Inside APRIL’s Due Diligence Process for Wood Suppliers
- All suppliers, including open market, are subject to strict due diligence checks to ensure APRIL’s sourcing does not contribute to deforestation or bad practice in the industry.
- APRIL’s sustainability team reviews historical satellite imagery of supplier concessions to ensure they comply with the June 2015 deforestation cut-off.
- Regular monitoring continues once a supplier is accepted to ensure they continue to comply with standards.
Before APRIL Group buys logs or woodchips from all suppliers, including open market supplier, that company and its plantations must undergo a strict due diligence process. These checks ensure that suppliers are aligned with APRIL’s sustainability and workers’ rights standards, as well as with industry and regulatory requirements. This process is critical to keeping APRIL’s supply chain deforestation-free and aligned with global best practices.
In this conversation, Head of Sustainability Operations Aldo Joson explains how APRIL ensures its suppliers meet strict sustainability and social responsibility standards. He outlines the steps APRIL takes to assess new suppliers, monitor compliance, and uphold its no-deforestation commitment.
Q: Why does APRIL conduct due diligence on open market suppliers?
A: APRIL’s priority is to ensure its supply chain remains deforestation-free and socially responsible. There’s no point in operating to high standards on our own concessions if we are outsourcing bad practice. It would also put us at risk of non-compliance with local regulations, and international regulations such as the upcoming EU Deforestation Regulation (EUDR). As a major regional industry player we also recognise our responsibility to do our part to uphold standards more broadly.
Q: Where does APRIL source raw material such as logs and woodchips from?
A: Most of our long-term suppliers are located close to our own concessions in Riau Province in Sumatra, but there are three large suppliers in Kalimantan with concessions totalling nearly 380,000 hectares which we recently brought into this long-term supply group. All suppliers to APRIL are listed on our online Sustainability Dashboard.
We work with a small number of open market suppliers to build in some flexibility and as a top-up to ensure the mill runs at capacity, even though this wood source is typically more expensive. Outside of Indonesia, these open market suppliers include plantations in Malaysia, Vietnam and Thailand. The proportion fluctuates from year to year, but last year 8.7 percent of logs from nine individual suppliers, and 4.2 percent of woodchips from eight suppliers came from the open market.
Q: What is the first step in the due diligence process?
A: Before we begin purchasing from a new supplier, APRIL’s sustainability team runs a range of due diligence checks on them. Most importantly, we need to be sure that the source will not violate our no deforestation commitment that originates from our 2015 Sustainable Forest Management Policy 2.0 (SFMP 2.0). This invokes a strict no-deforestation cut-off date of June 2015, and any supplier with land that was converted from forest to agriculture after that date is automatically excluded.
Q: How does APRIL verify land use history?
A: We use historical satellite images to determine when forest conversion originally occurred and what the land has been used for since. If significant forest regeneration occurred after 2015 followed by conversion to plantation, that supplier is still ruled out.
Q: What other risks are assessed in this initial acceptance or rejection decision?
A: Beyond the deforestation test, the due diligence team applies a broader risk matrix which takes in whether the supplier has procedures for protecting conservation areas and how frequent fire instances are in their concessions. It also includes workplace practices such as employee grievance resolution, child and forced labour.
One issue APRIL pays particular attention to is the proportion of a supplier’s land bank that is subject to land disputes and whether they have a roadmap for engaging with local communities to resolve those disputes. Land tenure rights and land claims are an important and sensitive issue so if a supplier won’t open their books regarding that, then we usually step away. That’s a major red flag.
Q: Is the due diligence only desk-based?
A: No. We also conduct site visits to verify findings to the extent that is possible. The full assessment process typically takes a few days or weeks and all these factors contribute to an overall risk score which informs whether they can be accepted as a supplier.
Q: Once a supplier is accepted, does due diligence end there?
A: No, it is an ongoing process. We have a mechanism for monitoring our suppliers’ land use activities and investigating complaints. For each supplier, we set up an automatic system to monitor satellite images of concessions for signs of conversion activity. The system can identify land cover change (LCC) of an area as small as one square kilometre which automatically flags any suspicious activity for review. To confirm what is happening on the ground, we then send out a team to visually inspect the area within four weeks of an alert.
Q: What happens if violations are found?
A: If the supplier is confirmed as carrying out conversion, we pause any purchases and work with them to halt the activity and restore the area. If they are unwilling to do so, we will drop them as a supplier. Our comprehensive SMFP 2.0 policy, brought in ten years ago, included rigorous due diligence and monitoring. This commitment led to a clear improvement, with some supplier due diligence scorecards rising from 90 percent to 95 percent. We see this progress as an opportunity to continue refining our supplier network with constructive practices.
Q: How else does APRIL support open market suppliers?
A: There are also regular touchpoints by the APRIL sustainability team to support our suppliers in upholding and raising standards. Capacity building is carried out through annual visits where gaps and opportunities for improvement can be addressed. We also provide training as part of this ongoing support. The due diligence checklist has also been periodically updated and improved, adding new requirements such as fire equipment, grievance mechanisms, prohibition of child labor, GMO organisms, and restricted chemical use.
Q: Who verifies that APRIL’s process is effective?
A: The risk assessments and APRIL’s responses to allegations of deforestation in our supply chain are subject to assurance by KPMG PRI. They submit an annual report to the independent Stakeholder Advisory Committee (SAC), the body set up under SFMP 2.0 to oversee the company’s sustainability commitments. KPMG PRI’s assurance reports and the SAC’s responses to them are published on APRIL’s Sustainability Dashboard.
This all adds up to a rigorous, independently verified process for assessing our open market suppliers and monitoring them over time to ensure they continue to uphold our standards and expectations of our stakeholders.
Find out more about our Ten Years of APRIL’s SFMP 2.0 report.
