastest growth of any country. More than 2200 new firms received FSC in 2019 – an average of six a day.^(174a)(174b) Earthsight has estimated that these Chinese factories pumped almost $6 million into FSC last year.⁽¹⁷⁵⁾

The problems with these companies are not limited to misleading marketing. They are also engaged in widespread fraud, systematically labelling uncertified wood – much of it of likely illegal origin – as coming from FSC-certified forests. In 2018, undercover journalists posing as potential buyers visited nine Chinese plywood factories of various sizes, all exporting to Europe. Seven of them openly admitted to putting FSC logos on shipments of uncertified wood. Company employees also alleged that European importers were aware of and even encouraged this kind of fraud.⁽¹⁷⁶⁾ Similar fraud has been found by undercover NGO investigators in other supply chains, even when they weren’t even looking for it. One Chinese flooring company marketing to the United States, for example, offered to put an FSC label on illegal wood flooring in exchange for a 10 per cent mark-up.⁽¹⁷⁷⁾

These cases are almost certainly the tip of the proverbial iceberg. The FSC database lists over 6,500 Chinese firms whose FSC CoC certificates have expired or been terminated to date and a further 300 currently suspended.⁽¹⁷⁸⁾ But an absence of transparency in the FSC system means it is impossible to determine how many of these were kicked out as a result of fraud. Though FSC requires certifying bodies and the ASI which police them to publish public summaries of their audits of FSC forests, there is no such requirement for CoC certificates.

FSC has also failed to address this fraud, as a result of pressure from its industry members. Currently, FSC does not track volumes of wood as they pass from forest to shelf, making it impossible to systematically assess possible levels of fraud. To solve this, in 2013 it launched a new ‘Online Claims Platform’, where companies could report volumes of production, purchases and sales of FSC-certified wood, allowing these to be reconciled against one another and ensure no more FSC wood is sold than is harvested. FSC’s original intention was to make the system compulsory, but after a backlash from the industry lobby, they hurriedly backed down and made it voluntary. Faced with entering data likely to expose systematic fraud they didn’t particularly care about, most companies unsurprisingly chose not to bother. Due to low take-up, FSC announced the retirement of the platform in January 2019.⁽¹⁷⁹⁾ A new, easier – and still voluntary – transaction verification system was abandoned little more than a year later, again because few companies chose to use it.⁽¹⁸⁰⁾

Illegal logging, human rights abuses and destruction of virgin forest

Even if the wood you buy from an ‘FSC supplier’ does in fact come from an FSC-certified forest, it doesn’t mean you are in the clear. There have been plentiful shocking cases of FSC-certified companies being involved in illegal logging, destruction of precious intact forests and human rights abuses.

Many such cases relate to the Congo Basin of Central Africa, whose countries are some of the most notoriously corrupt in the world. Before he became disillusioned with FSC, Scott Poynton’s firm was instrumental in achieving the first FSC certification of a logging company in Africa, CIB in Republic of Congo. In doing so, he worked closely with the country’s then forest minister, Henri Djombo. FSC became a big supporter of Djombo, describing him on its website as “a pleasant and open man” who had “dedicated his life to the service of forests and their sustainable management.”⁽¹⁸¹⁾ At a glitzy photo op in 2015, he signed a cooperation agreement with FSC’s director Kim Carstensen.⁽¹⁸²⁾

However, in 2019 evidence emerged of systematic illegality and high-level corruption by FSC’s good friend. Top executives of one of Congo’s largest logging firms told undercover EIA investigators that they had repeatedly bribed Djombo over a number of years with suitcases full of cash, in return for help avoiding sanctions for routinely violating forest laws and to illegally obtain logging rights.⁽¹⁸³⁾ After the EIA report was published, FSC’s glowing profile of Djombo quietly disappeared from its website.⁽¹⁸⁴⁾

