Basic Policy of Timber Procurement

Sumitomo Forestry Group engages in responsible timber procurement activities in accordance with the Sumitomo Forestry Group Procurement Policy to deliver legal and sustainable timber. This procurement policy appeals to social and environmental considerations such as the provision of fair opportunities when selecting suppliers and the sustainability of procurement products. Sumitomo Forestry Group has revised the policy in 2015 to broaden the scope of all procurement products to include construction materials such as metals, ceramics and resin products in addition to timber.

Furthermore, in light of the changing social requirements, such as the Clean Wood Act, we revised our traditional timber procurement criteria to formulate Timber Procurement Standards as well as a Due Diligence Manual in March 2018.

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Promotion System of Timber Procurement Management

Sumitomo Forestry Group established the Timber Procurement Committee, chaired by the general manager of the Sustainability Department (formerly CSR Department) and comprising managers from departments in charge of timber procurement for the trading and housing operations. The committee discusses issues related to group-wide timber procurement, including procurement standards and risk assessments for illegal logging.

Timber Procurement Committee met three times in fiscal 2017 and conducted surveys at 106 suppliers to confirm legality of the import timber. In addition to new and existing suppliers, we conduct operations in a way to ensure legal compliance at least during the previous fiscal year as well as once no more than two years from the current fiscal year.

Sustainable Timber Procurement Initiatives

Promoting Initiatives Adhering to the Procurement Policy

Procurement Policy
Under the Sumitomo Group Procurement Policy, Sumitomo Forestry Group carries out due diligence on timber procurement to ensure that the procurement is performed in a sustainable manner with consideration of compliance, human rights, labor practice, biodiversity, and local communities.

Compliance
When performing due diligence, the Company ensures suppliers supply the timber that meets logging compliance requirements and use only the timber products made with raw materials that satisfy the requirements by consulting the provided information. Normally, the information include names and locations of the producers, held certifications or permits, procured product names, quantities of the products, used wood species, their logging sites, and their main buyers.
Additionally, the aforementioned information sorted by country, region, wood species, and timber type is then compared with the procurement standards stipulated by Timber Procurement Committee for a risk assessment against illegal logging. For timber products found at medium to high risk, the Company requests additional information from their suppliers, sends its investigators for on-site inspections, and implement measures to mitigate the risk.

Consideration for Human Rights, Labor, Biodiversity Conservation and Local Communities
Following items are checked, through supplier surveys and local interviews for the products that are being procured:

  • Whether the rights of workers and local inhabitants are abused in the area where we procure the products and their raw materials from. If this is the case, whether suppliers check their logging practices take place with consideration for these rights.
  • Whether the high conservation values forests are included in the area where we procure the products and their raw materials from. If this is the case, whether suppliers check their logging practices with consideration to forests with high conservation value.

Review
Continued efforts to improve the supply chain is encouraged through the reports on the progress of these activities from sections in charge of timber procurement.

Timber Procurement Management System

Timber Procurement Management System

* In addition, non-compliance matters are reviewed through surveys and interview assessments.

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On-Site Inspection in Romania

Several environmental groups have expressed their concerns over illegal logging in the forest management and timer production in Romania in recent years. In April 2017, we conducted on-site inspection in Romania, first gathering information through meetings with such organizations as the Ministry of Environment and Forests of the Romanian Government, Japanese embassy, ASFOR (Romanian Forest Association). Then, we observed the lumber manufacturing of the supplier and, with the guide of forest rangers, the primary harvest of logs that is actually transported to the plant. The supplier properly checks transport permits and the logs bundled on the trailer when receiving raw material logs at the lumber manufacturing plant. For example, the visiting staff was able to confirm that the supplier is thorough in segregated management to make sure not to use logs brought in that exceeds the amount permitted and it is engaging in measures that include reporting to the forestry authorities. We received an explanation of forest management from a forest ranger on the harvest land and checked the actual hammer stamp mark and process when loading the trailer in the field. In addition, we confirmed the care in work to preserve the rare forest ecosystem by observing the forest conservation areas under the jurisdiction of Romania.

Inspection of harvest land still covered in snow

Check when loading the trailer

Properly checking the delivery at the plant using tablet terminals

Segregated management of round wood beyond the amount on the permit

 

On-Site Inspection of a Concrete Form Plywood Manufacturing Facility in Indonesia

In recent years, environmental NGOs have raised concerns about plywood manufactured in Indonesia in terms of the origin of the raw material logs and whether they are appropriately harvested or not. In Indonesia, there is a system called SVLK (Indonesian Timber Legality Assurance System) where timber product exporters must register and obtain SLVK operator certification issued by an independent accreditation organization that has been approved by a national certification committee. In addition, timber product exporters obtain a timber legality certification document (V-Legal Document), which indicates that legal compliance of the supply chain, from the harvesting of the logs to the processing of timber at the plants and export, has been audited and confirmed by the above-mentioned independent evaluation and accreditation organization. In July 2018, Sumitomo Forestry conducted an on-site inspection of a supplier’s concrete formwork plywood manufacturing plant and other facilities. In a log yard located close to the logging area were logs with QR code tags, with which we confirmed that logging area information can be retrieved on Indonesia’s Ministry of Environment and Forestry website. Legal document (V-Legal) also shows QR code and we confirmed that they indicate the same logging area. In addition, after logs are transported to the log yard of the factory, we were able to trace the course of transit and logging area information using these QR code tags by accessing the website and V-Legal document.

