Main terms that we use for talking about supply chain integrity are defined in the FSC normative documents. When describing our activities, we often mention:
Transaction verification (TV) loop: It is the verification process based on the FSC chain of custody standard to ensure that FSC output claims made by certificate holders are accurate and match the FSC input claims of their trading partners.
False claim: FSC claim made on sales documents (physical or electronic) or the use of the FSC trademarks, on products and/or for projects that are not eligible to be claimed, labelled and/or promoted as being FSC-certified or FSC Controlled Wood. A False Claim is different from an inaccurate claim, in which a product, that is eligible to be sold as FSC certified, is sold with the wrong claim.
Blocked organization: A certificate holder or a former certificate holder that is blocked from the FSC Certification Scheme in response to false claims by:(1) the suspension of the Granted Rights, alternatively the termination of the License Agreement for the FSC Certification Scheme, and (2) the restriction from carrying out processes or activities that are included within the scope of their FSC certification.
For more information about how FSC manages cases on supply chain integrity, click here.
Relevant normative documents
Those definitions and the main concepts related to SCI can be found in FSC normative documents, which can be found in the FSC Document Center, such as:
- Advice Note 18, FSC-DIR-04-004: A collection of advice notes related to the chain of custody, including an advice note about false claims, which stipulates actions that FSC, ASI, certification bodies and certificate holders should take when a false claim is identified.
- Transaction Verification Procedure, FSC-PRO-10-201 V1: Describes the process of implementing Transaction Verification loops by FSC, ASI and certification bodies.
- FSC Chain of Custody standard, FSC-STD-40-004: This is the main FSC standard describing how a certified chain of custody organization shall operate.
- FSC Chain of Custody evaluations standard, FSC-STD-20-011: This standard lays down the requirements based on which certification bodies conduct chain of custody audits.
- General requirements for FSC accredited certification bodies, FSC-STD-20-001: This standard specifies the accreditation requirements for all certification bodies operating FSC accredited certification programs.
Risk detection processes
FSC works closely with ASI to identify potential risks and monitors high-risk supply chains. FSC gathers information about potential problems in its supply chains through:
- Communication within FSC, its network partners and regional offices, and certification bodies
- Complaints received from concerned stakeholders
- Proactive monitoring of third-party information sources like the media, websites of environmental NGOs, etc.
For more information about ASI’s processes on risk detection and management, click here.
Transaction verification loop
Transaction Verification Phase 1: TV data collection and analysis
In this phase, all certificate holders who are covered by the scope of the TV loop are required to submit their sales and purchase data over a specific timeframe to ASI, through their certification bodies. ASI collects and analyzes the data which reveals specific supply chain clusters that indicate potential volume mismatches and fraud.
Transaction Verification Phase 2: TV investigation
In this phase of investigations, ASI verifies the potential mismatches through document review. Certificate holders showing the highest risk of major non-conformities are revealed in this phase.
Transaction Verification Phase 3: TV recommendations and actions
This is the final phase of a TV loop. Based on the findings of the previous phase, recommendations on blockage of certificates are developed and communicated with the relevant certification bodies and FSC. ASI also provides FSC with observations and recommendations for the improvement of the FSC certification system integrity.
For more information about TV loops, click here.
Other supply chain integrity investigations
Other than TV loops, FSC and ASI also conduct investigations into specific supply chain clusters and individual certificate holders in which potential false claims and fraud emerge as a result of monitoring, whistleblowing, incidents and TV loops. Certification bodies are also involved in the process, especially when it relates to investigations of individual incidents.
How to raise a concern
- If you wish to report a company for making an FSC claim or using the FSC trademark on a product that does not meet the requirements of FSC standards, then reach out the accredited certification body that manages the company’s FSC certification.
- If you wish to report an issue with an FSC accredited certification body, please reach out ASI, here.
- You may also write to FSC if your concerns are not addressed by a certification body or ASI.
How do certificate holders forward transaction data?
Certificate holders can submit their data using pre-defined formats supplied by FSC. The format requires information on volumes bought and sold, as well as unique identifiers such as invoice numbers.
How do certificate holders know if they are subject to transaction verification?
Certification bodies will notify the affected certificate holders, providing clear instructions, timelines and requirements of the specified transaction verification loop.
Read more on this: FSC Board Approves Plan To Address False Claims In The FSC System
Who will process the data that is submitted for transaction verification and is a non-disclosure agreement signed as part of the process?
Transaction verification is a certification activity carried out by Certification Bodies with their clients, and Certification Bodies collect the transaction data from their client certificate holders.
As with all certification activities, and according to FSC-STD-20-001, clause 1.8, the Certification Body “shall be responsible, through legally enforceable commitments, for the management of all information obtained or created during the performance of certification activities”. According to FSC-STD-20-001, clause 2.4.2, the Certification Body must have established procedures to “define the controls needed for the identification, transport, transmission, storage, protection, retrieval and disposition of its records related to the implementation of FSC requirements, including controls to safeguard confidentiality”. Therefore, if a certificate holder has concerns on matters regarding certification activities, including Transaction Verification, the certificate holder should raise these concerns with its Certification Body.