Meanwhile, studies had found increased illegal poaching of wildlife in areas FSC-certified CIB was opening up with industrial logging, and one of its log truck drivers was jailed for trafficking ivory.⁽¹⁸⁵⁾ In 2011, FSC auditors’ claims that the company’s logging was sustainable were made a mockery of after CIB admitted in a press interview that production of high-value species in its concessions had plummeted.⁽¹⁸⁶⁾ In 2016, one of the largest forest fires ever observed in the rainforests of Central Africa burned thousands of hectares of forest logged in the previous few years by another FSC-certified Congolese logging firm, IFO. A study found that the fires originated near old logging roads.⁽¹⁸⁷⁾

Both CIB and IFO were certified by FSC despite the fact that they were involved in logging and degrading ‘intact forest landscapes’ (IFL): the last untouched tracts of forest left on the planet. Though such logging has long been known to be ecologically unsustainable, FSC has continued to allow firms logging such areas to remain certified. In 2017, an academic study found that degradation of IFL in the Congo Basin was far actually worse inside FSC-certified concessions than outside them.⁽¹⁸⁸⁾ Half a million hectares of IFL had been degraded by FSC-certified logging firms in the region up to that point.⁽¹⁸⁹⁾ Greenpeace, meanwhile, has published evidence of vast tracts of clear-cutting being permitted in intact forest landscapes within FSC-certified forests in Russia.⁽¹⁹⁰⁾ The advocacy organisation pushed for FSC to ban logging in IFL at its General Assembly in 2014, but the motion which resulted was watered down under pressure from timber industry members and was described by observers as “full of loopholes.”⁽¹⁹¹⁾

While FSC concessions in Republic of Congo were merrily degrading intact forest landscapes and overharvesting, those in neighbouring Democratic Republic of Congo (DRC) were engaged in far worse. In April 2011, local villagers protested the failure of DRC logging firm SIFORCO to respect earlier promises to build a school and clinic by blockading the company’s operations. The police the company called in to break up the protest went on a rampage. Several villagers are reported to have been beaten and arrested, six women including three minors raped, and property damaged and burned. One villager is reported to have died as a result of injuries sustained in the attack.⁽¹⁹²⁾ An independent investigation concluded that SIFORCO was indirectly responsible. It had paid the police and provided them with transport.⁽¹⁹³⁾ Another logging giant in DRC, SODEFOR, also received FSC ‘controlled wood’ certification in 2010 despite being involved in human rights violations as well as destruction of high conservation values. The certifier involved had failed to conduct even the most basic checks.⁽¹⁹⁴⁾

More recent cases from other parts of the world provide further evidence of FSC’s deep, structural flaws. FSC’s rules require it to cut all ties (‘disassociate’) with any firm found to have engaged in very serious offences, such as human rights abuses, illegal logging or clear-cutting large tracts of valuable forest. This is true even if those offences take place outside certified areas, but by a company related through ownership to the one with an FSC certificate. Recent years have seen multiple large firms ejected from FSC for breaching this and other rules, but none of them have been as a result of an FSC certifier or auditor’s own routine checks. In every case it has taken NGOs complaining about blatant and recurring evidence of illegality by certificate holders for the FSC to act.

In 2019, FSC disassociated from the Jari Group, one of the largest wood product exporters in Brazil, after an investigation by an independent panel determined that the firm had been involved in illegal logging and had violated the rights of traditional communities residing in its FSC-certified concession.⁽¹⁹⁵⁾ Accusations about the treatment of local communities had been raised with certifiers as far back as 2012, yet nothing was done at the time. The certificate was only suspended in 2015 after Greenpeace alerted FSC to the fact that an operation by Brazilian environmental police had found Jari had committed systematic fraud and timber laundering, as well as clearing jungle in a protected area to build a log port. The inspection panel report confirmed that Jari’s guilt was ‘beyond reasonable doubt’, but failed to explain how auditors had not identified and acted on the community rights violations earlier, or why their conclusions differed from those of FSC certifiers who had lifted the suspension of Jari’s certificate in 2017.

