Tracking timber: scientific and digital innovations promise wood supply chain transparency

From the end of 2025, EU Regulation 2023/1115 is expected to come into effect. Its modest name belies its potentially industry-transforming impact. Described by the World Wildlife Fund as “historic”, “groundbreaking”, and as “changing the rules of the game”,¹ the ‘Deforestation Regulation’, as it is better known, will become one of the world’s first ever laws to tackle deforestation at the global level.

Covering numerous forest-risk commodities – including timber, palm oil, soy, coffee and cocoa – the regulation will require any company that produces, uses or trades in the listed commodities or derived products within the EU, to prove that the commodities have not come from recently deforested land. Crucially, while the commodities must have been grown or harvested in line with local laws, evidence of this alone will not be sufficient. To ensure products do not originate from regions with loose, ill-enforced, or even non-existent laws, firms must actively provide proof that relevant products have come via deforestation-free supply chains.²

According to Interpol, as much as 30% of the entire global trade in timber may come from illegal sources. Illicit timber is the world’s most profitable natural resource crime, worth as much as USD 150 billion each year

For the timber industry, the impact could be seismic. According to Interpol, as much as 30% of the entire global trade in timber may come from illegal sources.³ Illicit timber is the world’s most profitable natural resource crime, worth as much as USD 150 billion each year.⁴ For the myriad sectors and businesses that rely on timber, this poses a problem. In a vast, sprawling and often opaque industry, how can they be sure the wood they are buying comes from legal, sustainable sources? And, when it comes to satisfying the landmark new EU Regulation (and increasingly sustainability conscious consumers), can they prove it?

Under the microscope

US-based non-profit World Forest ID may have a solution. Formed in 2017 by the Royal Botanic Gardens at Kew, London, the United States Forestry Service, UK isotope testing experts Agroisolab, and the Forest Stewardship Council, World Forest ID is pioneering a new testing technique that aims to pinpoint the geographic location from which a piece of wood originated to within 10 kilometres.⁵

The work starts at Kew Gardens, where a vast physical and digital database is being built up containing anatomical analysis of hundreds of tree species. The recipe is simple – 1) cut a small cube of wood from the sample; 2) boil for 30 seconds to remove air bubbles; 3) plane sample into near microscopic slices; 4) analyse under microscope; 5) record image.

The resulting ‘wood anatomy’ database can be used to identify the species of a sample taken from any product, from an untreated piece of timber to a finished child’s toy

The resulting ‘wood anatomy’ database can be used to identify the species of a sample taken from any product, from an untreated piece of timber to a finished child’s toy. While advances in computing power have sped up the process, this first step is not new. What is new, however, is the second step.

All plant-life is made up of carbon, nitrogen, hydrogen and oxygen – each of these elements takes a different ‘isotopic form’ depending on location-specific factors such as the mineral make-up of the soil in which the plant grew and the meteorological conditions of the region. So, having first identified the species, scientists can now compare each sample against a second, still larger, ‘isotopic database’, taken from thousands of samples of living trees, with each record showing the location at which the sample was taken. Where an isotopic match is found, researchers can state with confidence that the wood under question came from the same region.

And the chance of finding a match is growing. World Forest ID has now built the world’s biggest open-source database of species and isotopic analysis, comprising 35,000 physical reference samples covering 378 plant species, creating chemical fingerprints for the species and geographical location for a growing number of deforestation-risk species, including timber, rubber, soy, coffee, cocoa, and palm oil.

Read also: Meet Monsoon Tea: the firm making traceable, forest-friendly tea

From theory to practice

In March 2024, Belgian authorities used this ground-breaking new technique to identify 260 tonnes of timber imported into Belgium from Russia illegally.⁶ Suspecting that Russian timber imports were continuing despite sanctions imposed after Russia’s invasion of Ukraine, Dr Victor Deklerck, scientific director of World Forest ID, led researchers in analysing samples against a sub-set reference library that related to the twelve nations thought the most likely candidates for the wood’s true origin, including samples taken from Russia.

Having identified Russia as the region of origin, authorities were then able to trace the supply chain back through Latvia and Estonia, closing down an illegal import route and a lucrative Russian revenue stream.

Annelies Wynant, spokesperson for the Belgian Federal Public Services of Health, Food Chain Safety and Environment, said: “It’s the first time we’ve identified a source in this way. We have different possibilities to seize the wood. We can also issue fines against the companies, and we can force them to take the necessary measures to avoid putting illegal timber onto the European market.”

