Holzindustrie Schweighofer expands in Romania despite illegal logging accusations

Holzindustrie Schweighofer expands in Romania despite illegal logging accusations
By Clare Nuttall December 8, 2015

Vienna-based wood processing company Holzindustrie Schweighofer (HS) is planning to boost production and take on more employees in Romania after opening a new sawmill, despite accusations that it has been involved in purchases of illegally harvested wood.

HS announced on October 27 that it had started operations at its new sawmill at Reci in central Romania, which is one of the most modern in Europe, according to Dan Banacu, general director of Holzindustrie Schweighofer Baco, the company’s factory in Comanesti.

The mill has an annual cutting capacity of 800,000 cubic metres (cm) of wood. As with HS’ other Romanian mills, almost all its production (98%) is value added, with 40% of that considered high value added, which includes panels, beams and materials for interior decoration. Bark and other byproducts are transformed into pellets or briquettes that are used in the company’s co-generation plants to power its own operations and feed into the national grid.

While the mill, HS’ third in Romania, is not yet operating at full capacity, it is expected to help boost the company’s total production slightly above the 1.6mn cm of timber processed in 2014, though Banacu says this will depend on the market situation. This includes domestic demand, since HS sells 30-40% of its Romanian production on the local market – a figure it hopes to increase. A further 30% is exported to the Far East, mainly Japan, with the remainder sold in Europe and the Mediterranean area.

“The decision to build the third sawmill was taken several years ago based on forecasts for future demand, including the picking up of the European economy,” says Banacu. Even more important, he adds, was the expectation of the “legal availability” of raw materials in Romania and neighbouring countries.

Illegal logging

Legal availability of wood is a critical issue for HS, which this year has been at the centre of a storm over alleged purchases of illegally logged wood. As Bucharest prepared to adopt a new forest code, thousands took to the streets of Bucharest and other cities in May to protest against the government’s failure to prevent illegal logging, including in some of Europe’s last virgin forests. As the country’s largest wood processor, HS was inevitably a target for protesters’ anger.

Worse for the company came on October 21, when the global NGO the Environmental Investigation Agency (EIA) published a report claiming that HS had processed “large amounts of illegally harvested timber” from Romanian forests. This follows publication of a video filmed by the Romanian NGO Agent Green that appears to show a shipment of undocumented wood from a Romanian national park being delivered to the company. According to the EIA, over 50% of logging in Romania is illegal.

HS has denied the accusations, writing in an October 23 statement that the EIA report, “presents a large number of false accusations”, and adding that the company reports any suspicious wood deliveries to the relevant authorities. And in an interview with bne IntelliNews, Banacu repeats this denial, saying the EIA’s accusations are “not founded on reality”. “All the wood that we process comes with legal documents and is registered in our bookkeeping system. We have a full set of rules and regulations for our purchasing people. We ask our suppliers not only for transport documents, but also for origin documents and for evidence about the place where they are harvesting and the way they operate,” Banacu says.

Asked whether HS plans to make changes to its procedures following the release of the EIA report, Banacu tells bne IntelliNews: “This is a permanent process that we are continuously improving.” He adds that HS complies with the Forest Stewardship Council (FSC) and Programme for the Endorsement of Forest Certification (PEFC) certification schemes.

A spokesperson for PEFC tells bne IntelliNews that when the first rumours of illegal purchasing surfaced, it filed a complaint with the certification body Holzforschung Austria, which visited Romania to verify that PEFC’s certification requirements were being correctly implemented. The review found that HS was in complete compliance with PEFC’s requirements.

The spokesperson acknowledges that the due diligence system used minimises risk, while not entirely ruling out abuse of the system, but says he is “fairly certain” that the certification body did a good job in verifying that HS meets the PEFC’s requirements.

Following publication of the October EIA report, new checks are being carried out but the results are not yet available. Meanwhile, in September the Forest Stewardship Council (FSC) extended HS’s certificate for five years following an audit of its Romanian facilities.

Wood for the trees

Banacu stresses HS’ importance as an investor and major employer in Romania. The country’s wood processing industry is relatively small – around one eighth the size of Sweden’s according to UN data – but HS is the major player in the sector. And given Romania’s stark urban-rural divide, there are few other opportunities in the districts where HS operates. In addition to over 3,000 people employed directly by the company, Banacu estimates that up to 20,000 jobs have been created indirectly, mainly in transportation and services companies.

The €150mn invested in the new Reci sawmill brings HS’ total investments in Romania to around €790mn, which Banacu offers as evidence of the firm’s purchasing policy. “Any investment of almost €800mn cannot rely on an illegal source of material,” says Banacu. “We have 3,000 people going to work every day and they need to know that in their country their work is not punished.”

Despite the accusations, HS plans to ramp up the number of employed at its new plant from just over 300 in October to 650 when it reaches full capacity. Other than that, no more investments are planned in the immediate future, Banacu says. “For the time being, our aim is to consolidate the business and investment and make sure everything is running smoothly.”