Framework conditions

This section briefly covers the contexts in which the tropical timber value chain operates and is embedded. Sustainability in the forest sector is affected by external and internal forces (FAO, 2011:

30) as well as by policy, regulation, and institutional factors (FAO, 2010: 149), termed framework conditions. These conditions are listed in Table 5.

Table 5 Framework conditions

1. Demographics in low and middle-income countries 2. Economic growth

3. Globalization 4. Social trends

5. Demographics in high-income countries 6. Competing materials

7. Competition of resources

8. Changes in forest ownership, control and management 9. Regulatory

10. Institutional framework

11. Business operating environment 12. Transport infrastructure

Whether these conditions have a positive or negative influence varies between countries and between sectors. Globalization for example, can be viewed as a positive force in some places but as a threat (negative influence) in others (FAO, 2011: 31). Population demographics and economic growth are the fundamental forces affecting the forest industry. These have a major impact on the demand of forest products. They may as a result influence supply side industry development. Financial and economic developments influence the market for timber and timber products. The current economic crisis for example has caused the trade in timber and timber products to decrease, with (Kamphuis et al., 2011: 93) imports of tropical timber by the Netherlands also decreasing (Kamphuis et al., 2011: 97).Globalization has resulted in a rapid expansion in the international flow of capital, goods and services since 1990 and this is only expected to continue in the future. It has however led to some market homogenization, with the expansion of multinational corporations a prime example.

Many products and services are now delivered to consumers in a similar way across the world and consumers are now aware of trends, tastes and fashions in other parts of the world (FAO, 2011: 32).

Changes in social trends, such as public opinion, attitudes and lifestyle also occur when incomes rise.

Global demand for both timber and land has led to the destruction of tropical forest resources as well as the economic decline of the timber industry (Kamphuis et al., 2011: 112). An increasing world population combined with increasing incomes causes’ worldwide demand for timber to increase (Kamphuis et al., 2011: 91). In markets such as packaging, personal care products, construction and furniture, forest products compete with other goods and services (FAO, 2011: 33).

Similarly, when populations and economies expand, competition for resources (land, labour and capital) increases. Changes in forest ownership, control and management are occurring because of increasing attention to forest ownership and management rights of forests (by local communities) and to the fiscal measures governments use to support forest management and collect revenues from the sector. These trends are related to the changing roles of government and citizens in the sector (FAO, 2010: 119). In some situations privately owned forest can benefit from sustainable forest management, by assigning management responsibility and control to individuals or communities. In other cases, it may mean that forest property rights are transferred from the state and concentrated in the hands of relatively few individuals (FAO, 2010: 169).

Regulatory

Formal policies can provide strategic guidance towards sustainable forest management (FAO, 2010:

154) and consist of national and/or subnational forest, nature protection/biodiversity and trade laws, policies, programs and binding and non-binding international conventions and agreements related to forests and their management. Examples include the Convention on Biological Diversity, UN Framework Convention on Climate Change, Convention on International Trade in Endangered Species of Wild Fauna and Flora and the International Tropical Timber Agreement. The EU Action plan (Voluntary Partnership Agreement) restricts the amount of illegal timber entering the European Union and promotes the sustainability of timber sourced from tropical regions (Kamphuis et al., 2011: 91).

Their success depends upon the extent to which a country has ratified and adopted the agreement, as well as on enforcement and monitoring.

Regulatory frameworks include the rules and systems put in place to encourage best practice and compliance with the official rules (Gregersen and Contreras 2010). Frameworks are often outdated, with forest regulations designed decades, or in some cases, centuries ago. Fortunately, there are examples of redesigned and successful regulatory approaches that are combined with incentives.

Policies relating to forests include sustainable forest management policies that limit the amount of produced timber and export timber from Malaysia and Indonesia to the EU (Kamphuis et al., 2011:

91), illegal logging policies to combat illegal logging in major importing countries (e.g. FLEGT in the EU and the Lacey Act Amendment in the US), that increase the implications for producers and traders of timber and timber products (Kamphuis et al., 2011) and the implementation of Reducing Emissions from Deforestation and Forest Degradation (REDD).

