Untangling the paper Chain: how staples is managing transparenCy with suppliers
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Issue Brief
Case Study
untangling the paper
chain: how stapLes is
managing transparency
with suppliers
ruth noguerÓn with contributions from keri hess and david refkin
SUMMARY
This series of case studies is intended to show commercial buyers of wood
and paper-based products, especially those who trade in species and/or source
from places with a perceived risk of illegality, how their supply chains can
conform with U.S. legal requirements on importing certain types of wood. The
case studies, compiled by the Forest Legality Alliance (FLA), draw lessons from
emerging best practices for managing risk in high-risk contexts. They discuss
the impacts of the U.S. Lacey Act (see Box 1) and other market demands for legal
wood products and identify and highlight potential problem areas as well as
pragmatic opportunities for reducing the complexity of compliance.
WRI.ORGStaples is deploying the tool Smart-
Source360 to trace the origin of its
About the series
This series of case studies aims to show commercial buyers of wood and paper-based
products, especially those who trade in species or source their materials from places with a products and manage the risk of
perceived risk of illegality, how their supply chains can conform to U.S. legal requirements sourcing unwanted or illegal materi-
on importing certain types of wood. als. SmartSource360 is an internet-
based supply chain management
The case studies, compiled by the Forest Legality Alliance (FLA) draw lessons from emerg- system designed to compile, analyze,
ing best practices for managing risk in high-risk contexts. They discuss the impacts of the store, and manage supply chain
U.S. Lacey Act (see Box 1) and other market demands for legal wood products, and identify information and documentation
and highlight potential problem areas, as well as pragmatic opportunities for reducing the directly from suppliers and sub-
complexity of compliance. suppliers. This issue brief documents
the pilot testing of SmartSource360
The FLA hopes that the Lacey Act will encourage best practices in forest supply chains and
provide valuable information about the global flow of forest products, without imposing to trace the supply chains of five
significant burdens on the private sector. private label products that originate
from China, the United States, and
To that end, the FLA case studies of best practices in private sector procurement describe: Brazil, through four suppliers.
ow the Lacey Act affects operations in countries that supply forest products to U.S.
H The pilot testing revealed five
importers; key lessons:
ow to supply information consistent with the Act’s intent, while reducing transaction
H
osition in the supply chain
P
costs and unintended consequences for producers;
matters. The longer the supply
B est practices along supply chains to streamline the flow of information about forest chain, the more difficult it is for
products; and companies to obtain information
ow to scale up these best practices to support the private sector in complying with
H about the origin of the raw
new legality requirements, consistent with the FLA’s goal of increasing the capacity of materials. Pulp and paper manu-
supply chains to deliver legal wood and paper and to help the private sector respond to facturers, or integrated paper
emerging forest product legality assurance requirements. companies, are better prepared
to quickly answer specific ques-
The case studies do not attempt to assess the legality of the supply chains in question. They
tions about the origin of their raw
are not investigations, legality verifications, product tracing, or chain-of-custody analyses.
materials. Paper converters often
The FLA does not intend to suggest that the resources highlighted in the series are a model
source from multiple suppliers
for supply chains, since supply chains differ vastly in size, location, and product. Nonethe-
less, the case studies presented in this series offer examples and insights that might spur and brokers who could be verti-
actions by other companies. cally integrated pulp and paper
manufacturers or non-integrated
paper manufacturers. In both
Executive Summary required to report the make-up and cases, paper manufacturers may
origin of the raw materials used to source wood from different sup-
Staples, Inc., the world’s largest manufacture the products. Lacey Act pliers, including on spot markets,
reseller of office products, is in the violations can result in significant at lower prices and without ask-
midst of adapting its sourcing prac- fines and jail time (U.S. Department ing questions about the origin of
tices to ensure that its products meet of Justice, 2012; EIA, 2009). the raw materials.
not only its own sustainable procure-
ment policy, but the requirements of Staples’ overall strategy to meet both uyers’ and suppliers’ priori-
B
the U.S. Lacey Act. Under the Lacey the U.S. Lacey Act requirements and ties need to be aligned. High-
Act, it is illegal to trade forest prod- its own Sustainable Paper Procure- level, direct, and consistent com-
ucts in the United States if they are ment Policy is to increase trans- munication between the buyer
of illegal origin, and importers are parency in its supply chains. With and the supplier is critical to align
the assistance of the Rainforest the supplier’s priorities with the
Alliance’s SmartSource Program, priorities of the buyer. Obtaining
2 |Untangling the Paper Chain: How Staples is Managing Transparency with Suppliers
accurate, detailed, sufficient
box 1
supply chain information and
active supplier participation in
The U.S. Lacey Act
a data disclosure process takes The United States enacted the Lacey Act of 1900 to ban trafficking in illegal wildlife.
time and effort. This is especially In 2008, the Lacey Act was amended to include plants and plant products such as timber
true if supply chain transparency and paper, making it the world’s first ban on trade in illegally sourced wood products. The
is not a priority for the supplier, 2008 amendments also include a requirement that wood-product importers submit a decla-
and in markets where there is ration describing their product(s), including the scientific names of all tree species included
no history of tracking the origin in the product, the country of origin, the volume, and the value.
of the raw materials or supply
chain transactions. The Lacey Act’s declaration requirement does not apply to all wood products. As of December
2012, U.S. importers of paper products were not required to complete the Lacey declaration
It is critical to overcome requirement unless paper is part of a product that otherwise requires declaration—for
concerns about the use example, a wooden frame with paper backing (Lougee, 2012). In cases where paper must
of confidential supplier be identified as part of a product, importers can use special codes assigned by the US
information. Direct suppliers Department of Agriculture’s Animal and Plant Health Inspection Service, which oversees
or their sub-suppliers, who are submission and reviews Lacey Act declaration forms (APHIS, 2012). It is unclear whether
asked to provide the most infor- paper importers will be required to complete the Lacey declaration form in the future.
mation about the origin of the
raw materials, may be suspi- What is illegal under the Lacey Act?
cious of the buyers’ motivation in There are two elements of a Lacey Act violation. First, a plant must be taken, harvested,
requesting information. Suppliers possessed, transported, sold, or exported in violation of an underlying law in the United
and sub-suppliers may consider States or any foreign country that protects plants or regulates the following:
the information confidential, or
S tealing plants;
may believe the data could be
used to circumvent them. Buyers T aking plants from an officially protected area, such as a park or reserve;
need to overcome this mistrust, T aking plants from other types of “officially designated areas” that are recognized by
communicate directly with their a country’s laws and regulations;
suppliers where needed, and T aking plants without, or contrary to, the required authorization, or;
incentivize supplier participation.
