The EU’s Deforestation Regulation, which passed on Dec. 6 last year, aims to prevent goods selling in the EU from contributing to deforestation and forest degradation after Dec. 31, 2020.
Under the new regulation, all companies involved in the trade of palm oil, cattle, soy, coffee, cocoa, timber, rubber and their byproducts must adhere to strict due diligence requirements
when exporting to or selling within the EU. The regulation is expected to take effect by the end of this year.
Malaysia’s timber export contributed RM23.25 billion to the country’s economy as of November last year, despite the drop in demand from Europe according to Malaysian Timber
Industry Board’s (MTIB) report. “Japan is the main export destination for Malaysian timber products, contributing 30.1% or RM2.1 billion in 2021,” The country’s timber industry still has a few obstacles to overcome, mainly with the requirements in certification of the European Union Deforestation Regulation (EUDR) that may limit the export-ing of timber products into multiple markets.
The country’s timber industry still has a few obstacles to overcome, mainly with the requirements in certification of the European Union Deforestation Regulation (EUDR) that may limit the export-ing of timber products into multiple markets. On Dec 6 last year, the EU reached an agreement on a new law to prevent companies from placing commodities — namely palm oil, soya, timber, rubber and cocoa — linked with deforestation and forest degradation into the EU market. (…) Previously, the local timber industry took almost a decade to achieve the Timber Legality Assurance System (TLAS) — to assure the legality of all timber and timber products exported from Malaysia — according to Sabah Timber Industries Association (STIA).
In light of the EU’s new deforestation regulation, Plantation and Commodities Minister Datuk Seri Fadillah Yusof recently announced that Malaysia may stop exporting palm oil to the EU.
Fadillah said the regulation would additionally burden Malaysian commodities exporters to the EU market, specifically the additional traceability requirements and data that must be provided to end customers based in the EU.
ESG
The Deputy Prime Minister furthermore stated there has been an increasing demand for Environmental, Social and Corporate Governance (ESG) investments worldwide, driven
by the global pressure to adapt to a changing climate and the search for more environmentally-friendly natural resources. In this regard, forest and timber certification plays a key role in keeping the balance between economic development and ecological integrity, he said.
He noted that the Malaysian Timber Certification Scheme (MTCS), a voluntary scheme operated by Malaysian Timber Certification Council (MTCC) had been recognised and endorsed by the world’s largest forest certification scheme, the Programme for the Endorsement of Forest Certification (PEFC) since 2009. Fadillah added that as of Dec 31 last year, a total of 5.81 million hectares of forest in Malaysia (equivalent to 31 per cent of the permanent reserved forests) have been certified under the MTCS, and 362 companies have been issued the PEFC’s Chain of Custody certificates. “Manufacturers, producers and exporters of timber products were anxious about having their business subjected to external audits, even though many of them were already under pressure from importers, most notably from Europe which wanted certified-timber products.”
They are seeking timber certification under the Malaysian Timber Certification Scheme (MTCS) that promotes sustainable forest management in their journey towards environmental, social and governance (ESG) as well as sustainable development goals. However, there is room for improvement as only about 10% of the 3,500 timber companies in Malaysia hold the Programme for the Endorsement of Forest Certification (PEFC) Chain of Custody (CoC) certificate, said the Malaysian Timber Certification Council (MTCC).
New EU import hurdles
In this regard, the Malaysian Timber Industry Board (MTIB) is currently focusing on efforts to prepare the timber industry for future challenges, mainly the certification from the European Union (EU). The board said that the EU Deforestation Regulation (EUDR) would present additional challenges for Malaysian timber exporters to the EU market:
“The regulation for deforestation-free products is an improper action by the EU, aimed at restricting the access of the timber and timber products market.
“These rules can affect small farmers and lead to rising prices and reducing production at a time when global inflation is soaring,” MTIB said in an email reply to The Malaysian Reserve (TMR). “Malaysia needs a period of time to prepare for the challenges since not all companies supply timber to the EU market,” it said.
Among the efforts undertaken by the MTIB are to obtain the EU recognition of the sustainable certification scheme and traceability system developed by the locals; build a panel of experts to form a sustainability framework to evaluate the EU requirements; and hold bilateral negotiations with the EU regularly to update on the latest situation. For the year 2023, MTIB will be implementing activities and programmes based on the five cores outlined in the National Timber Industry Strategic Plan (NTISP) 2021-2025, while focusing on the Shared Prosperity Vision (WKB) 2030, Sustainable Development Goals (SDGs), industry sustainability and the production of value-added products.
Author: Pieter Cleppe