SGS, the Swiss FSC certifying body which mysteriously failed to spot the illegality at Velyky Bychkiv, has been the subject of repeated scandals over the years. In Indonesia, for example, SGS auditors overlooked plentiful publicly available information that a firm it was certifying was involved in clearcutting vast tracts of precious tropical forest. By the time FSC was forced to investigate as a result of a formal complaint submitted by Mighty Earth, an NGO, the company – Korindo – had destroyed 30,000ha – an area five times the size of Manhattan.^(196a)(196b)

While the Korindo case involved the company’s wider practices, plenty of other examples of serious wrongdoing going unnoticed involve the FSC certified operations themselves. SGS was also found to have mysteriously overlooked a litany of serious issues in its certification of a logging firm in Guyana, for example. In that instance, all the failures related to the certified area.⁽¹⁹⁷⁾ More recently, as outlined earlier in this report, in 2015, explosive evidence emerged of widespread illegal logging and purchasing of illegal timber by one of Europe’s largest sawmilling firms, Austrian-owned Holzindustrie Schweighofer. The company stood accused of being the main culprit behind rampant illegal and destructive logging in Romania, home to Europe’s largest remaining tracts of intact forest. Top officials were caught on camera in a sting operation by NGO the Environmental Investigation Agency, encouraging a prospective supplier to break the law in order to deliver them more wood. Inspections by Romanian officials found 165,000 cubic metres of illegal timber which had been supplied to Schweighofer from just one Romanian county.⁽¹⁹⁸⁾

Forced to investigate after WWF submitted a formal complaint, FSC hired an independent inspection panel which confirmed that Schweighofer had sourced from national parks, destroyed high conservation value forests and traded in illegal timber. Though not all the timber involved was FSC-certified, plenty was. The investigation found that some of Schweighofer’s own FSC-certified Romanian forests had been the subject of corrupt, fraudulent land transactions and that the timber coming from them must therefore be considered illegal.⁽¹⁹⁹⁾ Relevant court action had been ongoing for years before these forests were certified. In one case, the individuals involved had even been found guilty and jailed, yet the forest had remained FSC approved. Schweighofer’s owner had even admitted some years earlier that illegal logging was as common in FSC-certified forests as uncertified ones. This didn’t prevent his company from making “false and grossly misleading” statements implying that its FSC chain-of-custody certification somehow applied to all of its timber purchases, including the uncertified ones.⁽²⁰⁰⁾

Rather than investigating how its auditors managed to overlook these violations year after year, expressing contrition at cases like these, or making a real effort to learn from them, FSC bizarrely posits them as proof that its systems are working. In a section on how it goes about ‘ensuring integrity’ in its 2018 annual report, FSC claims that kicking Jari, Korindo and Schweighofer out proves how effective it is at identifying and rooting out wrongdoers.⁽²⁰¹⁾ But they were all actually exposed by outsiders. In fact, in every case the FSC’s own systems had signally failed to pick up blatant warning signs. It also took years for meaningful action to be taken, and FSC has bent over backwards to let the companies back in as soon as possible, claiming that the policy of association is not meant to be ‘punitive’.⁽²⁰²⁾

Even where certified companies are proven to have engaged in serious wrongdoing they have found it all too easy to hoodwink FSC and get back inside the tent. Indonesian pulp and paper giant Asia Pulp and Paper (APP) was kicked out in 2007 after NGOs exposed its involvement in clearing vast tracts of tropical forest, much of it illegally. Naively assuming that the company could nevertheless be trusted, FSC quickly began talks to readmit the firm; it was only when a journalist began digging some years into those talks that it was revealed that during the entire time APP had continued to secretly clear tropical forest through undeclared subsidiaries. Despite APP being blacklisted, one of its declared subsidiaries also managed to obtain FSC Chain-of-Custody certification and spend seven years selling FSC-certified diaries to a leading UK stationary brand before being exposed by environmental activists.⁽²⁰³⁾