F ailing to pay appropriate royalties, taxes, or fees associated with the plant’s harvest,
Direct communication with transport, or commerce; or
suppliers is important. L aws governing export or trans-shipment, such as a log-export ban.
Relationship building and trust
can take years to develop and is Second, an individual or company must trade this illegally sourced plant in the United
influenced by cultural differences. States to trigger a Lacey violation.
Direct, high-level communication
with suppliers can be key to Penalties for unknowingly violating the prohibition are much less severe if a company
can show that it exercised “due care” to prevent illegal material from entering the United
overcome concerns about the use
States as a result of its business transactions. The notion of due care may encompass
of the supply chain information
many different factors depending on the circumstances of the forest management, product
being disclosed and align the
manufacturing and trade. The Lacey Act does not prescribe how to exercise due care; how-
corporate priorities.
ever, the 2012 Criminal Enforcement Agreement between Gibson Guitar Corp. and the U.S.
Intermediaries can play a role Department of Justice offers insights that companies can consider in developing their own
supporting the implementation due care systems. The systems could include training for purchasing staff, communication
of a procurement policy. An with suppliers, verification of foreign laws and licenses with in-country legal professionals
intermediary actor who supports and/or knowledgeable third parties, requesting sample documentation from suppliers and
the implementation of a procure- maintenance of records (U.S. Department of Justice, 2012).
ment policy is useful in cases
For more information about the Lacey Act, please visit www.aphis.usda.gov/plant_health/
where the company does not
lacey_act/.
have in-house expertise on forest
Issue Brief | October 2013 | 3issues. Intermediaries can also This issue brief draws on relevant paper products are global commodi-
provide independent third- documents and interviews with ties and the supply chains that bring
party verification and validation key stakeholders. The FLA did not finished products to the store shelves
of the supply-chain information systematically review all the docu- can originate in far-away countries.
submitted by the suppliers. ments and information related to the According to the UN Food and
However, completely outsourcing products discussed in this brief, nor Agriculture Organization (FAO),
implementation is not advisable did it audit the supply-chain control China emerged as a major producer
because direct involvement from system highlighted here. of pulp and paper products over
the buyer is critical to reinforce the past decade. Other countries
the importance of the policies, Context and like Brazil, Indonesia, and South
ensure that policy requirements Korea have also increased produc-
are well understood, and
Background tion, while traditional European and
encourage suppliers to fully In 2011, global paper and paper North American producers have
disclose information. board production reached a record decreased outputs (Appendix 1).
level of 399 million metric tons
The 2008 amendments to the U.S. Pulp and paper importers face risks
(UBM, 2012). People rely on paper
Lacey Act are changing the way of encountering illegal wood in their
products for communication, pack-
Staples sources its paper products. supply chains, and consequently,
aging materials, sanitary needs, doc-
While Staples has long recognized potential Lacey Act violations.
umentation, and more.1 The many
the connection between corporate Recent analyses and investigations
grades and applications of paper
responsibility and business profit- link paper products, particularly
rely on fiber from natural forests,
ability, the Lacey Act amendments, from Asia, to controversial sources or
recycled paper, wood byproducts,
and the emergence of other regula- timber harvested illegally. Examples
and increasingly, forest plantations
tions, such as the European Union of these claims include illegal log-
(Figure 1).
Timber Regulation, have helped ging in protected areas (Eyes on the
accelerate the implementation of Importers of pulp and paper prod- Forests, 2011); use of protected tree
Staples Sustainable Paper Sourcing ucts face challenges complying species in papermaking (Greenpeace,
Policy. With the pilot testing of with the legality requirement of the 2012); taking trees without authori-
SmartSource 360, Staples’ managers U.S. Lacey Act. Identifying the raw zation and/or overharvesting (Green-
gained a better understanding materials used to make paper and peace, 2005; Satriastanti, 2011);
of the complexity of their supply assessing their legality can pose establishing plantations in violation
chains. The pilot test also informed significant difficulties for various of the law and without the consent of
next steps in the SmartSource 360 reasons. Papermaking is a complex local communities; and failing to pay
deployment. These steps include process where the wood undergoes required taxes and fees (Gilbert and
continuing to reach out and educate extensive transformation, involving Cortesi, 2011).
suppliers and sub-suppliers, requir- a wide variety of actors (Figure 2).
ing new suppliers to participate in Also, raw materials are easy to Staples’ Approach to
the program, and implementing blend, and finished products usu-
incentives to improve disclosure. ally involve multiple types of papers,
Paper Sourcing
including recycled fibers. Finally, Staples is the world’s largest reseller
of a wide range of solid wood and
paper-based office products. With
The many grades and applications of annual sales reaching $25 billion
USD, the company also provides
paper rely on fiber from natural forests, services and expertise to other office-
goods suppliers, copy and print
recycled paper, wood byproducts, and services, and technology (Staples,
2012). Presently, Staples operates in
increasingly, forest plantations. 26 countries and employs more than
88,000 people worldwide.2 Since the
4 |Figure 1 Untangling the Paper Chain: How Staples is Managing Transparency with Suppliers
natural forests and forest plantations AS FIBER SOURCES
oreal
B
Natural forest
Forests T emperate and subtropical forest T ropical forest
Species found in paper products include Species found in paper products include Numerous species and very large trees
spruce, aspen, birch, and poplar. These slow maples, oaks, pine, fir and cedar. are found in tropical forests. These
growing trees (60+ years to maturity) yield forests are under pressure from extensive
strong, high quality fiber, but are a costly logging and agricultural expansion.
source of fiber.