Checking log tags at the plant’s log yard

Checking tags at the interim log yard

At the logging company, confirming the logging area from the tag information (1)

At the logging company, confirming the logging area from the tag information (2)

Response to the Clean Wood Act

The Act on Promotion of Use and Distribution of Legally-harvested Wood and Wood Products (the Clean Wood Act) was enacted in May 2017 for the purpose of encouraging use of timber from trees harvested in compliance with the laws and regulations of Japan and other countries and to create a market where illegally logged timber which damages the environment is not made available. Sumitomo Forestry has registered the Timber and Building Materials Division which conducts the import and sales of timber as a Type 1 Wood Related Entity in November 22, 2017 as the First Clean Wood Act Registration. Sumitomo Forestry Wood Products has subsequently been registers as a Type 1 and Type 2 Wood Related Entity (purchase and sale of timber) as of February 20, 2018. We have also registered the Housing and Construction Division (March 16, 2018) and Sumitomo Forestry Crest (May 9, 2018) as Type 2 Wood Related Entities as part of our efforts to procure legal timber throughout the entire Group.

Registered Wood Related Entity Type Registration Date Registration Number Agency Issuing Registration
Timber and Building Materials Division Type 1 Wood Related Entity November 22, 2017 No. JIA-CLW-Ⅰ 17001 Japan Gas Appliances Inspection Association
Building Materials Procurement and Logistics Department, Housing and Construction Division Type 2 Wood Related Entity March 16, 2018 No. HOWTEC-CLW-Ⅱ 0001 Japan Housing and Wood Technology Center
Sumitomo Forestry Wood Products Type 1/Type 2 Wood Related Entity February 20, 2018 No. JAFTA-CLW-Ⅰ Ⅱ-3 Japan Forest Technology Association
Sumitomo Forestry Crest Co., Ltd. Type 2 Wood Related Entity May 9, 2018 No. JIA-CLW-Ⅱ 18002 Japan Gas Appliances Inspection Association

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Timber Procurement Seminar Held

With increasing global concern for deforestation, corporate initiatives related to the procurement of tropical timber are being scrutinized. Consequently, we held a seminar with an invited expert entitled, “Timber Production and Management of Sustainable Forests in Indonesia and Malaysia” on October 31, 2018, with 32 participants in charge of international logistics marketing, which handles tropical timber and other imported timber. At the seminar, participants learned the latest information on both countries’ timber legality assurance systems, the current situation related to the timber certification system in the region, and management of sustainable forests.
Given the rapidly changing social and environmental issues surrounding our businesses, we offer these seminars and trainings aside from the cross-section trainings provided by Human Resource Department.

KIKORIN-PLYWOOD

Lecture by Dr. Hiromitsu Samejima, research manager of IGES
(Institute for Global Environment Strategies)

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Promotion for Sales of Environmentally-friendly KIKORIN-PLYWOOD

Sumitomo Forestry has set a ratio of products that use plantation trees and certified timber from the procurement of import wood board products such as plywood as a 2020 target and it strives to expand this business. Plywood that uses 50% or more plantation timber, FSC-certified or PEFC-certified timber is marketed as KIKORIN-PLYWOOD, and some of its revenue is invested in plantation businesses in Indonesia.

KIKORIN-PLYWOOD

KIKORIN-PLYWOOD

target

Sales of KIKORIN-PLYWOOD

2013 2014 2015 2016 2017
31,100m³ 31,900m³ 28,100m³ 30,200m³ 46,255m³

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Participation in JBIB

Sumitomo Forestry participates as a member in the Japan Business Initiative for Biodiversity (JBIB), made up of companies which engage in activities which aim to conserve biodiversity. In fiscal 2017, we worked to research sustainable raw material procurement in the raw material procurement working group.

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Communication with Our Business Partners

In the distribution operations of timber and building materials, given that it is characterized as being a regional industry, Sumitomo Forestry maintains close communication with the suppliers and purchasers of timber and building materials in each region.

Main Communication Activities with the Business Partners of the Timber and Building Materials Division

Name/scale Description
The Sumirin club –a membership organization to communicate with regional suppliers of timber and building materials
Number of members: 873 companies (as of July 2017)
Established in different regions around Japan as a forum for communication with business partners for distribution operations of timber and building materials. Training sessions and informational exchange meetings are held two or three times a year in each region, allowing members to deepen mutual friendships, promote product R&D, enhance production and distribution, and support improvements in the industry as a whole.
Publication of Building Materials Monthly
Monthly print run of approximately 4,200 copies
With a history spanning more than half a century, this monthly magazine publishes timely information and topics regarding timber, building materials and the housing industry from a distinctive perspective unique to Sumitomo Forestry.

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CSR