TFT’s Due Diligence Review

Conclusion and recommendations from TFT’s Due Diligence Review Report July 2018

« SODEFOR engaged TFT to complete a third party Due Diligence review of its concessions and operations in January 2018, and this was carried out in June and July 2018. The purpose of our engagement with SODEFOR was to identify key areas for improvement in the Company’s current forest management plans and operations covering environmental and social aspects. On the basis of the findings we were asked to propose alternative approaches and recommendations which, if adopted, would enhance the SODEFOR’s Forest Management operations. »

1. General Conclusion

SODEFOR’s forest management assessment took place in an atmosphere of trust and full transparency. TFT team had access to all the desired information, as well as access to the selected sites of operations. This assessment revealed the following conclusions:

  1. In terms of the legal compliance of operations: efforts are actually made by the company to carry out management operations in accordance with legal and regulatory requirements. The development of management plans is an example to be cited in this particular context of operations. However, gaps were observed in particular:
    1. Exceeding the volumes authorized by the operational teams. However, for almost two years the company has responded by integrating into its operating system traceability alerts that can proactively inform operating teams when volumes harvested are closer to authorized volumes.
    2. For some of concessions, SODEFOR has not harvested wood for nearly four years, which is contrary to legal and regulatory requirements. Indeed, extensive investigations enabled to explain that these are due in particular to the international crisis in the timber market, but also to the transition that must be made by the company, particularly the development and implementation of the forest management plans.  The company has to revise and adapt its strategy taking into account new economic realities, but also new requirements.
  2. On the socio-economic aspect, it is undeniable that the company’s presence, especially in such remote areas, has a real impact on the human level. SODEFOR, despite the financial challenges that particularly have impacted their business and the wood sector as a whole have maintained a stong for example Mai-Ndombe (health care provision, construction and rehabilitation of school infrastructure, assistance social services, etc.). This presence is without question providing a positive impact. On the other hand, the assessment also revealed that the company is facing challenges in proactive social management as well as the implementation of social investments for the benefit of neighboring communities. SODEFOR must strengthen his team on social management as well as the efficient and effective deployment of social clauses with local communities.
  3. In terms of forest management, a lot of effort is being put into finalizing the development plans for the various concessions. To date, several management plans have been approved by the competent administration and others have been submitted, pending their approval. However, it should be noted that the company, beyond its ability to meet its commitments (conduct forest management operations on all concessions) must strongly consider the need to make a real transition in its strategic vision on the medium long term. The implementation of management plans implies other requirements and skills necessary to ensure forest management in accordance with the new rules. For example, annual operational plans (logical deployment of five-year plans at the annual level) are not carried out in such a way as to consult and proactively consider the activities of the neighboring communities in the annual plan. Also, community consultations are clustered at group level, which does not always reflect rights and desires of individual communities.

At the end of the field assessment, TFT team prescribed a set of recommendations that were widely discussed and approved by SODEFOR top management.

2. Recommendations

a. Legality

  1. Explain clearly in writing the harvesting beyond authorized volumes and present the corrective action and also redress with government authority and file this accordingly.
  2. Review the database to see and precise the type of operations taking (active felling or just log extraction) in the concession that were opened for more than 3 years.
  3. Explain clearly why and how harvesting beyond authorized volumes happened, make sure there is clear corrective action that also has a redress with government authority support/approval.
  4. Review SODEFOR capacity to complete the FMPs expected to be submitted by December   2018 and also undertake a review as to the Company’s ability to manage all concessions.
  5. Ensure clear status of the concessions under Company-13/FORABOLA-6/FOLAC-1 as the existing letters from the Government do not capture/cover all concessions managed by the Company-13/FORABOLA-6/FOLAC-1 stating the timeline for completion of the FMPs. Making it clear which require FMP submission by Dec 2018 and July 2019.
  6. Seek written clarification from the relevant Government authority regarding the concessions not operated (any harvesting for periods greater than 2 years) and right to maintain concessions. Although the assertion is that this is not a problem unless the Government sends a demand, this is still a breach of the code.

b. Implementation of the Forest Management Plan (FMP)

  1. Ensure robust research is conducted in high value commercial species and harvest limits set based on scientifically valid data to maintain the composition of the forest commercial species. 
  2. Ensure that summaries of the FMPs are socialized with communities, so they are aware of operations. Especially the AAC areas. Things like locations of worker camps, extraction routs and potential impact of agricultural crops are just a few examples of elements that are important to exchange with community.
  3. Review the existing team and determine the additional staff required to undertake all operations, monitoring, community use mapping and redress according to the FMP requirements
  4. Undertake proactive community participatory mapping and incorporate the outcomes into the operations under any AAC as well as providing the communities with the participatory maps and updates of active harvesting areas. 

c. Social

  1. Establish and actively build the capacity of a robust social team and ensure that it is embedded into the Sustainability Team. 
  2. Establish a simple central register of social agreements, their status and keep these updated. SODEFOR set up more robust systems to monitor the reality/collect evidence of what is happening across your concessions regarding social aspects and engagement with community.
  3. Establish a clear complaints management procedure and socialize this with the communities and “Groupement”.
  4. Establish safe worker transport quickly and ensure their use
  5. Review weekly workers allowances and ensure it covers a fair costs for food in a given week
  6. Identify a clear solution to resolve this liability and workers should provide written agreement with any compensation proposal offered
  7. Develop a robust grievance approach and ensure good communication and proper implemented in practice. Grievances should be addressed in a timely manner with records kept
  8. Review the approach to delivering water. Implement closed water systems and simple   electric/solar pumps. Ensure that all teams have access to sufficient drinking water

d. Sustainability Team

  1. Establish a clear understanding of the GAPs identified above (recommendation 1 to 18) and what it will take close GAPs over time
  2. Complete a review of the current team members, their roles and responsibilities and time available to complete the tasks and close GAPs
  3. Review and generate a clear Sustainability team structure and if certain roles are not filled, fill these positions
  4. Build capacity of Environmental and Social staff in the Sustainability team through both structured workshops and field-based training
  5. Establish a Joint Steering Committee (JSC) of Executive/Senior Managers (to be agreed   but should have top line decision makers) that sees the Sustainability Head/team report on key actions and remaining GAPs based on clearly agreed workplans and priorities. JSC provides input and takes decisions on resourcing and actions that can then be cascaded by the Sustainability Team across the operation and have the full support of the operations.

e. Communications

  1. Establish a more proactive communication approach. One that sees a slow but clearly growing set of communications and a desire to be more transparent and open (positive stories and also stories that flag gaps and most importantly what is being done to close gaps and a regular (3 to 6 month) update on progress in implementing changes).