Forest Plantation Area, 2010
Thousands of hectares
Less than 5,000
5,000–9,999
10,000–19,999 Forest plantations are expanding to increase forest yields and productivity. Over the last 30 years, plantations
have become common in the tropics, often replacing natural forests. Eucalyptus (5–7 years to reach maturity), Sources: FAO Global Ecofloristic Zones;
20,000 and greater acacia (7–10 years) and pine (10–20 years) are the most common species used in pulp plantations. FAO Global Forest Resources Assessment
early 2000s, Staples has recognized To meet consumer demand, own Sustainable Paper Procurement
the connection between corporate Staples sources its products from Policy (Box 2) is to increase trans-
responsibility and business profit- various countries, including Argen- parency in their paper supply chains
ability. The company has been tina, Brazil, Canada, China, and the and work with buyers and suppliers
visibly involved in efforts to improve United States. Many of Staples’ to improve sourcing practices.
corporate environmental sustain- suppliers have non-integrated, Increasing transparency will enable
ability,3 leveraging its role as a major fragmented supply chains and the identification of the origin of the
buyer and retailer of wood products could be sourcing fiber from many products, to enable Staples’ manage-
and working with other corporate different countries (Staples, 2011; ment to assess and manage the risks
players to build momentum and Buckley, 2012). of illegal wood, and eliminate it from
accelerate processes to achieve their supply chains.5
common environmental goals.4 The company’s overall approach to
reducing the risk of sourcing illegal
raw materials and implementing its
Issue Brief | October 2013 | 5Figure 2
generic paper manufacturing supply chain
STEP DESCRIPTION/ACTIVITIES
WOOD HARVESTING Logging
TRANSPORT (8) >>
Raw materials are sourced directly (1) or indirectly. (2)
Logs are chipped; chips are mixed; wood fibers are extracted through mechanical or
PULP MAKING
chemical processes. (3)
Fibers can be whitened to enhance visual features of paper. (4)
TRANSPORT (8) >>
Pulp sourcing. (5)
Pulp is mixed with water and fillers to enhance quality. (6)
Mix is placed on a mesh screen where water is drained as fibers go through pressing and
PAPER MAKING drying rolls.
Paper rolls go through a calendaring process to remove imperfections.
Coating can be added to improve paper quality. (7)
Large paper reels might be slit into rolls or sheets of paper.
TRANSPORT (8) >>
Paper reels are converted into many types of end-use products.
Converting operations include multiple processes including sheeting, slitting, folding,
PAPER CONVERTING
binding, gluing and printing among others. Depending on the country of sourcing,
companies can use highly specialized machinery in this process.
TRANSPORT (8) >>
DISTRIBUTING Finished products distributed and sold.
Notes:
1. For companies vertically integrated with forest companies.
2. Pulp manufacturer’s suppliers can source from a number of sub-suppliers, including sawmills, logging companies, plantation owners, brokers, and private landowners. All
these actors supply wood to both pulp and paper factories, and buy materials in the open markets and/or from smaller producers or intermediaries.
3. Companies that are vertically integrated with pulp manufacturers source directly from them, although they could still purchase materials on the open market. Non-integrated
paper companies can source from a variety of sources, as in number 2.
4. Mechanical pulp: fibers are physically pulled apart through mechanical processes. Compared to chemical pulping, the process is less expensive and with high yield (approx.
90%), but fibers are not as strong. Chemical pulp: fibers are pulled apart using chemicals. The process yields is less (approx. 50%) but fibers are strong and ideal for most
paper types.
5. Until the last 20 years, most of the fibers were bleached using chlorine dioxide. The industry has now moved largely to other agents such as oxygen or ozone. Bleaching
processes include Elemental Chlorine Free (EFC) or Total Chlorine Free (TCF).
6,7. Commonly used fillers and coating pigments used include calcium carbonate, talc, clay, and titanium dioxide to enhance brightness and smoothness. Latexes and starches
can be used to anchor coating pigments.
8. Depending on the level of vertical integration, there might be no transportation needs between pulp and paper manufacturing and/or between paper manufacturing and
paper conversion.
6 |Untangling the Paper Chain: How Staples is Managing Transparency with Suppliers
Implementation and SmartSource program At the core of the SmartSource
program is SmartSource360. Smart-
verification of the overview
Source360 is an internet-based
sourcing policy Through its SmartSource program, application developed in collabora-
Rainforest Alliance provides tailored tion with Credit 360.7 It is designed
Staples Sustainable Paper Procure- advice in developing and implement- to trace supply chains by facilitat-
ment Policy applies to all paper ing forest-products sourcing policies ing data compilation, analysis, and
grades and to all suppliers at each to eliminate illegal and unsustainable reporting. SmartSource360 is an
step along the supply chain. Staples raw materials and promote certified interactive, automated replace-
is rolling out its implementation forest products (Rainforest Alliance, ment of manual, spreadsheet-based
of the policy in phases, beginning 2013).6 In addition to direct advice systems used to track, analyze, and
with markets in North America and and supply chain assessment, pro- validate supply-chain information.
moving to Europe and other inter- gram participants receive corporate SmartSource360 is designed to
national markets. The rollout staff and supplier training on forest- be intuitive and user-friendly, and
prioritizes areas of perceived poten- related issues, and support with sup- to accommodate varying levels of
tial high risk based on the country plier and stakeholder communica- knowledge about supply chains and
of origin, source, and transparency tions (Rainforest Alliance, 2011B).
of the supply chain. Suppliers
sourcing from areas identified as
potentially controversial are asked to
box 2
demonstrate, through credible third- Staples Sustainable Paper Procurement Policy
party certification, that the sourced
products are non-controversial. The overall long-term goals of the Staples Sustainable Paper Procurement Policy are: to
Top suppliers are also requested source paper products that are certified under the Forest Stewardship Council (FSC) stan-
to periodically report the environ- dard, or alternative certification standards when FSC is not available or feasible; to obtain
mental performance of their paper products made with post-consumer recycled or sustainable alternative fibers; and to procure
making facilities, or the papermakers materials manufactured in ways that minimize life-cycle environmental and social impacts.
furnishing purchased paper.
