Building a comprehensive Due Diligence System in Vietnam

Within this context, the management of the Handicraft & Wood Industry Association (HAWA) of Ho Chi Minh City has proposed to develop a Due Diligence System (DDS) at the association level. Established in 1991, HAWA is a Non-Governmental Organisation and Volunteer Association with nearly 400 company members operating in wood processing, handicrafts (bamboo, rattan, water hyacinth, etc.), trade and service providers.
 

Developing the 'Core Material' of the system

The overall objective of this project is to develop the core materials, including standards, procedures and guidelines that will direct the implementation of the HAWA DDS. The project also provides corresponding training to ensure the system's overall effectiveness. HAWA DDS is a voluntary due diligence system platform at the association level to provide credibility on the legality of timber sources used for woodworking production in Vietnam. This platform has been developed to help HAWA members and non-members respond to international market requirements and facilitate compliance with VNTLAS/OCS (Operator Classification System) requirements. 
 
Preferred by Nature assisted the HAWA DDS team in developing the platform, supporting the seven principles of the HAWA DDS system: confidentiality, transparency, truthfulness & accuracy, impartiality & fairness, effectiveness & efficiency, independent monitoring, and voluntary approach. The project's first step is to develop the system's foundation comprising of standards, procedures, rules and regulations, and guidelines, also known as the 'Core Material'. 

Following the completion of the DDS system development, Preferred by Nature provided training for HAWA personnel and further support as needed after the handover. The evaluation was conducted as the third and last step after the platform had been piloted and completed. The development of the HAWA DDS system was achieved within three years, from July 2018 to November 2021. 

Project Background

The original HAWA DDS design (in 2015) was focused on helping HAWA members respond to DD requests from overseas clients and was built around existing voluntary certification systems. The concept needed to be revised in anticipation of future VNTLAS implementation with specific legal compliance and DD requirements imposed by the Vietnamese government. Another issue with the original DDS concept (and other voluntary DDS systems used by HAWA members and certified by third-party certifiers) was that the burden and responsibility to apply DD was laid upon the manufacturers at the end of the supply chain or far removed from possible illegalities committed at the source, which makes it difficult to assess and mitigate risks. 

To inform the necessary revisions to the DDS and the design of the consecutive piloting phase, HAWA organised extensive consultations with approximately 170 active wood processing companies (members and non-members), VNFOREST officials, representatives of EU buyers, technical FLEGT and certification experts, EUTR Monitoring Organisations (NEPCon, SGS and BV) and domestic wood suppliers (i.e., Vietnam Rubber Association, Vietnam Rubber Group, Acacia wood suppliers). The consultation allowed the identification of new ideas, including developing a single system to facilitate DD by international buyers before FLEGT licensing starts and enabling government verification by the State Government when FLEGT-VPA implementation comes into force.
 
According to FAO, the platform has received widespread support from major players in Vietnam’s timber industry. HAWA has successfully engaged Vietnam Rubber Group (VRG) – the largest plantation owner in Vietnam, managing over one million hectares – who had registered 1,500 hectares of mature plantations, harvested in 2021. Meanwhile, four companies in the key acacia-growing provinces of Dong Nai, Quang Tri, Dak Nong and Gia Lai have also committed to registering over 3,000 hectares of acacia plantation area.

Read more about the result here. 

>> To access the HAWA DDS platform, click here.