In yet another damning example revealed almost accidentally during research for this report, Chinese flooring exporter Dalian Xingjia still has an FSC Chain-of-Custody certificate⁽²⁰⁴⁾, despite being exposed in 2013 for handling illegal Russian oak cut in precious Siberian tiger habitat. Bosses from its parent company had bragged on hidden camera about their illegal logging, laundering of illegal wood and bribery of Russian officials.⁽²⁰⁵⁾ The case led to multimillion-dollar fines for its US customer, leading flooring firm Lumber Liquidators.⁽²⁰⁶⁾

In 2015, authorities in Peru and the US launched a joint crackdown on the notorious timber carrier Yacu Kallpa, which they suspected of plying illegal Peruvian timber to the US. A staggering 91 per cent of all timber found on board during the bust – one of the biggest in Latin American history – was subsequently found to be illegal⁽²⁰⁷⁾. By 2017, the US Trade Representative considered the evidence against one of the Peruvian companies whose timber was on board – Inversiones La Oroza – strong enough to invoke forest governance provisions of the US-Peru trade deal for the first time, banning the firm from exporting timber to the US. The USTR’s investigation confirmed the previous findings of NGOs, concluding that La Oroza’s exports “were not compliant with Peru’s law, regulations, and other measures on harvest and trade of timber products.”⁽²⁰⁸⁾ In spite of all this, Inversiones still has a valid FSC chain-of-custody certificate and is allowed to sell wood with the FSC logo.⁽²⁰⁹⁾

The conflict of interest at the heart of FSC

German journalists investigating FSC for a damning documentary released in 2018 visited Republic of Congo, where one source involved in certification there told them: “I wanted to withdraw the certificate of a certain company, but when I met with the boss of that company, he got so angry that I left the hotel immediately. That night I feared for my life. When I told my boss about the meeting he also got angry. He said I was no longer to inspect that forest concession. The timber companies pay money to keep their certification. We timber checkers are independent in theory, but not really. Because in practice, we go to a site, do a check, and afterward nothing changes. The companies go back to cutting down many more trees than they are allowed to.”⁽²¹⁰⁾

This is the reality of FSC certification at the coal face. Certifiers are competing for business from the companies they certify, leading to a race to the bottom in standards. Staff working for certifiers who follow the rules too strictly get harassed or sacked; certification companies which do so go out of business. What NGOs have seen in Ukraine in this regard is par for the course worldwide. The likes of Counsell and Poynton have been pointing this out for years; tackling it was one of the main recommendations of 2002’s Trading in Credibility report. As Poynton said in 2015, “there really is no third party, independent auditing in certification, independent meaning no direct economic relationship between certifying body and company. Rather, certification is permeated with deep conflicts of interest.”⁽²¹¹⁾

Practical suggestions have been put forward for changing FSC’s systems to remove this fundamental conflict of interest, but they have been ignored, as the organisation ploughs forward, appearing intent only on expansion at almost any cost. When confronted by those same German documentary-makers about conflicts of interest, FSC’s only response was to stress the role of ASI in the system, the body tasked with ‘watching the watchdogs’: keeping the certifying bodies in line.⁽²¹²⁾ But ASI has very rarely exposed serious wrongdoing where it wasn’t alerted to it first by outsiders. It is also hardly independent itself, given that it is 100 per cent owned by FSC, and an important source of its funding⁽²¹³⁾, leading to yet another conflict of interest. The results of its audits of CoC certificates or certifier head offices also remain secret.

Undermining regulation

FSC’s problems matter, increasingly so. The timber industry remains a major driver of deforestation and forest degradation worldwide, which is in turn responsible for 10 per cent of climate-changing emissions.⁽²¹⁴⁾ While most attention has now rightly shifted to the role of large-scale agriculture in driving the clear-felling of forests, degradation of forests through logging is almost invariably the first step down the road which ultimately leads to clearance. And even supposedly sustainable ‘selective’ logging can dramatically decrease carbon storage and result in biodiversity loss on a par with conversion.^(215a)(215b) Where such logging is illegal or occurs in high value forests, as in the examples above, much more so.