Suppliers are asked to confirm the sources of the fiber in the products, indicate the
Since 2009, Staples has partnered legality of the fibers’ harvest and trade, and demonstrate that products do not originate from
with the Rainforest Alliance, and controversial sources, including:
has participated in its SmartSource Wood harvested in violation of traditional and civil rights;
Program to develop and implement
its paper procurement policy, and Wood harvested in forests where high conservation value forests are threatened;
to assess the supply chain of the
products based on random audits Wood harvested in forests being converted to plantations or non-forest use;
to validate information about its
Wood harvested in forests that contain species that have been genetically modified.
products. Staples chose to work with
the Rainforest Alliance because of Where FSC products are not available, Staples accepts products certified under the
the Rainforest Alliance’s expertise Programme for Endorsement of Forest Certification standards, the Sustainable Forestry
in the forest sector, history working Initiative, and the Canadian Standards Association systems.
with global companies on sustainable
sourcing of forestry and agricultural Consistent with Staples Sustainable Paper Procurement Policy, suppliers are required to
comply with all environmental and forestry laws and regulations as part of Staples’ Supplier
products, and record in develop-
Code of Conduct.
ing environmental standards and
advancing forest certification. Sources:
The Staples Supplier Code of Conduct. Online at: http://www.staples.com/sbd/cre/marketing/staples_soul/
documents/staples-supplier-code-of-conduct.pdf (4/27/12).
Staples Sustainable Paper Procurement Policy. Online at http://www.staples.com/sbd/cre/marketing/staples_
soul/documents/staples-sustainable-paper-procurement-policy-1.pdf (4/17/12).
Mark Buckley, Vice President of Environmental Affairs, Interview, July 2011.
Issue Brief | October 2013 | 7evaluates and validates the informa-
tion and supporting documentation
provided, including purchase orders,
invoices, contracts, agreements,
The data validation focuses mostly on the sustainable forest management
certificates, and legality verification
origin, legality, and certification of the certificates, among others. The data
validation is based on Rainforest
product and product components. Alliance staff expertise, and focuses
mostly on the origin, legality, and
certification of the product and prod-
uct components. In effect, the data
compiled and analysis generated by
SmartSource360 can then be used by
the program participant to create an
forest issues. The reporting plat- documentation for each source
auditable supply chain, identify po-
form includes instructional support, category listed by the suppliers.
tential breaks in the chain of custody,
including videos, documents, and This data is uploaded onto the
assess risk of sourcing illegal and/
wizards to guide users through the SmartSource360 system by the
or unsustainable products, direct
questions asked. supplier, to directly correspond
suppliers to locate new sources when
with the specific component input
The SmartSource360 platform is necessary, and thus, implement the
material it represents.
based on e-mail invitations where company’s procurement policy.
program participants invite their The platform is designed to securely
SmartSource360 is one of several
suppliers and sub-suppliers to capture data about the product and
platforms that have emerged to
login and provide information and product components along the sup-
allow buyers and suppliers to collect,
documentation about the origin, ply chain; suppliers only see their
assess, and share information about
legality, and sustainability of the products (or product components)
paper products. Other platforms
products (Figure 3). Among other and the information provided by
include the Publishers’ database
data, the information required from their immediate sub-supplier. How-
for Responsible Environmental
suppliers includes: ever, all the supply chain information
Paper Sourcing (PREPS), and the
is available to Rainforest Alliance
Weight/volume of wood or fiber Environmental Paper Assessment
staff and the program participant—
contained in the product as Tool (EPAT).8
in this case, Staples.
sold (i.e., per unit or total).
The more information suppliers SmartSource360 pilot-testing
Product component details, and sub-suppliers provide, the more and deployment
including the name, geographic complete and transparent the overall
Between 2011 and 2012, Staples
location, and contact details of supply chain is. Once the data is
and Rainforest Alliance pilot tested
each sub-supplier, plus source uploaded to the system, a product
SmartSource360 with five private-
categories (e.g., “unknown”, report is automatically generated
label products that were supplied
“known”, “legal”, “certified”, for each product, showing a break-
by four companies. Two products
etc.), species, name, approximate down of source category and source
were supplied by a Chinese con-
volume/weight, and geographic country. In addition, global reports
verter, two by a U.S. pulp and paper
origin of each component of the can be generated, with a variety of
manufacturer, and one by a Brazilian
input material they supply. views and data findings; for instance,
converter purchasing from vertically
the system can separate data by the
Supporting documentation, integrated pulp and paper manufac-
total volume/amount of wood/fiber,
such as purchase invoices, for- turers. The objective of the pilot was
broken down by source category or
est certification documents, to assess the capabilities of the tool,
geographical origin, for all products
and paper profiles. The Smart- with a future deployment to all of
purchased during designated time-
Source program requires specific Staples’ suppliers in mind.
frames. Rainforest Alliance staff then
8 |Figure 3 Untangling the Paper Chain: How Staples is Managing Transparency with Suppliers
how smartsource360 works
SUPPLY CHAIN STEP DESCRIPTION/ACTIVITIES
Program participants identify the products and suppliers.
Rainforest Alliance uploads basic information about the products including product names, Stock-Keeping
PROGRAM Units (SKUs, a unique tracking number code to identify products), quantities purchased, supplier company
PARTICIPANT names, supplier company contact information and purchasing channels.
Rainforest Alliance e-mails direct suppliers inviting them to log into the system to provide information about
the origin, legality and sustainability of the product. Reminders are sent as needed.
Direct supplier (converter, distributor) accesses the system.
Supplier identifies product components (e.g. board, writing paper and the binding tape in notepads).
DIRECT Supplier provides information and documentation about the paper, pulp and fibers used in the products by
SUPPLIER component, or
The supplier invites component manufacturer(s) to log into the system to provide information. Reminders are
sent as needed.
Paper manufacturers access the system.
PAPER Paper manufacturers provide information and documentation about the pulp and fibers used in the paper, or
MAKER Paper manufacturers invite pulp supplier(s) to log into the system and provide the information. Reminders
are sent as needed.
Pulp manufacturers access the system.
