Market-based instrument curbs deforestation
Market-based instrument curbs deforestation
Vincent Lingga, Senior Editor, The Jakarta Post, Jakarta
The devastating flash floods at Bahorok, North Sumatra, early this month that killed more than 150 people, are another strong reminder of how the traditional approach to protecting forests through a regulatory system has failed miserably due to a corrupt system of governance and inadequate institutional capacity.
Indonesia has enacted laws on environmental protection and has issued myriad regulations and rules to protect forests, and erected nontariff barriers to prevent trading in illegally felled timber.
Yet deforestation continues. Interisland trade and export of illegally felled timber have been going on. The Central Bureau of Statistics has officially recorded exports of logs, even though this commodity is banned from export.
As only incremental improvement can, at best, be made in the system of governance and institutional capacity, it seems more urgent now to expand forest product certification as a market- based instrument to supplement the regulatory system for curbing illegal logging.
The concept of forest certification is designed to use market forces to control illegal logging through demand-side and supply- side approaches, mobilizing consumers and traders to shun forest products that are not certified according to internationally recognized standards of sustainable forest management.
This virtual boycott forces forest-based companies (producers) to have their operations and products certified by accredited, independent forest-certifying bodies.
The demand for forest product certification has escalated since the early 1990s as a result of the campaign for green products by consumers, traders and conservation groups in North America and West Europe, who have been concerned about high rates of deforestation, especially in developing countries.
The green consumer movement became more organized and better coordinated after the establishment in 1993 of an international, independent and nonprofit organization called the Forest Stewardship Council (FSC), with its headquarters in Bonn.
Grouping representatives from environmental and conservation groups, the timber industry, forestry professions, forest certification organizations and forestry communities, FSC has developed forest certification standards, accredits independent certifiers and helps develop national and regional forest management standards.
FSC gets full support from the Global Forest and Trade Network (GFTN), a group of organizations around the world also committed to promoting trade in certified forest products as a means of improving forest management practices.
Latest data shows that GFTN now has more than 18 regional and national organizations, called forest and trade networks, under the coordination of the Worldwide Fund for Nature (WWF), with around 800 members consisting of large timber companies and retailers (producers and buyers) spread out in more than 30 countries.
Therefore, even though the government does not require forest certification, more than two dozen Indonesian companies, mostly furniture, door, panel and frame producers in Java, have voluntarily sought forest certification for their products from accredited certifiers to gain access to the American and European markets.
The term "voluntary" here is not entirely correct because the companies have effectively been forced to obtain green certificates; not through regulation, but by the market.
Importers/traders in the two regions simply don't want to touch uncertified forest products.
Likewise, two of Indonesia's largest pulp and paper producers, Asia Pulp and Paper Co. Ltd. (APP), with annual capacities of 2.3 million metric tons of pulp and 3.6 million tons of paper, and PT Riau Andalan Pulp and Paper (RAPP), with two million tons of pulp and 350,000 tons of paper, are now geared up to comply with the criteria and standards required for certification.
The companies will not explicitly acknowledge it, but pressure from their buyers overseas has been responsible partly for their commitment to having their operations and products certified according to the principles of sustainable forest management.
APP signed in August an agreement with the WWF for preparing programs on the sustainability of its forest concessions, the legality of its pulp materials and the resolution of land conflicts with communities.
As RAPP environmental general manager Canesio P. Munoz observes, "even though we have always seen to it that all pulp inputs entering our mills are legal, we will remain under suspicion of using illegal wood unless we have our operations and products independently certified."
RAPP has obtained an ISO 14001 certificate for environmental management system standards from SGS Yarsley International Certification Services and is geared up to gain forest certification next year or 2005.
Without sustainable forest management, these two companies, which require around 20 million cubic meters of wood fiber inputs a year, could indeed be a major threat to Indonesian forests.
They have often been accused by non-governmental organizations (NGOs) of using illegally cut wood, though none of these charges has ever been proven in court.
The problem is that more than 95 percent of forest-based companies in Indonesia, especially pulp and paper and plywood producers, have yet to realize the vital role of certification in maintaining the principles of good forest management.
Traders and general consumers in Indonesia, like those in other Asia-Pacific, African and Latin American countries, have yet to be converted into full supporters of the green product campaign. This task is quite daunting, not only because of the need to change attitudes but also because forest certification is costly and initially time consuming.
Forest certification is based not only on the principles of sustainable management of forests and wildlife reserves but also on the maintenance of the legal and customary rights of local communities and indigenous peoples and long-term social and economic welfare of forest workers.
Indonesia began to develop standards and criteria for forest- product certification only in 1999 after the establishment of the Indonesian Ecolabelling Institute (LEI), an independent organization, with funding support from the WWF, the U.S. government and many NGOs in Europe and North America.
LEI is now developing, in cooperation with FSC, standards and criteria for certification systems for the management of sustainable natural forest and industrial timber plantations, community-based forests and a chain of custody (a system of tracking the source of wood) as well as an accreditation scheme for certifiers.
According to LEI executive Daru Ascarya, LEI and FSC have thus far accredited four forest-certifying bodies, namely PT SGS ICS Indonesia, PT TUV International Indonesia, PT Sucofindo and PT Mutuagung Lestari.
Indonesia, like most other developing countries, has still a long way to go before the bulk of its forest-based companies are capable of complying with the principles of sustainable management, but expanding forest certification across the timber industry could speed up the process.
The Nature Conservancy and WWF, in cooperation with many other NGOs and foreign governments, are sponsoring projects in East Kalimantan, Java and Riau to develop a cost-effective method of certifying the legal origins of wood right through the supply chain, from forest to customers.
The projects are being implemented by Geneva-based SGS, the world's largest inspection, testing and verification organization, and URS Forestry environmental services company.
But other major donors affiliated with the Consultative Group on Indonesia (CGI), who have often expressed grave concern about extensive damage to the world's second-largest tropical forests in Indonesia, should contribute more to building up a higher national capacity for forest certification.
The market for tropical forest products could be damaged if the global demand for certified products generated by the green- consumer campaign far outpaced the capacity of forest certification in Indonesia.
However, the development of the certification system will not run smoothly unless the Indonesian government itself streamlines the system of its regulatory procedures in land-use planning, land rights, forest harvesting permits and wood transport documentation, which have often left forest-based companies in a catch-22 situation.
Forest certification, as a market-based instrument, will also be less effective in saving forests if banks and financial and securities analysts do not use sustainable forest management as an investment-screening tool.