There is increasing recognition across the political spectrum that to address the imminent threat of climate catastrophe, we need to reduce consumption. All serious environmental experts encourage a policy of ‘reduce, re-use, recycle’. Yet FSC remains stuck in an outdated mindset, happy to lobby for expansion of the logging business (as long as this expansion is certified), rather than attempting to temper this industry’s voracious appetite for new sources of timber. And it isn’t just coming from its industry members. In 2018, FSC board member and former chair Tony Sebastian was quoted in the press encouraging people to buy more virgin paper.⁽²¹⁶⁾ Sebastian is one of the environmental movement representatives on the FSC board. He also advocates dropping FSC’s ban on certifying wood from monoculture plantations which displaced natural forest since 1994. This is necessary to enable the notorious multinational logging giants in his native Sarawak, Malaysia, to get certification, despite having been responsible for perhaps the worst and fastest case of tropical forest loss the world has ever seen.⁽²¹⁷⁾

Rather than helping forests, FSC increasingly threatens to harm them, by absorbing pressure from consumers and progressive companies, and reducing the impact of timber legality laws put in place in major consuming nations in recent years. As the investigative NGO EIA has observed, from bitter, repeated experience: “Unfortunately, in too many parts of the world, organisations such as the FSC are merely certifying the status quo. This often undermines any meaningful reform efforts to truly protect the world’s forests, by instead offering governments and companies the false appearance of good forest management and sourcing practices.”⁽²¹⁸⁾

A particular bugbear for EIA is how in terms of legality, FSC’s requirements are now actually lower than those being demanded by law in major consuming markets such as the EU and US. These laws demand ‘due diligence’ from wood importers, of sufficient rigour in the EU to reduce the risk of the wood being illegal to a ‘negligible’ level.⁽²¹⁹⁾ But doing this requires a level of traceability, knowledge of supplier involvement in illegality and transparency that FSC’s systems simply don’t provide. FSC doesn’t require the publication of maps of the concessions it certifies, and makes no effort to track the timber which comes from them, though the technologies to do so are fairly cheap and readily available.⁽²²⁰⁾

FSC’s systems don’t reduce risk to a negligible level in theory, let alone in practice. And traceability isn’t the only reason. While governments and consumers increasingly follow the ‘precautionary principle’, FSC takes the opposite stance. The disassociation cases above are the rare exceptions. In the 27 years of the FSC’s existence, having issued 42,388 firms with Chain of Custody and a further 1,726 with ‘forest management’ certificates⁽²²¹⁾, it has opened investigations into a grand total of 13 companies⁽²²²⁾ – less than 0.02 per cent of the total. In Ukraine, it has refused to take action when FSC-certified state logging firms stand formally accused by authorities of serious corruption and illegal logging, claiming that it can only act once a guilty verdict has been reached.⁽²²³⁾ Its much-heralded Policy for Association also includes an onerous level of proof. Even if the ‘preponderance of evidence’ is that an FSC-certified company is guilty of heinous crimes like massive illegal logging and rights abuses, they cannot and will not disassociate.⁽²²⁴⁾

Laws like the EU Timber Regulation (EUTR) and the US Lacey Act have the potential to transform wood markets worldwide, but this potential is being increasingly undermined by FSC. Though its systems don’t actually ensure compliance, most companies and enforcement officials treat them as if they do. These laws have driven a massive surge in FSC certification. The area of FSC-certified forest in Ukraine, for example, doubled in the five years after the EUTR took effect.⁽²²⁵⁾ Pretty much every firm importing tropical wood into the US and Europe now proudly advertises its FSC certificate, even if most of its wood isn’t certified. Nearly every case of breaches of these laws uncovered by NGOs in recent years has involved FSC-certified wood or FSC-certified companies. Driven in part by these laws, FSC now encompasses around a quarter of the world’s industrial wood production^(226a)(226b), and likely a much higher proportion of the wood imported and sold in the US and Europe.

FSC is also taking the place of meaningful reforms in forest countries. The EU has been working for years with tropical timber producer countries to implement key improvements to forest governance, like increasing transparency, allowing civil society a role in decision-making, clarifying laws and implementing technology to trace wood to its source. The EUTR was meant to help encourage these countries to play ball, by blocking access to the lucrative EU market to those who don’t. Yet its efforts are stalling in many countries, and FSC is partly to blame.