PULP Pulp manufacturers provide information and documentation about the fibers used in the pulp, or
MAKER Paper manufacturers invite wood supplier(s) to log into the system and provide the information. Reminders
are sent as needed.
Wood suppliers access the system.
WOOD
Wood suppliers provide information and documentation about the raw materials. Reminders are sent
HARVESTING as needed.
Costs
For paper/wood product buyers: Costs vary depending on the number of products and the level of support requested from Rainforest Alliance staff. As an
example, for handling up to 4,000 unique product types, the price could be approximately US$40,000 per year, plus additional costs for validation. The costs
cover the license fee for the use of the system, costs for training (staff and supplier training), internal operational alignment, and supplier management related to
data collection, analysis and reporting.
For paper/wood product suppliers: In principle, there should be no significant additional expenses to suppliers to provide documentation about their products,
provided that requesting documentation about the product from the immediate sub-supplier is a common business practice. However, there could be financial
implications in implementing a traceability system and associated activities (i.e. educating and obtaining credible information from sub-supplier).
More critically important than the cost of obtaining information from the supply chain to establish traceability is the cost (time and expense) to suppliers to
comply with the policy requirements. The cost of demonstrating compliance could be a barrier to compliance itself.
Issue Brief | October 2013 | 9Each supplier volunteered for the After the four-week period, Rain- for Staples. They also lacked material
pilot after being approached by forest Alliance staff evaluated the traceability systems. In addition, the
Staples. Suppliers received a one- information submitted. The data Chinese suppliers voiced concern
hour, web-based training session and documentation from the U.S. that Staples would use the confiden-
by Rainforest Alliance. Through the and Brazil-based suppliers was tial business information to circum-
training, suppliers were introduced relatively complete and contained vent the supplier and source directly
to the tool and learned to navigate its few errors. With support from a from sub-suppliers and brokers.
features using the ‘live’ tool. The goal Staples’ authorized buyer, Rainfor-
To address these shortcomings,
of the training was to familiarize sup- est Alliance staff followed up with
Staples arranged a face-to-face meet-
pliers with the types of information the suppliers via phone or e-mail to
ing between Rainforest Alliance staff
requested and the actions required request clarification or additional
and high-level executives from both
from them as pilot participants. information and documentation.
Staples and the Chinese supplier.
Once the trainings were complete
The data and documentation from The purpose of the meeting was to
(five in total: one for the Staples staff
the Chinese supplier, however, were explain the importance of the data-
involved in the project and one for
incomplete and included errors. disclosure process, discuss the use
each of the suppliers), suppliers and
Based on their interactions with of the data collected, and explain the
Staples received login details for the
Rainforest Alliance staff, the Chinese SmartSource360 platform. After the
tool and a four-week timeline to en-
suppliers appeared unaware of the meeting, the Chinese supplier was
ter data for products sold to Staples
legality requirements and the impor- given an extended deadline to com-
during calendar year 2010.
tance of supply chain transparency plete the reporting (Figure 4).
Figure 4
smartsource360 deployment and development
10–11/11
Additional data
requests and
supplementary
guidance
provided as
needed
4/11 7/11 8/11 10/11 11/11 12/11 3/12 7/12
Suppliers Product In-person Data entry,
and products data entry training second round
identified for Chinese concludes
supplier
SmartSource360 Data Data entry, Data validation
virtual trainings validation second round concludes
starts (Chinese supplier) Pilot concludes
starts
10 |Untangling the Paper Chain: How Staples is Managing Transparency with Suppliers
By the close of the second reporting
period, the Chinese supplier
had provided additional information Because the information provided
and documentation, but it was
still incomplete. by the Chinese supplier was
Results inadequate, Rainforest Alliance was
Through the SmartSource360
pilot, the U.S.-based supplier dem-
unable to determine the specific
onstrated that its fiber originated
from non-controversial sources, and
origin and species make-up for all
the Brazil-based supplier demon-
strated that all fiber sourced for the
of the fiber in its products.
product was FSC certified. However,
because the information provided by
the Chinese supplier was inadequate,
China-based supplier from the pilot the more challenging it is to trace
Rainforest Alliance was unable to
test. Staples and Rainforest Alliance and exercise control over the
determine the specific origin and
hope that this supplier will close the supply chain, and the greater the risk
species make-up for all of the fiber in
gaps in the products piloted, as it of procuring illegally sourced raw
its products.
continues to work through its sup- materials. Compared with convert-
Since the conclusion of the pilot, ply chains. In general, the amount ers, distributors or printers, paper
Staples has launched Smart- and quality of data and supporting manufacturers or integrated paper
Source360 with existing private label documentation from the Asia-based companies are better prepared to
suppliers, focusing on suppliers in suppliers for the additional products quickly answer specific questions
Asia first. As part of the deployment, is in most cases better than that about the origin of their raw ma-
Staples and Rainforest Alliance have experienced during the pilot, and it terials and the associated supply
launched several training sessions to continues to improve over time. chain because they are closer to the
help build capacity within the Staples As more companies ask suppliers source(s) of the raw materials.
team that sources private label prod- for product data, suppliers will be-
In the pilot, the China-based supplier
ucts out of Asia and direct Staples come more proficient at furnishing
was a converter, and thus, it was
suppliers based in Asia. Capacity the information.
more removed from the source of the
building so far has included organiz-
ing and participating in a responsible Analysis and Findings raw materials. The company had to
request its suppliers to provide infor-
sourcing supplier event at Paper-
The pilot highlighted challenges, mation about their sub-suppliers in
World China in Shanghai in 2012;
identified areas critical to success, order to gather details and evidence
delivering web-based and in-person
and yielded lessons to both improve about the origin and legality of the
training (bilingual) for Staples staff
the functionality of SmartSource360 paper and the pulp. This took more
in 2013; bilingual and interactive in-
and shape the tool’s deployment time and additional effort compared
person training for Staples suppliers
among Staples’ suppliers. to vertically integrated suppliers.
in 2013; and providing a recorded
Five key lessons emerged from
bilingual web-based training for sup- Buyers’ and suppliers’
pliers for ongoing use. the pilot:
priorities need to be aligned
At the time of publication, six Position in the supply chain Ensuring that buyers and suppliers
months after the pilot concluded, matters share the same priorities is critical to
Staples was tracking approximately
Position in the supply chain is an ensuring that supply chain transpar-
100 products in the SmartSource360
important consideration in the con- ency initiatives work. The U.S. and
platform. Fifteen Asia-based sup-
text of the U.S. Lacey Act; the more Brazil-based companies that partici-
pliers were reporting through
actors involved in the supply-chain, pated in the pilot test were most
SmartSource360, including the
Issue Brief | October 2013 | 11It may be that suppliers in some regions for failing to participate or fully dis-
close data. To be effective, this type
of the world are not accustomed to of reward/consequence incentive
must be made at the highest levels
detailed questions about the sourcing of the company and communicated
to all purchasing staff and suppliers
of their products, or requests to provide integral to purchasing decisions.