Certification Bodies must have the necessary agreements with their clients to comply with the requirements of FSC-STD-20-001.
Who will be processing the data?
Certification Bodies provide the transaction data to ASI for investigation through verification that FSC output claims made by certificate holders are accurate and match with the FSC input claims. This check-and-balance system is essential for a third-party certification system like FSC, which cannot be waived.
Note: Processing of business sensitive and confidential data is lawful as processing is necessary in order to ensure compliance with the FSC Certification scheme to which the data subject is party.
What happens if data from two trading parties does not match?
When ASI verifies that transactions do not match between trading partners, ASI informs the applicable certificate holders’ Certification Bodies to request additional information for further investigation.
Will FSC have access to the submitted data and store it?
In carrying out transaction verification, FSC does not expect or require receiving, accessing or processing Transaction Verification data. However, FSC does receive all relevant information and data regarding non-conformities identified via ASI investigations, so that FSC can take the appropriate measures to protect the FSC scheme and FSC’s reputation. FSC has the appropriate legal agreements with ASI and Certification Bodies to handle such data and information.
Are transaction verification requirements the same everywhere in the world?
Yes, they are the same everywhere in the world. However, based on a risk analysis and evidence of false claims, FSC and ASI will mainly focus transaction verification loops on certain regions and supply chains, where likelihood of false claims is high.
What happens if a certificate holder refuses to provide transaction data to their certification body?
The refusal to provide transaction data represents a breach of the contractual agreement between the organization and the certification body. If the information is not provided within the time frame requested by the certification body, the certificate holder will be issued a CAR or have their certificate suspended and/or terminated.
What are the consequences for uncertified businesses that are found making false and/or inaccurate claims?
Fraud and misuse of the FSC label by non-certificate holders are dealt with through the FSC legal office and trademark enforcement team, which investigate false use of FSC trademarks for non-eligible products and take legal action when needed.
What is the difference between false claims, inaccurate claims, and fraud?
‘Fraud’ is the term used for intentional false claims within the FSC system. ‘False claims’ happen when a product that is not eligible to be sold as FSC certified is sold with FSC claims on its sales documents. False claims can be intentional or not. They are only considered fraud when it can be proven without a doubt that the claim was made intentionally. ‘Inaccurate claims’ are where a product that is eligible to be sold as FSC certified is sold with the wrong claim (e.g. a product that should be sold as FSC Mix is sold as FSC 100%).
What information must be provided to fulfil the transaction verification requirement?
The data required for each TV loop may vary but generally will include information on trading partner (e.g. name, FSC CoC code), quantity, units, FSC claim type and species. Other data may be requested such as transaction identifier (e.g. invoice number), transaction date, description of products, country of origin, etc. No financial information will be required. The data will be collected on a sample basis, usually relating to a specific species, product type or timeframe in a specified format. The size of the sample requested will be determined by FSC and ASI based on risk. Auditors may also request access to shipping documents, invoices, or similar for confirmation.
Updates: TV loops
Bamboo supply chains:
FSC revisits integrity of bamboo supply chains - 30 June 2022
FSC Blocks Organizations with False Claims in Bamboo Supply Chain - 19 January 2021
FSC Suspends Two Certificate Holders Following Investigation - 18 June 2018
Integrity risks found in charcoal supply chains - 15 February 2022
FSC Introduces New Charcoal Transaction Verification - 28 July 2020
Perechin’s FSC Certificate Remains Terminated - 27 July 2020
Polyprom Group Certificates Terminated - 22 November 2019
FSC Suspends Ukrainian Charcoal Certificate Holders - 22 August 2019
FSC Lifts Suspension of Dancoal Certificate - 2 May 2019
FSC suspends Dancoal certificate, following sourcing violations - 28 August 2018
FSC Conducts Investigations On Charcoal Producers - 2 July 2018
Swift action initiated to investigate the charcoal supply chain - 8 October 2017
Paulownia supply chains under investigation - 1 July 2022
FSC Acts on Potential Fraud in Paulownia Wood Supply Chain - 6 December 2019
Transaction Verification In Paulownia Supply Chains - 19 February 2019
FSC blocks Brazilian company - 26 July 2022
FSC blocks three companies from Peru - 26 April 2022
Updates from an investigation into African Aucoumea supply chains - 25 January 2022
Transaction Verification in Asia Wood Pellets Supply Chain - 23 March 2021
FSC Introduces New Okoume Transaction Verification - 28 July 2020
FSC Introduces Transaction Verification for All Forests in China - 14 April 2020
Transaction Verification in Oak Flooring Supply Chains - 9 April 2019