Institutional framework

This refers to the institutional structure and capacity, important for achieving national goals for forest management. Capacity is dependent on education and research while the institutional structure is related to forests and forestry. Examples include such things as:

• Who is responsible for forest policy formulation?

• The level of subordination to the minister i.e. the head of the forestry agency reports directly or indirectly to the minister.

• The level of human resources within public forestry institutions (this is an indicator of the institutional capacity to promote forest objectives).

• The number of graduates in forest-related education.

• The number of professional staff (people with an university degree) in publicly funded forest research centres.

The assumption is that a certain level of staff in public forest institutions is needed to promote sustainable forest management. But the overall needed institutional capacity depends on many factors such as financial resources, knowledge, technology, infrastructure and equipment, partnerships and overall institutional context (e.g. policies, legal framework and other institutions).

Also the appropriateness of staffing levels also depends on society’s demands on forests which, in turn, are driven by demographic, geographic, environmental and climatic factors, as well as the level of economic development and national priorities (FAO, 2010: 154).

The managerial, technical and administrative capacity of a country for sustainable forest management is dependent on education and research (FAO, 2010: 158) because education and research provide necessary and relevant information and knowledge to manage, conserve and enhance forest resources (FAO, 2010: 162). That can be indicated by:

• The number of students completing a master’s degree is one indicator of the future national ability to develop and implement policies and strategies for sustainable forest management.

• The number of bachelor’s degrees can provide an indicator of the ability to manage programs and implement policies.

• The technical certificates or diplomas indicate the ability to implement operational plans.

• The total number of university students who graduate with master’s and bachelor’s degrees may also indicate the importance society accords to forests and their management.

• The number of professionals working in publicly funded forest research is an indication of the national interest in, and capacity to solve, forestry sector issues.

• The percentage of female students points to possible future changes in the gender balance in forestry.

Besides institutional structure and capacity also customary or informal rules about forest ownership and use are of influence on how local communities maintain (or not) ecosystem services in relation to timber concessions. Especially in tropical forested areas customary control and governance of forests is often as (if not more important) than formal regulation and policies (Cotula et al., 2007;

Marfo, 2010). See also Guariguata (2009).

Business operating environment

Business operating environment is the context in which a chain operates commercially and can have impact on how chain operates e.g. corruption. References to studies such as World Banks doing Business reports (World Bank, 2010) and transparency international’s corruption perception reports (Transparency International, 2011) and governance indexes (World Bank, 2010) highlight that countries with weak and fragile governments, poor governance, high levels of corruption and difficult business operating environments (such as many of the major timber producing countries from which Netherlands imports i.e. Indonesia, Malaysia, Russia) make conditions in chains more difficult, add costs and time… can speculate that may also be a (negative) link with attention to ecosystem services…certainly the link between illegal logging and negative impacts on ecosystems has been made (Koyunen, 2009; Alemagi and Kozak, 2010; DFID, 2010).

Transport infrastructure

Transport infrastructure such as roads, railways, rivers facilitate access to forest resources e.g. in remote tropical forests in developing countries, often difficult terrain and low levels of infrastructure (levels are mentioned in Doing Business report) which makes accessing timber often costly and difficult. The impact of increasing access to concessions (Ebeling and Yasué, 2009) (combined with other factors mentioned, such as agricultural expansion and population and urban growth) can be to reduce biodiversity and pressure ecosystems (e.g. increase in hunting, fishing, illegal timber felling, opens up routes for expansion of population and conversion of forest to farms (DeFries et al., 2010;

Gibbs et al., 2010).

Internal forces

Besides external forces also internal forces affect sustainability in the forest industry. Internal forces are forces that appear throughout the production chain (from the fibre supply to end product). Many of these forces are related to the way in which the industry operates (FAO, 2011: 36).

Potentially positive internal forces are:

• environmental attributes of forest products;

• adaptability and management of the raw material supply;

• potential for innovation. The capability of innovation can be seen by the advances the industry makes in harvesting and logistics, processing technologies and the progress in extracting more products from each unit of fibre input. The focus here is on product and process innovation as such, but social innovation can also be considered here.

And potentially negative internal forces are:

• existing industry structure and investment;

• labour costs and working conditions;

• social and environmental performance and perceptions;

• maturity of existing product markets;

• end use issues (durability, regulations etc.).