Staples is currently developing re-
supporting documentation. quirements for new suppliers, staff
guidelines, and recommended action
steps for existing suppliers who have
not been able to adequately disclose
at the end of the disclosure period.
responsive to Staples’ sourcing prior- Rainforest Alliance training events Staples expects to continue to focus
ities because they have a long history with Staples purchasing staff and on building capacity and transpar-
of selling into developed markets and Staples suppliers to introduce Smart- ency among existing suppliers but
are likely accustomed to answering Source360. These trainings aim to will take steps to ensure the suppliers
supply chain questions. build understanding of why meet disclosure requirements over
it is important to increase supply time, including requiring third party
Staples’ experience with its China-
chain transparency. legality verification or other methods.
based supplier is not an exception. In
fact, based on Rainforest Alliance’s It is critical to overcome From a broader perspective, supply-
experience, obtaining good data and
active participation by both the buy-
supplier concerns about the chain data requests from multiple
use of confidential sourcing buyers could be an important reason
ing company staff and direct supplier for suppliers to use tools like Smart-
during the first year of implementa- information Source360. Instead of responding to
tion is a common issue, regardless of Suppliers might worry that by reveal- one data request, the supplier would
the data collection tools used or the ing supply chain information, they compile data to answer to multiple
amount of “hand-holding” that has might enable their buyers to bypass requests. More information demand
occurred. There have been situations them and source directly from sub- from buyers could make companies
in which the direct suppliers “agree” suppliers and brokers instead. This is like Staples more influential with
to disclose information and affirm a critical issue buyers need to over- their suppliers, and better able to
that they understand the importance come in order for tools like Smart- obtain better data. Some suppliers
of these requests but the information Source360 to work as intended. Even in the pilot stated that they had not
disclosure is, in fact, poor. It may be if direct suppliers are willing to pro- received similar information requests
that suppliers in some regions of the vide supply-chain information, their from other buyers, including global
world are not accustomed to detailed sub-suppliers might be less trust- companies that have made responsi-
questions about the sourcing of their ing and feel that their supply chain ble procurement commitments, about
products, or requests to provide sup- should remain confidential. Lack of the origin of the raw materials at the
porting documentation. Also, suppli- supplier and sub-supplier motivation level of detail required by Staples in
ers may not be accustomed to finding to voluntarily engage in data disclo- the pilot.
or requesting information from their sure—often born from a reluctance
sub-suppliers about the origin of the to reveal confidential information—
Direct communication with
products. is a major challenge to supply suppliers is important
Despite these initial challenges, and chain transparency. Relationship building and trust can
building on the experience from the The buyer can incentivize supplier take years to develop and can be
pilot, a major focus of the Staples participation through positive recog- influenced by cultural differences. Di-
procurement policy implementation nition. At the same time, the buyer rect communication between buyers
process is outreach and training. could create negative consequences and suppliers is critical to overcoming
To date, Staples has sponsored two concerns about the use of disclosed
12 |Untangling the Paper Chain: How Staples is Managing Transparency with Suppliers
information. Direct communication ability features of the products. Yet, department gets involved, people at
can also help to align corporate prior- completely outsourcing procurement all levels pay attention. We now need
ities. In the pilot, Rainforest Alliance policy implementation and control is to accelerate the process and involve
was the direct point of contact with not advisable. In the pilot project, for other companies.”
the suppliers during the data col- instance, Staples’ involvement was
Through the pilot, Staples devel-
lection stage. This arrangement was required for reinforcing the impor-
oped a better understanding of the
designed to expedite the pilot; Staples tance of its procurement policies with
complexity of its supply chains and
would be the main point of contact its suppliers, ensuring policy require-
a clearer vision of next steps. In the
upon implementation of the tool ments are well understood, and en-
short term, these include reaching
more broadly. Although unplanned, couraging suppliers to fully disclose
out to suppliers and sub-suppliers,
Rainforest Alliance happened to have the information.
and incorporating legality require-
a direct relationship with the U.S.-
and Brazil-based supplier prior to the Conclusion ments into purchasing agreements.
Staples is committed to use Smart-
pilot, but no prior relationship with The 2008 amendments to the U.S. Source360 with its supplier base. If
the China-based supplier. Although Lacey Act are changing the way Sta- properly implemented, the system is
the information provided by the ples sources its paper products. The expected to yield information at the
Chinese supplier remained incom- company already had a procurement level of detail required for the Lacey
plete, progress was made only after policy in place and was interested Act declaration requirements, should
an in-person meeting facilitated by in tracing the supply chain to reveal paper products be phased in in the
Staples China. The meeting empha- the source of the fiber used to make future, and to support continued im-
sized the importance of the supplier two paper products. The Lacey Act provements against the commitments
participation, and helped build trust amendments, and the emergence of in Staples Sustainable Paper Procure-
between the two corporations. Even other regulations (such as the Euro- ment Policy.
after the meeting, the China-based pean Union Timber Regulation), have
supplier was unable to obtain all the Although progress is being made,
helped accelerate Staples’ process.
requested information. It is possible challenges remain. Starting with
These legality requirements have
that trust issues and relationships communication, information and
focused Staples’ overall sustainabil-
farther down the chain to the forest education, Staples intends to work
ity agenda to take steps to increase
source may have ultimately affected with its suppliers and bring them to a
transparency in their supply chains,
the supplier’s ability to obtain the position where they are able to meet
exercise due care, address the risk
requested information. Staples’ legality requirements. A par-
of illegal wood in its products, and
allel approach that Staples has identi-
prepare for declaration requirements.
