To support SMEs in the NSR timber and biomass industry to implement responsible sourcing in a more efficient and effective manner. The goal is to increase the competitiveness while also reducing negative environmental and social impacts of global supply chains.  

With an innovative approach we are combining latest technologies, like Blockchain and forensic analysis, into a completely new sourcing solution, ResponsibleSource, for sourcing of commodities such as timber and biomass.

ResponsibleSource (RS) is an innovative service model that empowers SMEs trading in timber and biomass to manage supply chains using a decentralized process combining cloud-based information & data management, Blockchain technology and a risk-based verification system. This will lower transaction costs and eliminate bottlenecks preventing SMEs from responsible sourcing.

The project will be structured in 4 work packages with specific activities: 

1 DEVELOP VOLUME VERIFICATION SYSTEM USING BLOCKCHAIN TECHNOLOGY   

Research and development required to build a Blockchain system with attributes to make a tamper-proof supply chain traceability system, including application of timber manufacturing conversion rates. 

- Develop Blockchain database for timber and biomass 
- Develop methodology for conversion rates    
- Apply conversion rates to Blockchain ledger   
- Adjust based on pilot test 

2 SUPPLY CHAIN MANAGEMENT PLATFORM AND RISK INFORMATION DATABASE   

Develop online supply chain management platform, including integrating data regarding timber legality risks from NEPCon Sourcing Hub website and Blockchain ledger    

- Develop Risk Information Database   
- Develop online supply chain management platform - a user interface for information and document tracking, and integrate it with Blockchain ledger and risk information database   
- Adjust as needed based on pilot test results     

3 VERIFICATION SYSTEM  

Develop protocols for verifying material using risk-based auditing and forensic technologies across the supply chain. The system will include protocols for when and where to use in-person verification, based on risky points identified in the supply chain.   

- Develop protocols for risk-based auditing system that links to the supply chain mapping platform   
- Develop protocols for applying forensic technologies to verify physical product attributes and earth observation technologies to verify forest management attributes from the timber origin   
- Pilot tests - Conduct pilot tests with 6 company partners      

4 SCALING STRATEGY AND IMPACT STUDIES   

- Collect and analyse data on limitations of current timber and biomass supply chain certification and management systems using interviews and focus groups   
- Collect and analyse data on industry partners’ experience with RS  
- Develop an impact assessment of industry partners’ RS experience   
- Revise the scale-up plan and other materials based on the foregoing activities and pilot test results   

The expected outcome is an innovative system and service model ResponsibleSource that empowers companies trading in timber and biomass to manage supply chains from responsible sources using a decentralized process combining cloud-based information & data management via an online platform (i.e., the system), combined with a risk-based verification system that requires manual verification only at critical points of risk in a supply chain (i.e., the service).   

This project will place the NSR timber and biomass industries in the technological forefront of responsible sourcing and therefore be in a strong position for trading with major players in the global timber and biomass marketBy applying RS, companies will minimize the risks of counterfeit goods by protecting against unknown product substitutions made by suppliers. This will strengthen the brands and trustworthiness of companies and contribute to increased consumer confidence.

Today’s information-rich marketplace allows products to be differentiated not only by intrinsic qualities and prices, but also by their conditions of production and, particularly, their social and environmental impacts. Firms must manage supply chain information to effectively source responsibly produced inputs to avoid both reputational and regulatory risks. Contemporary companies have numerous interacting supply chain objectives, which they address with silo-ed, disconnected tools, with varying results. Amassing and organizing sufficient trustworthy information on supply chains to allow firms to manage production impacts and reputational risk is difficult, leading to several unmet needs for industry and society.  

We have described the need on an industrial and societal level:  

Industry  

1. Regulatory risks - According to the EUTR (EU Timber Regulation), effective from March 2013, all companies importing wood or wood products to EU must have a due diligence system (DDS) in place. The core of the due diligence concept is that companies must conduct a risk assessment and risk minimization to prevent the import of illegally harvested timber in their supply chain. If companies accidentally import wood products from illegally harvested sources, there is a huge risk that they will also support corruption in the countries concerned. In addition, illegal logging has major consequences in many places in the world, including the destruction of ecosystems, loss of valuable natural heritage, increased CO2 emissions, breach of local and forest-dependent people's rights, etc. Companies can choose to develop their own DDS or to only material with a 3rd party certification, such as FSC (Forest Stewardship council), where legality is included as part of the certification standard. However, it is rare that any company can purchase certified content for 100% of their supply chains, as enough certified material is simply not available. R will help companies to deal with regulations such as EUTR in a more efficient and effective way. 

2. Limited Volume – 3rd party certified material that verified legality & other sustainability aspects (such as Forest Stewardship Council) is often unavailable for all required inputs. ResponsibleSource will open new markets via a risk-based approach that can be applied to all material - certified or not.  

3. Resource Intensive – Global supply chains are often very complicated and non-transparent, making supply chain management extremely time-consuming. On-site auditing systems for certified material are extremely resource intensive, requiring audits at all points in value chain. ResponsibleSource will reduce complexity and improve transparency in supply chains, while increasing resource efficiency by requiring auditing only at points of identified risk in a supply chain.  

4. Manipulation Risks - Current supply chain management practices rely on easily falsified paper trails, leading to artificially inflated volumes and product substitutions. ResponsibleSource’s use of Blockchain for volume reconciliation, combined with forensic technologies to verify physical attributes of timber, will provide tamper-resistant digital product tracking.  

 5. Technological Siloing–Current systems do not effectively integrate product certification, regulatory compliance, logistics, and supply chain tracking in a coherent and easy-to-use supply chain management system. ResponsibleSource will allow companies to integrate all aspects into one system that works with day-to-day business management, lowering transaction costs, increasing efficiency, and avoiding risks arising from communication breakdowns.  

Society  

1. Forest Conversion-Current sustainability certification systems focus on low-risk production areas, unintentionally devaluing environmentally critical tropical forest areas, which are often converted to types of land uses. RS will help firms reach sources in other regions, increasing supply chain flexibility while supporting forest-dependent people's livelihoods. By lowering transaction costs for sustainably produced materials, the initiative would also provide lower-cost options for global consumers, helping scale up responsible production.  

2. Illegal timber trade–Illegal timber trade remains a challenge with severe impacts on global markets and on communities and environments in the countries of harvest. Ensuring legal sourcing and production of timber will reduce negative impacts of ongoing illegal production and have positive impacts on national economies of impacted countries.  

3. Corruption and Fraud–Easy manipulation of current supply chains feeds illegal logging provides opportunities for bribery, funds armed conflict and causes significant loss in government revenues. By providing more reliable means of tracking supplies, ResponsibleSource would help limit these significant negative economic and political impacts in high-risk producing countries.  

Some minor cases of fraud regarding timber regulations or certification systems have been made public; the situation could easily explode if a major, international brand is found to have been using a certification label or compliance with environmental regulation as means of “greenwashing” their supply chain. As a result, firms are now looking for robust alternatives they can manage themselves, avoiding incurring additional reputational risks by connecting their reputation to an external certification systems’ brand.  

When the ResponsibleSource service is in place, it can be applied to a whole range of commodities such as palm oil, soy, cocoa, cotton etc. 

NEPCon work with many industry players in the North Sea Region (365 for FSC COC for timber, 21 for SBP for biomass). We have been in contact with potential partners already and will select final partners once the concept is approved.

NEPCon work with many industry players in the North Sea Region (365 for FSC COC for timber, 21 for SBP for biomass). We have been in contact with potential partners already and will select final partners once the concept is approved.