In Gabon, where the EU has been trying to implement a relevant bilateral agreement for a decade, the government instead announced in 2018 that it would be demanding all its logging concessions to be FSC certified by 2022. Neighbouring Republic of Congo, which the EU has also been working with, is rumoured to be considering following suit. FSC said it wasn’t consulted by the Gabonese about the decision, but that it ‘strongly supported the ambition shown by the government’.⁽²²⁷⁾ The entire forest estate in Belarus – an important Ikea supplier where high-level corruption “occurs with impunity” and bribes are common practice⁽²²⁸⁾ – is already FSC-certified.⁽²²⁹⁾

Rather than address this problem, both FSC and Ikea are lobbying for changes which would make it worse. They are pushing for FSC-certified wood to be given a ‘green lane’ under the EUTR, effectively making it exempt, either in principle or in practice.^(230a)(230b)

The least Ikea should do

Short of radically changing its business model, there is still a lot more Ikea could and should do to address the problems highlighted in this report. But it still needs to think big if it is to get to the root of them.

Ikea’s stated goal is for its business to be ‘circular’ by 2030. But while this includes a commitment to make its products recyclable, it does not include a commitment to use only recycled materials to make them. Instead, Ikea’s policy assumes that FSC-certified wood is ‘renewable’, and therefore already in line with its goal.⁽²⁵²⁾ Once it reaches its aim of 100 per cent FSC virgin wood, as it is likely to by the end of 2020, it will consider its job done. But this is a false assumption. To be truly circular, Ikea must increase its ambition, seeking to eliminate the use of virgin wood altogether, starting with that originating from natural forests.

So long as it continues to use virgin wood, Ikea must do more to minimise the impact of this on people and the planet.

The implications for Ikea in this report are broad, and so the solutions must be too. Ikea cannot solve its problem by simply dropping VGSM, Plimob or Velyky Bychkiv as suppliers, or no longer buying Ukrainian wood. Arguably they shouldn’t even do that, at least in the medium term. These companies are important employers in one of the poorest areas of Europe. They are also arguably victims as much as villains in this story. Ukraine needs to be able to sell timber and collect taxes on it to fund its development. The case studies in this report are not bad apples in an otherwise good bunch: they are examples of more systemic problems almost certainly repeated many times in many other places. Ikea consumes almost ten times as much wood from Russia as it does from Ukraine and relies on the same flawed FSC systems to ensure those purchases are legitimate. It buys five times as much from Belarus.⁽²⁵³⁾

Ikea cannot currently rely on FSC to mitigate the impacts of its business on forests. It cannot even rely on FSC to ensure its wood was legally sourced, or avoid its money reaching the pockets of corrupt officials. But it also cannot solve its problem by moving to another green label. Environmentalists are united in their disdain for FSC’s competitors like PEFC and SFI, which they dismiss as greenwash.⁽²⁵⁴⁾ Indeed, the available evidence indicates that were they to allow wood from these other schemes then the risk of driving the worst abuses would increase.

Ikea must instead act swiftly to clean up its supply chains, using stronger standards and more rigorous and truly independent audits of its own, particularly in high risk countries. But it can have an even greater impact by persuading FSC to do better itself.

Reforming FSC

Though some of the supposedly environmentalist members remaining in the FSC are also complicit (see section: The Revolving Door, regarding WWF), the main reason for its abject failures is pressure from the industry lobby. Before its departure in 2018, Greenpeace bemoaned what it described as the ‘red sea’ of voting cards waved en masse by the industry members at FSC conferences, blocking any attempt at meaningful reform.⁽²⁵⁵⁾

Civil society groups have proved unable to make FSC change, either from the inside or from the outside. If it is to modernise and meet the challenges of the 21st century, the timber industry it serves needs to make it do so. And no-one has more influence than Ikea, by far the world’s largest consumer of FSC-certified wood, and one of its biggest supporters and donors.