Intermediaries can play fied is to engage with other corporate
According to Mark Buckley, the VP
a role supporting the of Environmental Affairs at Staples:
actors with similar interests to build
implementation of a more collective demand for supply
“The Lacey legality requirements
chain information. This would, in
procurement policy help focus attention on sustainability
turn, incentivize data sharing and
and gain visibility; when the legal
The presence of an intermediary improve the quality of the data.
actor to support the implementation
of sourcing policies can be useful,
especially if the buyers lack the in-
house capacity to address legal and
environmental issues related to forest
“The Lacey legality requirements
products in the global context. The
Staples-Rainforest Alliance partner-
help focus attention on sustainability
ship has worked in designing Staples and gain visibility; when the legal
Sustainable Paper Procurement
Policy and rolling up its implemen- department gets involved, people at all
tation, but also in reviewing and
validating the legality and sustain- levels pay attention.”—Mark Buckley
Issue Brief | October 2013 | 13references
Animal and Plant Health Inspection Service Greenpeace. 2012. The ramin paper trail: Asia Satriastanti. F.E. 2011. Special report: how a
(APHIS), 2012. Lacey Act Plant and Plant Product Pulp and Paper under investigation. Amsterdam: $115b illegal logging probe was felled. The
Declaration, Special Use Designations. Wash- Greenpeace International. Online at http://www. Jakarta Globe: Online at http://www.thejakarta-
ington DC: US Department of Agriculture: Online greenpeace.org/international/en/publications/ globe.com/archive/special-report-how-a-115b-
at http://www.aphis.usda.gov/plant_health/ Campaign-reports/Forests-Reports/The-Ramin- illegal-logging-probe-was-felled/ (10/03/13).
lacey_act/ (1/22/13). Paper-Trail/ (4/24/12).
Staples. 2012. Staples Corporate Profile:
Environmental Investigation Agency (EIA). 2009. Greenpeace. 2005. Illegal logging continues in Online at http://investor.staples.com/phoenix.
The U.S. Lacey Act: Frequently Asked Question China and Asia Pulp and Paper is held respon- zhtml?c=96244&p=irol-IRHome (4/27/12).
about the World’s First Ban on Trade in Illegal sible. Press release. Hong Kong: Greenpeace
Wood. Washington DC: Environmental Investiga- East Asia. Online at http://www.greenpeace. Staples. 2011. Staples and Sustainability. Presen-
tion Agency: Online at http://www.eia-global.org/ org/eastasia/press/releases/forests/2005/app_ tation at the BizNGO annual meeting (Nov 30-Dec
PDF/EIA.LaceyReport.English.pdf (5/20/13). hainan_20050525_html/ (4/25/12). 1, 2011): Online at http://www.bizngo.org/pdf/
bizngo-agm2011-markbuckley-bizngo-staples-
Eyes on the Forest. 2011. APP/SMG Supplier Rainforest Alliance. 2011A. SmartSource: and-sustainability.pdf (4/27/12).
Clearcuts forest in Biosphere Reserve Zone. Riau, Rainforest Alliance solutions for responsible
Sumatra: Eyes on the Forest. Online at http:// purchasing. Rainforest Alliance. United Business Media (UBM). 2012. Global
www.eyesontheforest.or.id/index.php?page=news Paper and Board Production at Record Levels.
&action=view&id=340 (4/24/11). Rainforest Alliance. 2011B. SmartSource360: a UBM Businesses. Online at: http://news.ubm.
web-based tool for supplier reporting required as com/index.php?s=2429&item=123825 (5/20/13).
Gilber, D. and L. Cortesi. 2011. Corruption, land part of the SmartSource Responsible Sourcing
conflict and forest destruction: an Asia Pulp and Program. PowerPoint Presentation. U.S. Department of Justice. 2012. Gibson Guitar
Paper case study from Sumatra, Indonesia. San Corp. Agrees to Resolve Investigation into Lacey
Francisco: Rainforest Action Network. Online at Rainforest Alliance. 2013. Supply-chain analysis Act Violation. Press Release. Washington, D.C.:
http://ran.org/sites/default/files/ran_kerumutan- and assistance for legal, traceable and sustain- U.S. Department of Justice. Online at http://www.
casestudy.pdf (1/8/13). able supply-chains. Rainforest Alliance website: justice.gov/opa/pr/2012/August/12-enrd-976.
Online at http://www.rainforest-alliance.org/ html (5/20/13).
forestry/sourcing (4/27/12).
14 |Untangling the Paper Chain: How Staples is Managing Transparency with Suppliers
ENDNOTEs
1 Paper products can be classified into four 2. Jake Swenson, Director of Sustainable companies, farmers, and communities on
major grades: graphic, packaging, hygienic Products and Services, Staples. sustainable agricultural production and
and specialty papers. Graphic papers are Review comment. sustainable forest management. For more
primarily used in newspapers, magazines, 3. Efforts include: the Environmental Paper information on the Rainforest Alliance and its
catalogs, promotional materials and general Working Group and the Environmental projects, visit www.rainforest-alliance.org.
office paper. Many of these grades utilize Paper Assessment Tool (www.epat.org), 7. Credit 360 is a service provider specialized
special clays and coatings to enhance the Greenhouse Gas Protocol (www. on corporate sustainability data compila-
readability, gloss or other desired quality ghgprotocol.org), the Green Power Market tion, management and analysis. For more
requirements. Packaging papers are papers Development Group (www.wri.org/project/ information about Credit 360, please visit
of multiple grades used for shipping, food next-practice/history), the Forest Products http://www.credit360.com/credit/site/home.
packaging, and grocery/shopping bags. The Working Group (www.greenblue.org/activi- acds (5/15/12).
use of these grades is rising due to increas- ties/forest-products/forest-products-work- 8. For more information about PREPS and
ing global manufacturing and shipping, ing-group/), and the Carbon Canopy project EPAT, visit http://prepsgroup.com/home.
as well as rising consumption of prepared (www.carboncanopy.com). php and https://www.epat.org/EPATHome.
foods. Hygienic papers include tissues, 4. Mark Buckley, Vice President of Environ- aspx?request=119.
toilet paper, kitchen towels, and diapers. mental Affairs, Staples. Interview, July 2011. 9. Mark Buckley, interview, July, 2011.
