COMplicit in corruption

How billion-dollar firms and EU governments are failing Ukraine's forests

NEW DEVELOPMENTS:

23 November 2018: Two new independent studies have confirmed the sheer scale of corruption and illegality in Ukraine’s forest sector, first exposed in a report by Earthsight in July, and support the case for action by the country’s government. Read more in Ukrainian or English.

18th July 2018:​ Prime Minister of Ukraine announces crackdown on illegal timber and appeals to EU for help, in wake of Earthsight exposé.  Read Earthsight's response here.

  • Timber from Ukraine's forests is flooding European markets, and is used in everything from flooring to newspapers, including products sold by major retail chains 

  • Report reveals supply chain is permeated with illegality from harvest to export, enabled through an epidemic of corruption the fragile state is struggling to get to grips with 

  • Some of the world's largest wood processing firms are named in the report as leading buyers of suspect Ukrainian wood 

  • Investigation pins blame for the ongoing trade on the failure of governments in European countries to enforce an EU law meant to ensure wood imports are legal 

14th July: An investigation released today reveals how European consumers are contributing to an epidemic of corruption in Ukraine's forests, in a trade worth over a billion Euros each year. 

 

The findings are revealed in Complicit in Corruption, a report from the UK-based non-profit Earthsight, and are the culmination of two years of work, including field and undercover investigations. The report points the finger at EU governments and some of the world's largest multinational wood processing companies. 

 

Ukraine is home to some of the largest tracts of forest left on the continent, home to rare animals such as bears, wolves, lynx and bison. As well as threatening these forests, the report shows, the EU's imports are undermining the efforts of Ukraine to establish the rule of law. Former President Viktor Yanukovych is reckoned to have stolen more than $100 billion from the state during 2010-14, and the country continues to battle some of the highest levels of corruption in the world. 


 

The wood imported from Ukraine is used in a vast array of products in Europe. "Your roof, your floor, your table, the newspaper you are holding, all might well be made from Ukrainian wood" said Sam Lawson, Earthsight's Director. "And if it is, there is a good chance it was cut or traded illegally, abetted by high-level corruption". 

Complicit in Corruption reveals how illegality permeates the timber supply chain in Ukraine from harvest to export. Field investigations indicate that 40 per cent of the timber being produced by the country's state-owned enterprises is illegally cut through the abuse of a loophole allowing trees to be harvested to prevent the spread of disease.

 

Court records unearthed by Earthsight also show that top forestry officials in Ukraine's largest timber-producing provinces are the subject of major criminal investigations, involving systematic illegal logging and timber exports. A former national forest chief, Viktor Sivets, is on the run, accused of having received over €30 million in illegal kickbacks into Swiss bank accounts from overseas log buyers in exchange for access to cheap wood. The payments were routed through UK letterbox firms with owners registered in secrecy jurisdictions such as Panama. Earthsight uncovered evidence that such high-level corruption has continued under his successors.

The EU is by far the largest destination for Ukrainian wood exports, representing 70 per cent of the total. EU purchases have been rising rapidly, breaking €1 billion in 2017. Earthsight estimate that at least 40 per cent of this wood was harvested or traded illegally. 

 

The EU buyers of this wood include a number of billion-dollar firms, whose owners are among Europe's wealthiest individuals. Though they are not themselves formally accused of wrongdoing, Earthsight found some of these giant companies are actually mentioned in ongoing criminal investigations of officials in Ukraine. One – Austrian firm Schweighofer, Europe's second largest sawmiller - has even been specifically implicated in the corrupt scheme allegedly masterminded by the former forest chief. All of them continue to import large volumes of wood from state logging enterprises which are the subject of such investigations.

These companies supply products sold in the largest retail chains in Europe, including Homebase in the UK and Obi in Germany, HP copy paper on sale in branches of Staples and furniture sold by Ikea. 

 

Recognising the need to address its role in driving illegal logging overseas, the EU has a law requiring importers to conduct due diligence to ensure that the wood they buy is legal. The report reveals how this law is not being meaningfully enforced, and points the finger of blame at the governments of the EU countries bordering Ukraine, including Romania and Poland. 

 

"Some of the 'due diligence' measures these companies are using are laughable" said Mr Lawson. "Yet the authorities are signing off on them. As far as Ukraine is concerned, right now the EU's law might as well not exist." 

 

Also in the firing line is the Forest Stewardship Council (FSC), which claims to be able to guarantee the legality and sustainability of wood through independent audits. Many big retailers rely on its systems, yet Earthsight's report shows how dodgy Ukrainian wood has repeatedly received the FSC stamp, and quotes one former head of a state logging firm who says circumventing its systems is easy.

 

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Since our report was published it has made headlines in Ukraine, and has also featured in high profile media in Europe, including leading German news magazine Der Spiegel, and prime-time in-depth coverage on flagship German TV station Das Erste. Shortly after the report was published, the Ukrainian Prime Minister ordered a crackdown on illegal timber. Major EU buyers have suspended purchases, dropped suppliers or launched investigations in response, and Earthsight was invited to present the findings to a major roundtable meeting at the Ukrainian Parliament. 

Read the full report

In English

                     In Ukrainian

       Summary only- In Ukrainian

Watch the 90 second film

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