Read also: COP16 – what should business leaders expect?

With the technique proven in the real world, World Forest ID is now branching out to other deforestation-risk commodities. A recently launched pilot project even aims to test whether the origin of shrimp can be pinpointed in the same way – it is hoped the work will help in the battle to end illegal mangrove destruction, which are often deforested to make way for shrimp farms.⁷

Timber on the blockchain / Digitising nature

While chemical fingerprinting picks up discrepancies at the end of supply chains, another recent innovation could help keep tabs on timber right from the start. The digital blockchain, which, since 2008, has been most associated with facilitating the record-keeping and transfer of Bitcoin, has become an important part of many supply chains.

As timber moves along the supply chain the blockchain record, in effect, moves with it, recording each time the timber changes hands

In the US, the Endowment for Forestry and Communities, a public charity established at the behest of the US and Canadian governments, recently launched the ForesTrust blockchain in partnership with supply chains firm Chainparency.⁸ The project works by tagging felled trees or wood products such as pulp with a unique blockchain-based identification number, linked to information such as the location from which the wood originated and any relevant sustainability certifications.

As timber moves along the supply chain the blockchain record, in effect, moves with it, recording each time the timber changes hands and making available to each subsequent buyer the full record of the timber’s history. With blockchain records tamper-proof and updated in real-time, they enable ongoing and easy monitoring of all timber, rather than only occasional ad-hoc sampling by auditors who are often reliant on easy-to-fake paper certifications.

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The ForesTrust project is just one of several similar block-chain based efforts to prove the provenance of timber and timber products. Timber Chain, launched as a partnership between global non-profit Preferred by Nature and supply chains start-up iov42,⁹ has been tracking timber from Malaysia to sawmills in Eastern Europe since 2021, while the Forest Stewardship Council has tested its own beta version of a blockchain-based supply chain.

In future, it is possible that the two innovations – chemical analysis and digital tracking – could combine, with each timber consignment’s chemical fingerprint stored in the digital packet of information along with the date of harvest, geo-location and sustainability certifications.

As supply chains become increasingly transparent, investors can more easily identify the firms acting early to stay ahead of tightening regulations

Transparency – the business and investment case

The world’s forests absorb one a half times more carbon than the US emits each year.¹⁰ They also provide many other essential ecosystems services, supporting 80% of all terrestrial plant and animal species,¹¹ controlling floods, preventing soil erosion, cleaning our air and water, and balancing precipitation and water cycles. Forests are essential to the health and even future viability of our planet. Despite this, every year a further 4.7 million hectares of forest are lost, with 95% of that destruction occurring in tropical regions.¹²

As this worrying picture becomes ever clearer, businesses are coming under growing pressure to ensure that their products do not come from deforested areas. The EU’s forthcoming Deforestation Regulation is just one example – in recent years a plethora of domestic laws have added to pressure on firms to minimise any negative environmental impacts arising from their global supply chains¹³. At the same time, recently implemented supranational disclosure rules – such as the EU’s Corporate Sustainability Reporting Directive (CSRD) – require firms to examine and report on the sustainability of their business practices.

Across all sectors, from timber to food to the extraction of metals and minerals, this focus is creating a double opportunity for investors. As supply chains become increasingly transparent, investors can more easily identify the firms acting early to stay ahead of tightening regulations, or those taking action to create more climate-resilient commodity supply chains through the implementation of nature-positive business models. This includes practices such as agroforestry and organic agriculture, which enable the transition from conventional to regenerative agriculture.

Read also: Investing in nature’s regenerative power | Lombard Odier

Investors will also discover new opportunities in supply chain management itself, as companies invest to ensure regulatory compliance. According to market analysts Grand View Research, the global market for supply chain management – which is already worth USD 23 billion annually¹⁴ – is expected to see compound annual growth rate of 11.2% between now and 2030¹⁵, driven partly by the need to demonstrate supply chain traceability and sustainability.

For decades, the opacity of timber supply chains has made the industry an easy target for fraud and criminality. It has also brought some forests to the brink of disappearing altogether, with potentially catastrophic consequences for our ability to combat climate change. National efforts to prevent illegal logging have often seen only patchy success – however, today’s scientific and digital innovations, combined with tighter regulations, offer new hope for the world’s vital forests.