Rising incomes in developing countries 5. Mark Buckley, interview, July 2011.
have increased the global use of these paper 6. The Rainforest Alliance (RA) works to
products. Specialty papers are essentially conserve biodiversity and ensure sustain-
a catch-all category, including all other able livelihoods by transforming land-use
grades of paper used for a wide variety of practices, business practices and consumer
purposes such as cigarette paper, wallpa- behavior. RA has over 20 years of experi-
per, paperware, wax paper, and paper for ence working in over 65 countries with
industrial use.
Issue Brief | October 2013 | 15Appendix 1 – Global Trends in Pulp and Paper Production
Historically the large majority of major producers of paper and paper Canada, Nordic countries, China,
paper was manufactured near board. In 2000, pulp manufactured Germany and Japan represented 67%
forests. The United States, Canada, in the US, Canada, China, Japan, and of the total global paper and paper
the Nordic countries (Sweden, the Nordic countries represented board production. In both of these
Finland) China and Japan were large 73% of total global pulp production, categories, Brazil, Indonesia and
producers of pulp. These countries, per Figure A. For paper and paper India were relatively minor players.
as well as Germany, have been the board, per Figure B below, the US,
Figure A
Top Producers of Pulp for Paper* in 2000 Other
Chile
18% USA Brazil
Russia
1% 29% Canada Indonesia
3% China India India
1%
2% Finland Russia
4% Sweden Chile Indonesia
6% Japan Other
Brazil
14%
7%
7% 8% Japan
Sweden
*Pulp for paper includes all pulp (mechanical, semi-chemical, chemical) except dissolving pulp, which is not used for paper (Levedys, A., FAO.
2013. Personal comment). Finland
China
Canada
Figure B
Top Producers of Paper and Paper Board in 2000 Other
USA
Chile
21% USA Japan
26% Indonesia
China Russia
2% Canada Indonesia Russia
3% Brazil Chile
3% Sweden Other Japan
5% 11%
Finland
Finland
6%
6% 10%
7% Sweden
Brazil
Canada
16 | ChinaUntangling the Paper Chain: How Staples is Managing Transparency with Suppliers
There have been very significant doubling its capacity), and Indonesia, from 34.7 to 96.5 million tons and
changes in pulp and paper and paper Chile and India are all in the top 11 is now the world’s largest producer.
board production in the last decade. countries. Per Figure C, these five South Korea, Indonesia and Brazil
China is now the second largest emerging countries now represent are all in the top 10 countries. These
global producer of pulp, surpassing 24% of total pulp production. The four countries, per Figure D, now
Canada and following the United numbers for paper and paper board represent 33% of global paper and
States. Brazil has become a significant are even more startling. China has paper board production.
pulp producer (4th largest, nearly surpassed the United States, growing
Figure C
Top Producers of Pulp for Paper* in 2010 Other
South Korea
26%
USA Japan Indonesia
27%
China Brazil
Canada Indonesia Brazil
Germany South Korea
3% Japan
Finland Other
2% 11%
Sweden Sweden
2%
10%
6%
3% 4% 6% Finland
Germany
*Pulp for paper includes all pulp (mechanical, semi-chemical, chemical) except dissolving pulp, which is not used for paper (Levedys, A., FAO.
2013. Personal comment). Canada
China
USA
Figure D
Top Producers of Paper and Paper Board in 2010 Other
South Korea
19% USA Japan
27% Indonesia
China Brazil
Canada Indonesia Brazil
Germany South Korea
Japan
3%
24%
Finland Other
3%
Sweden Sweden
3%
6%
3% Finland
3% 6% 3%
Germany
Canada
China
Issue Brief | October 2013 | 17Figure E
Trade Flow of Pulp for Paper
Pulp Imports, 2000 Pulp Exports, 2000
15
Pulp Imports, 2010 Pulp Exports, 2010
12
9
6
3
0
-3
-6
-9
-12
A
ina
da
il
en
d
an
sia
ia
ile
ain
y
ly
s
an
nd
az
lan
US
Ita
es
na
ed
p
Ch
s
Ch
Sp
Br
rm
Ja
rla
Ru
on
Fin
Ca
Sw
the
Ge
Ind
Ne
Demand for pulp and paper and There has been a dramatic shift of new manufacturers in China, Korea
paper board is significant in Western trade flows over the last ten years. and Indonesia. Other major import
Europe and North America, although China has become by far the larg- markets include Western Europe
growth rates have slowed substan- est market for pulp, with close to 14 (especially Germany), and develop-
tially since 2007, due to poor eco- million tons now being imported to ing countries. For exports, while
nomic conditions and increased use support its vast paper manufactur- Germany, the U.S., Canada and the
of electronics. Demand is growing ing operations. Major exporters into Nordic countries remain the top five
in the developing world, especially China include Canada and Indonesia. exporters, China, Indonesia, Italy,
China, India and Brazil, due to In addition, Brazil, Chile, Indone- Spain and Brazil have grown sub-
generally improving economic sia and Uruguay have now joined stantially since 2000. See Figure F,
conditions, increased literacy and Canada, the U.S., the Nordic coun- comparing paper and paper board
a growing consumer culture that tries and Russia as major exporters trends in 2000 and 2010.
typically uses more packaging mate- of pulp. See Figure E comparing pulp
rials. Yet, per capita consumption in trade flows from 2000 and 2010. Another emerging trend is the
these countries is still considerably increased reliance on pulp from
less than in Europe, North America The shift for paper and paper board plantations, particularly Indonesia
and Japan. is less dramatic. However, the United and Brazil. As production capac-
States is now importing large quanti- ity increases in Asia, particularly
ties of paper and paper board from
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